The size of the population under the control of the Islamic State (IS) and the militant group's income have both fallen by about a third, according to a report by a US-based analysis firm released on Monday.
A fall in oil output following air strikes on production facilities, combined with a loss of tax revenue due to a smaller population, meant IS was now coming up with new levies to impose on people to try to bump up its funds, said research group IHS.
About 50 percent of the group's revenue comes from taxation and confiscation, 43 percent from oil and the rest from drug smuggling, the sale of electricity, and donations, the report said.
It calculated that between mid-2015 and March this year, IS's income dropped from around $80 million a month to $56 million a month.
Daily oil output dropped 33,000 barrels to 21,000 barrels in the same time period, which according to IHS reflects the intensification of efforts by the US-led coalition and Russia to target oil production facilities with air strikes.
"Almost all the main oilfields operated by the group have been targeted by airstrikes, predominantly by the US-led coalition, resulting in reports of extensive structural damage," it said.
However oil production had not stopped and given IS's ability to repair and improvise, the fall in oil output should be seen as "an interruption of production, not a complete stoppage."
Significantly, IS had not raised its oil prices, which IHS assessed "reflects the Islamic State's priority interest in quick sales of the oil in order to generate cash."
Compounding the drop in oil revenue was IS's loss in territory. The group had lost about 22 percent of its territory in the past 15 months, said Columb Strack, senior analyst at IHS. "Its population has declined from around 9 million to around 6 million. There are fewer people and business activities to tax; the same applies to properties and land to confiscate."
As such, the militants were coming up with new ways to get money from people, including tolls for truck drivers, fees for anyone installing new or repairing broken satellite dishes, "exit fees" for anyone trying to leave a city, and fines for people who could not answer questions on the Quran correctly or who drove on the wrong side of the road.
It had even started allowing people sentenced to corporal punishment to pay fines instead — "a strong indicator of the financial difficulties the group is going through." IHS said the drop in income could have an impact on IS's future.
However there was no indication of discontent resulting from increased tax burdens from local populations, it said.
"The Islamic State is still a force in the region, but, this drop in revenue is a significant figure and will increase the challenge for the group to run its territory in the long term," said Ludovico Carlino, a senior analyst.
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