Joshua Fawcett Weiner
@FawcettWeiner
“This piece contributes to the Civil War Paths’ Building Bridges blog series by advancing a more holistic, nuanced understanding of the funding options and constraints for armed groups”
Armed groups need revenue to fund their operations and achieve their goals, but we still do not understand how groups determine the mix of funding strategies that they use. In this piece, I draw on my dissertation research to show how the Islamic State (IS) in Syria adapted to declining oil prices by increasing taxes for people in the group’s territory. Despite relying on resource revenue, IS chose to increase taxes because they provided greater value over the long term compared to alternatives like looting. Studying IS’ behaviour improves our understanding of how armed groups fund themselves and sheds light on group governance practices as well as the links between state development and rebel governance. This piece contributes to the Civil War Paths’ Building Bridges blog series by advancing a more holistic, nuanced understanding of the funding options and constraints for armed groups.
Armed Group Revenue
Armed groups, like most organisations, require revenue to function. Groups must pay their fighters and purchase the necessary tools to engage in violent conflict and sustain the organisation’s operations. They do this in hostile environments, and, if the group is governing people and territory, they might also need to fund public services, which 35 percent of groups do through taxation. Groups typically use a mix of external funding, including foreign state and/or diaspora funding; and internal funding, such as resource revenue; taxation; kidnapping; and looting (property expropriation) to fund their operations. Foundational research on armed group behaviour argues that the way groups generate revenue affects whether groups develop institutions and govern territory, the types of recruits groups attract, as well as group socialisation practices, which impact whether they use violence selectively or indiscriminately against civilians. For example, Collier and Hoeffler argue that groups with resources do not create institutions. However, empirically, groups, including IS, use a mix of revenue generating strategies, not just one. IS sold oil, levied taxes, and expropriated property. This means that prior research that attributes armed group behaviour to single funding sources are likely attenuated, and, as a result, we need to improve our understanding of how variation in a group’s mix of funding strategies affects its behaviour.
Revenue Over Time
Civil wars are long, with the median ongoing conflict lasting more than 10 years. Armed groups’ income will vary over these long time periods. Group territory may expand or contract, resource prices fluctuate, and external support can increase or be withdrawn. As a result of these shifts in the strategic environment, the ways groups generate revenue will also change over time.
Partially due to issues of data availability, we do not know how groups manage their changing revenue needs over time. Current work suggests that groups with resources or external funding cannot build the institutions necessary to tax people should resource prices drop or external funding decline, which leads these groups to loot. However, groups with resources, such as IS, do build institutions, and, rather than looting more, my research demonstrates that IS increased taxes in oil-producing Syrian provinces under their control after oil prices fell from August 2014 to January 2016. My research shows that these IS provinces chose taxation over another adaptive strategy, because of its relative value.
Group Options and Constraints
Much like states, many armed groups govern people in the territory they control, but they have different policy options and constraints than states. States can issue debt, and the International Monetary Fund serves as a lender of last resort. These options help states weather unexpected shifts in their revenue. Armed groups operate with fewer policy levers, they cannot feasibly issue debt and they often operate in relatively poorer regions where the population cannot be easily taxed at high rates. My research argues that this makes them more likely to have to actively substitute one revenue source for another when revenue declines. This is precisely what IS did in Syria. As oil prices fell precipitously in fall 2014, IS began increasing taxes in regions that previously depended on oil revenue, shifting their funding mix to mitigate the effects of lost resource revenue on group operations. Prior to fall 2014, the tax burden for people in oil- and non-oil-producing IS districts was similar and quite low. In oil-producing provinces, IS prioritised resource revenue to fund their operations, and implemented a small number of ideologically driven taxes. When resource revenue declined, IS chose to add new taxes in oil-producing regions, but they did not increase looting.
Without access to often secret decision-making meetings or documents, it is difficult to conclusively determine why IS chose taxation over looting when its oil revenues declined. However, armed groups that intend to control territory long-term prioritise investments in governance, like taxation, rather than short-term strategies, like looting. IS fits that pattern. Additionally, oil-producing IS provinces raised administratively costly but more lucrative taxes to address revenue shortfalls, increasing the frequency of property and income taxes rather than border taxes or looting. Knowing that people in its territory have a limited ability to pay and that revenue from one tax is contingent on other taxes, the group chose to increase the types of taxes that produced the most net value for the organisation.
Further work is needed to determine the conditions under which groups choose their revenue-generating strategies, particularly for cases where the group had different options and constraints from IS. Groups without the ability to tax will behave differently, but this needs to be examined further. A deeper understanding of how armed groups fund their operations will nuance our theories of the relationship between funding and group behaviour and illuminate where rebel governance and state development converge and diverge. Importantly, knowing more about why armed groups choose different funding strategies could help governments and organisations plan for and mitigate the strategies most likely to harm civilians.
