Stopping ISIL: No money, no honey
THE PLAYER - Enrique Y. Gonzalez (The Philippine Star) - December 13, 2015 - 9:00am

The coordinated terror attacks in Paris shocked the whole world. It also brought to the mainstream consciousness the reality that the war on terrorism is far from over and has only begun.  It is an unfortunate reality that our children will live in a world where terrorism has thrived and proliferated. 

Does terrorism have a silver bullet? Is there a simple answer to this seemingly complex problem?

I believe the key to curbing terrorism is to cut off the resources being accessed by terror groups. 

Anti-terrorist organizations can borrow a page from the playbook of corporate America. Larger competitors will typically squeeze small competitors by driving prices down, blocking access, limiting the supply chain, and cutting access to capital. After all, Ronald Reagan did set the precedent when he said he would defeat communism by “bankrupting it.”

Even terrorists are governed by the need for capital. Thus, in a recent TED talk, Loretta Napeleoni says most members of terror groups are actually focused on generating revenue for the terror organizations they work for! 

ISIL funding comes from oil, natural gas, extortion, phosphate products, cement, wheat and barley, kidnap for ransom and donations, with a dominant share being contributed from natural resources (82 percent, or approximately $2.3 billion/year). The world is now facing a terror group that is quite different from historical ones. ISIL has a cash cow (Syrian and Iraqi oil fields), a form of legitimized state (ISIL) towards its radical constituents, and is extremely active on social media, spreading its gospel. 

Recent estimates also peg ISIL forces at 50,000 to 100,000. Assuming the basic cost to feed one member is $5/day or $150/month, ISIL costs range from US$7.5 million to $15 million a month, or up to $180 million a year. If you add living costs, medical, transportation, etc., the real cost is close to $1 billion. As you can see, running a large organization has a massive burn rate. ISIL’s smart play was seizing oil fields and securing their own “endless” source of cash from the very beginning. This changed the rules of the game.  

What does a page look like from the chapter on how to bankrupt your competition?

1. Lobby for regulators to cancel their permits. Shut ’em down.

2. Handicap their organization by poaching their “key men.” Recruit their stars. ’Nuff said.

3. Undercut them on pricing to wipe out their gross margins until they run out of cash. Identify their key distributors and temporarily supply them with cheaper product. Know how long before they run out of cash. This is otherwise known as “dumping.”

4. Choke their supplies. Reacquire or take over their supply routes or production sites. Artificially inflate pricing on their cost of goods by buying up raw mats in the surrounding areas for the next 12 months. 

It is now public knowledge that the US government spends $9 million a day on the war against ISIL. Russia’s bombing of ISIL targets costs US$4 million to $5 million a day.  With ISIL’s funding coming from trade and business activities, this now points to the fact that the battle is not just ideological and military-centric but one involving business and economics as well. Want to end terror? Bankrupt it. As the saying goes, “no money, no honey.”


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