As the coalition bombers hit the sources of finance of the Islamic State, the group is squeezing money out of local people in the northern Iraqi city of Mosul by manipulating the exchange rate between U.S. dollars and Iraqi dinars.
The financial infrastructure of the Islamic State would be among the prime targets of the U.S-led coalition in addition to attacking Islamic State's fighters and its leaders.
Extracting, refining and transporting oil is a major source of revenue, already suffering from the fall in world prices, for the Islamic State and the air strikes have reduced them further. It has destroyed at least 10 "cash collection points" since October, estimated to contain hundreds of millions of dollars, says the coalition. Reports of Islamic State cutting fighters' wages by up to half are proof that the coalition is putting pressure on the group, say U.S. military officials.
While wages for foreign fighters, which were between $600 to $800 have also been cut, the average pay of ISIS fighters has been cut from $400 to $200 a month. However U.S. Army Colonel Steve Warren, spokesman for the international coalition, say that it is not clear by how much wages for foreign fighters have been cut.
Yet by introducing a new revenue stream, the militants, enjoying near total control of the local economy, appear to have adapted to these setbacks in Mosul.
Currency traders in Mosul say that the group pays monthly salaries in dinars to thousands of fighters and public employees while it earns dollars by selling basic commodities produced in factories under its control to local distributors.
They said that the dollar is strengthened when exchanged for smaller denominations of dinars and the group earns profits of up to 20 percent under preferential currency rates it imposed last month.
"Daesh sells (the products) to traders in dollars, but it pays salaries in small denominations of dinars," said an exchange bureau employee in Mosul, using an Arabic acronym to refer to Islamic State.
$100 is currently valued at around 118,000 dinars according to the official rate set by the Iraqi government.
According to the owner of a currency exchange bureau, when the same amount is bought with 25,000-dinar notes, the largest bill in circulation, it costs 127,500 dinars. When purchased with 250-dinar notes - the smallest bill available, the rate rise to 155,000 dinars. Islamic State prefers the larger bills as they are easier to transport.
The statements were confirmed by three other currency traders however the reports could not be verified by the media independently.
While it is not yet clear that if these practices extended beyond Mosul, the largest city under Islamic State control, to other territories in Iraq and Syria, it is also not possible to determine how much money Islamic State is making by controlling the currency market.
Since Islamic State has threatened to confiscate the money of anyone who breaks the rules, parallel trading at more competitive rates is very limited, traders said.
"Nobody would risk it," one of the traders told Reuters.
Islamic State operates a cash economy and controls most means of production, including factories producing cement, flour and textiles as it is frozen out of traditional financial institutions by international sanctions.
(Source:www.reuters.com)
The financial infrastructure of the Islamic State would be among the prime targets of the U.S-led coalition in addition to attacking Islamic State's fighters and its leaders.
Extracting, refining and transporting oil is a major source of revenue, already suffering from the fall in world prices, for the Islamic State and the air strikes have reduced them further. It has destroyed at least 10 "cash collection points" since October, estimated to contain hundreds of millions of dollars, says the coalition. Reports of Islamic State cutting fighters' wages by up to half are proof that the coalition is putting pressure on the group, say U.S. military officials.
While wages for foreign fighters, which were between $600 to $800 have also been cut, the average pay of ISIS fighters has been cut from $400 to $200 a month. However U.S. Army Colonel Steve Warren, spokesman for the international coalition, say that it is not clear by how much wages for foreign fighters have been cut.
Yet by introducing a new revenue stream, the militants, enjoying near total control of the local economy, appear to have adapted to these setbacks in Mosul.
Currency traders in Mosul say that the group pays monthly salaries in dinars to thousands of fighters and public employees while it earns dollars by selling basic commodities produced in factories under its control to local distributors.
They said that the dollar is strengthened when exchanged for smaller denominations of dinars and the group earns profits of up to 20 percent under preferential currency rates it imposed last month.
"Daesh sells (the products) to traders in dollars, but it pays salaries in small denominations of dinars," said an exchange bureau employee in Mosul, using an Arabic acronym to refer to Islamic State.
$100 is currently valued at around 118,000 dinars according to the official rate set by the Iraqi government.
According to the owner of a currency exchange bureau, when the same amount is bought with 25,000-dinar notes, the largest bill in circulation, it costs 127,500 dinars. When purchased with 250-dinar notes - the smallest bill available, the rate rise to 155,000 dinars. Islamic State prefers the larger bills as they are easier to transport.
The statements were confirmed by three other currency traders however the reports could not be verified by the media independently.
While it is not yet clear that if these practices extended beyond Mosul, the largest city under Islamic State control, to other territories in Iraq and Syria, it is also not possible to determine how much money Islamic State is making by controlling the currency market.
Since Islamic State has threatened to confiscate the money of anyone who breaks the rules, parallel trading at more competitive rates is very limited, traders said.
"Nobody would risk it," one of the traders told Reuters.
Islamic State operates a cash economy and controls most means of production, including factories producing cement, flour and textiles as it is frozen out of traditional financial institutions by international sanctions.
(Source:www.reuters.com)