RAND Report Finds Wrecked Economies Under Islamic State

(CN) — Electricity shortages, increased violence and skimpy crops impede local economies in Islamic State-held cities, according to a RAND study that analyzed the “caliphate” using satellite imagery.

The appeal of the Islamic State rests, in part, on its desire and ability to govern captured areas, an approach that distinguishes it from similar groups. Hindering its capacity to manage such regions, however, are U.S.-led military efforts to wrest control back from the group, which have sparked greater economic instability in ISIS-controlled regions, according to the RAND Corp. report, “When the Islamic State Comes to Town: The Economic Impact of Islamic State Governance in Iraq and Syria, published Wednesday.

At its peak, the Islamic State controlled large portions of Iraq and Syria, containing several million people. While the group devoted considerable resources to governing its capitals of Raqqa, Syria, and Mosul, Iraq, cities under its control experienced an overall 23 percent reduction in economic activity, according to the study.

During the Islamic State’s peak territorial control and decline through mid-2016, local economies experienced decay across multiple sectors, which RAND was able to measure using satellite-derived data.

“The Islamic State’s inability to sustain a large-scale prosperous proto-state represents an institutional failure by the group to capitalize on a vast territory, historically weak governments, potentially sympathetic local populations, and a massive financial war chest,” said lead author Eric Robinson, a research programmer and analyst at the nonpartisan research organization.

RAND’s assessment focuses on the Islamic State’s ability to manage local economies by taxing them, for a major portion of its revenue, and its efforts to gain broader support and more recruits by touting prosperity within its so-called caliphate.

Early in the conflict, the Islamic State successfully aided the economies of Raqqa and Mosul, which were to be the heart of the caliphate the group hoped to establish. But it was unwilling or unable to support economies in less secure or contested areas in its territory.

While the Islamic State’s ineffective governance of these cities was partially to blame, the report finds that the primary factor driving economic decline was the group’s inability to defend controlled areas from military opposition.

“Our analysis suggests that it is too simplistic to blame stagnant economic conditions solely on the quality of the Islamic State's governance,” said co-author Daniel Egel, an economist at RAND. “The U.S. and coalition military campaign against the group has been integral to their failure to build prosperous local economies and develop a sustainable caliphate."

In addition to satellite imagery, the report uses remote sensing data to establish quantitative indicators of economic activity in the group’s territory, including market and industrial activity, commercial vehicle traffic and labor supply.

The analysis provides insights into the stabilization needs of liberated areas, according to the authors, which the coalition battling the Islamic State can use to restore economic activity and normal life within the region.

(Photo by DigitalGlobe shows damage to an industrial area in Mosul in February 2016.)

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