The Economics (and Accounting) of Al Qaeda in Iraq

The Boston Globe:

... contrary to speculation that Al Qaeda in Iraq was reliant on international donations, this wasn’t a source of funding either. The group was self-financing. In fact, the core organization of Al Qaeda in Iraq in Anbar province was so profitable that it sent revenue to associates in other provinces of Iraq, and perhaps even further afield. The group raised millions of dollars annually through activities such as simple theft and resale of valuable items such as cars, generators, and electrical cable, and hijacking truckloads of goods, such as clothing. And their internal financial record-keeping was diligent, with all the requirements of expense accounts in regular businesses. A central unit of Al Qaeda in Iraq’s hierarchy required operatives to keep records of even the smallest outlay and to turn over their “take” to upper-level leaders, who made the spending decisions.

These carefully monitored expenses occurred in the context of what was literally a workforce. While people tend to think of Al Qaeda as simply a band of fighters, in reality there was a large organization needed to facilitate attacks and create support within the local community - all of which required money. As such, Al Qaeda in Iraq maintained an expanding payroll of members, imprisoned members, families of members, and dead members’ families, with ever fewer fighters and revenue producers. On the hook to provide for many local Iraqis, it had to resort to increasingly unpopular methods for generating revenue.

Beyond these daily expenditures, Al Qaeda in Iraq had big-ticket expenses. Launching attacks was one recurring overhead cost. An attack involved salaries for operatives, safe houses, transportation, weapons, and a crude form of life insurance for the wounded or for families of those killed. (By contrast, most civilian households in Anbar lacked any form of insurance.) Given these pressures, cash flowed fast in and out of Al Qaeda in Iraq’s central command in Anbar. About every two weeks, Al Qaeda doled out funds to pay not only for attacks, but also for housing, medical, and bureaucratic needs.