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Middle East Experts Examine War Economies in Libya, Syria and Iraq

By Carrie Snurr

Countries in the Middle East and North Africa have struggled with insurgent groups generating profits in war economies through smuggling, extortion and seizing control of commodities such as water.

Lina Khatib, head of the Middle East and North Africa program at Chatham House, focused on the war economy of Syria, which has been locked in a brutal civil war since 2011 at an Oct. 19 panel discussion. She is currently working on a project for Chatham House on Syria, focusing on what is happening in Syria locally.

Hay'at Tahrir al-Sham, a militant group that has been involved in fighting in Syria, has in the past relied on donations to sustain its operations and is now beginning to turn buy and create private companies as a way for the group to sustain itself without relying too much on outside groups, Khatib said.

“It has taken control of electricity and water provisions in Idlib,” she said. “This is not because it wants to provide services but because it wants to charge citizens for the provision of these services. And of course being in charge of electricity and water gives it a large degree of control over the population.”

Lina Khatib Middle East Institute Wartime Economies
Lina Khatib with Chatham House says the war in Syria has led to insurgent groups to take advantage of instability by buying goods in government-controlled territories and then selling them at an inflated price in rebel-held regions. (Photo: Middle East institute)

Khatib added that the main method of raising money for the groups in Syria is through trade between rebel-held areas of Syria and government-held areas. The groups can take advantage of buying cheaper goods in government-held areas and then selling those goods at much higher prices in rebel-held regions.

The Middle East Institute hosted the panel at its headquarters. Khatib and two other scholars with Chatham House explained how insurgent groups have utilized and profited from ongoing war economies in North Africa and the Middle East. Paul Salem, senior vice president for policy analysis, research, and program, moderated the discussion.

The panelists defined the term war economy as the economy of a country during war time, not simply an economy that contributes to war.

Each speaker focused on one of the three countries, explaining how insurgent groups such as the Islamic State have utilized war economies to sustain their operations through means such as extortion and smuggling.

Tim Eaton, a research fellow with Chatham House, focused on the war economy in Libya and explained that insurgent groups in the country can sell goods through smuggling, rents and extortion in territory that groups control and by predating on revenues from the state by buying goods at official rates and then selling on the black market.

Middle East Institute Wartime Economies
The panel focuses on war econmies in the three nationa of Iraq, Libya and Syria, with each panelist discussing a different country and how the war economy functions in that country.  (Photo: Middle East Institute)

“When we look more broadly, Libya has the perverse distinction of, perhaps, being the only country that seems to fuel its own conflict,” Eaton said. “Everybody’s essentially getting paid. The state payroll remains largely unaudited. Essentially, everybody continues to draw a salary. At the same time the activities that they undertake are often divisive.”

He added that many of the dynamics of the Libyan economy do not get enough attention, saying that migrant smuggling receives attention but other aspects don’t receive that attention.

Libya has become known as a kind of gatekeeper for Europe’s migration crisis. Many migrants fleeing violence countries such as Syria and Yemen have flowed through Libya in attempts to reach Europe through smugglers. Thousands of migrants have died in their attempts to cross the Mediterranean.

Renad Mansour, an academy fellow at Chatham House, focused on Iraq and it’s collapse of the unitary state under deposed leader Saddam Hussein. He spoke more on the rise and essential defeat of the Islamic State in Iraq and the aftermath of that defeat.

“We’re trying to understand this theoretical term, the war economy, and its impact of state-building and its impact on peace, and stabilization,” Mansour said. “And see if we can extrapolate some commonalities. These countries face the same kind of problems.”

Tim Eaton Middle East Institute Chatham House Wartime Economies Libya
Tim Eaton with Chatham House defines a war economy as being an economy in a country at war, rather than just and economy that contributes to war. The panelists use this definition when describing their country's war economy. (Photo: Middle East Institute)

The international community has agreed to defeat the Islamic State through bombings, he said. They haven’t come to a political agreement and have yet to reach the economics of Iraq after essentially defeating the Islamic State in the country.

Most of the organization of the Islamic State in Iraq were opportunists who saw they could profit from smuggling routes and other means of making money through ISIS. He added leaders were focused on the ideology of the Islamic State but many who joined the group would easily join with another group if that became more profitable.

“Most of them will turn back to whoever is paying,” Mansour said. “And we’ve seen that in Iraq itself. David Petraeus’ idea wasn't just to bring more troops to Iraq but to also start paying the tribes. And that was ultimately the fundamental carrot that brought everyone back to the state.”

He stressed how job creation could bring back the people who went to join the Islamic State because it offered more lucrative opportunities.

The Islamic State has been able to sell and trade goods such as antiquities and oil. The group also collected money through creating taxes, licenses and fees in the areas it tried to build its state. It has also used state resources.

This is where the war economy blurs. If you look at what was happening in Mosul legitimate political parties and state actors were part of that economy,” he said.“All of them were engaging with this war economy. A company associated with a political party would provide the telecommunication networks for the Islamic state while their fighters were fighting the Islamic State.”

He added the Islamic State has been considered to be the most wealthy terrorist organization in the world. The Islamic State has utilized already established smuggling routes to bolster its operations.

Renad Mansour Middle East Institute Wartime Economies Iraq
Renad Mansour explains how the Islamic State has been able to collect money in Iraq through creating fees and taxes in areas it's siezed and, more recently, through investing in legitimate businesses through middle-men. (Photo: Middle East Institute)

“With the loss of territory, they’ve had to change their economic resources, their financial models, with the anticipation that looking at what’s happening in Iraq today, there’s going to be no political solution, ” he said. “‘We’ll be back, let’s invest our money.’ So what you see is investment into legitimate industries.”

The Iraqi government has been working on stemming the ISIS war economy. He added that they have not been successful because all the organizations working to stem money flowing to the Islamic State have not been working together. The weakness of the Iraqi government is what has kept the war economy operating.


Carrie Snurr is an editorial intern for The Washington Diplomat.




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