Drawing from 140 recently declassified documents, this report comprehensively examines the organization, territorial designs, management, personnel policies, and finances of the Islamic State of Iraq (ISI) and al-Qa'ida in Iraq. Analysis of the Islamic State predecessor groups is more than a historical recounting. It provides significant understanding of how ISI evolved into the present-day Islamic State and how to combat the group.

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Foundations of the Islamic State

Management, Money, and Terror in Iraq, 2005–2010

by Patrick B. Johnston, Jacob N. Shapiro, Howard J. Shatz, Benjamin Bahney, Danielle F. Jung, Patrick Ryan, Jonathan Wallace

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أُسُس تنظيم الدولة الإسلامية: الإدارة، والمال، والإرهاب في العراق، من عام 2005 إلى 2011

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Research Questions

  1. How did ISI organize itself?
  2. How did ISI raise revenue, handle expenses, and pay wages to its personnel?
  3. How did ISI train and allocate its membership?

Foundations of the Islamic State: Management, Money, and Terror in Iraq, 2005–2010 draws from more than 140 recently declassified documents to present a comprehensive examination of the organization, territorial designs, management, personnel policies, and finances of the Islamic State of Iraq (ISI) and al-Qa'ida in Iraq (AQI), both predecessors of the Islamic State. These records paint a clear picture of ISI practices and standard operating procedures. Leadership consciously designed the organization not just to fight but also to build an Islamic state governed by the laws dictated by its strict Islamist ideology. ISI was a vertically integrated organization with a central management structure and functional bureaus. It sought to replicate these structures at multiple lower geographic levels across territory. Each geographic unit had substantial autonomy to pursue the group's strategic objectives but was required to send frequent reports to the group's leadership; the central organization used these reports to inform decisions and provide strategic guidance. ISI paid its personnel a wage that would draw true believers rather than opportunists; trained and allocated its membership with an eye toward group effectiveness; raised revenues locally through diversified sources; and was able to maintain itself, albeit at much reduced strength, in the face of a withering counterterrorism and counterinsurgency strategy put in place by its opponents, starting in late 2006.

An analysis of the Islamic State predecessor groups is more than a historical recounting. The lessons from examining the group's history are useful for setting expectations about the strengths and vulnerabilities of the Islamic State and its ability to combat its opponents, designing a coordinated and effective campaign against it, and understanding why it might be able to survive such an effort and sustain itself in the future, albeit perhaps at a lower level of threat. Defeating the Islamic State will require persistence. The record of counter-ISI operations from 2006 through 2010 shows that military action and political accommodation can work together to degrade the group substantially, if not defeat it.

This report is a joint effort among the RAND Corporation, the Empirical Studies of Conflict Project at Princeton University (esoc.princeton.edu), and the Combating Terrorism Center at West Point (www.ctc.usma.edu).

Key Findings

ISI Adopted a Vertically Integrated Bureaucratic Model

  • ISI's bureaucratic model looked like the ideal structure al-Qa'ida operatives described in memos, but ISI replicated that structure at local levels to implement territorial control.
  • By 2008, ISI had subdivided Iraq into specific sectors but was struggling to fill its designated positions at the subnational level.
  • ISI allocated human capital rationally, with the suicide-bomber corps dominated by foreigners (more likely than Iraqis to be fanatical believers in the group's ideology) and with intelligence and security personnel (where local knowledge was critical) dominated by its Iraqi members. However, the majority of foreign fighters were not suicide bombers.
  • ISI's management and information reporting requirements appeared quite systematic for an ostensibly covert militant organization.

As with the Present-Day Islamic State, ISI Demonstrated Sophisticated Financial Management

  • The salaries and other compensation ISI paid to its members seem designed for an environment where labor was plentiful and the organization needed to attract loyal members and screen out opportunists and spies.
  • ISI's monthly payroll consistently consumed the largest single portion of its revenues. ISI had a well-developed payroll system with clearly defined salaries.
  • There was significant personnel mobility within ISI. Turnover was high, and the group frequently reassigned members to different military units or back-office positions.
  • ISI aimed to raise money locally, largely from criminal activities but also partly from activities that resembled state action, such as taxation.
  • ISI placed a premium on local fundraising because that gave it maximum control. Fundraising also allowed the group to look more like a state; its taxation activities resembled what any state might do.
  • ISI leadership sought substantial oversight of the group's finances and put in place detailed record-keeping requirements for tracking and auditing purposes.

Recommendations

  • Any counterpersonnel strategy against ISI must strive to eliminate entire layers of high-level and midlevel managers.
  • Capitalizing on any fissures within the group will be essential to defeating the Islamic State and ensuring that the group does not reemerge.
  • If the coalition can cause a cutoff of salaries, it could harm morale within, and support for, the Islamic State for a failure to deliver on promises made to recruits. This could be even more damaging if combined with evidence that some leaders were embezzling money.
  • To broaden the fight against the Islamic State's revenues, the coalition will need to identify the intermediaries and end purchasers of the group's products and either target these people or sanction them and their financial institutions.
  • The coalition has elevated efforts to interdict oil transport, including targeting oil infrastructure and trucks. Other measures could include destroying road entrances to oil fields and giving heightened attention to any oil trucks leaving the Islamic State territory. Any such truck must pass through checkpoints or border crossings and should be noticed or recorded, suggesting official complicity. Further investigation into how such trucks are able to get through checkpoints is merited and official complicity should be addressed.
  • Stop the flow of foreign fighters in both directions: Enhance border controls in transit countries (Turkey, most especially); more effectively scrutinize potential members from source countries; stop people from getting first-hand training and becoming integrated directly into fighter facilitation networks; and improve information-sharing among intelligence and law-enforcement organizations, both within and across countries.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    The Islamic State of Iraq and the Iraq War

  • Chapter Three

    The Organizational Economics of Insurgency and Terrorism

  • Chapter Four

    Organizing Insurgency and Terrorism in Iraq

  • Chapter Five

    Foreign Fighters, Human Capital, and Terrorism in Iraq

  • Chapter Six

    Islamic State of Iraq Compensation

  • Chapter Seven

    The Fates of Terrorists: Tracking Militants' "Career Paths"

  • Chapter Eight

    Assessing the Islamic State of Iraq's Finances: The Governorate Dimension

  • Chapter Nine

    Assessing the Islamic State of Iraq's Finances: Central Activities and Financial Control

  • Chapter Ten

    Conclusions and Implications

  • Appendix A

    Captured Documents: Description, Methodology, and Analysis

  • Appendix B

    Research on Covert and Clandestine Organizations

  • Appendix C

    Compensation Documents List

Research conducted by

This research was sponsored by the Defense Advanced Research Projects Agency and conducted within the International Security and Defense Policy Center of the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community. Additional partners and funders are listed in the acknowledgments.

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