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CHILDREN AND FAMILIES The RAND Corporation is a nonprofit institution that EDUCATION AND THE ARTS helps improve policy and decisionmaking through research and analysis. ENERGY AND ENVIRONMENT HEALTH AND HEALTH CARE This electronic document was made available from INFRASTRUCTURE AND www.rand.org as a public service of the RAND TRANSPORTATION Corporation. INTERNATIONAL AFFAIRS LAW AND BUSINESS Skip all front matter: Jump to Page 16 NATIONAL SECURITY POPULATION AND AGING PUBLIC SAFETY Support RAND SCIENCE AND TECHNOLOGY Purchase this document TERRORISM AND HOMELAND SECURITY Browse Reports & Bookstore Make a charitable contribution For More Information Visit RAND at www.rand.org Explore the RAND National Defense Research Institute View document details Limited Electronic Distribution Rights This document and trademark(s) contained herein are protected by law as indicated in a notice appearing later in this work. 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PERFORMING ORGANIZATION Rand Corporation,National Defense Research Institute,PO Box REPORT NUMBER 2138,Santa Monica,CA,90407-2138 9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSOR/MONITOR’S ACRONYM(S) 11. SPONSOR/MONITOR’S REPORT NUMBER(S) 12. DISTRIBUTION/AVAILABILITY STATEMENT Approved for public release; distribution unlimited 13. SUPPLEMENTARY NOTES 14. ABSTRACT 15. SUBJECT TERMS 16. SECURITY CLASSIFICATION OF: 17. LIMITATION OF 18. NUMBER 19a. NAME OF ABSTRACT OF PAGES RESPONSIBLE PERSON a. REPORT b. ABSTRACT c. THIS PAGE Same as 116 unclassified unclassified unclassified Report (SAR) Standard Form 298 (Rev. 8-98) Prescribed by ANSI Std Z39-18 This product is part of the RAND Corporation monograph series. RAND monographs present major research findings that address the challenges facing the public and private sectors. All RAND mono- graphs undergo rigorous peer review to ensure high standards for research quality and objectivity. An Economic Analysis of the Financial Records of al-Qa’ida in Iraq Benjamin Bahney, Howard J. Shatz, Carroll Ganier, Renny McPherson, Barbara Sude With Sara Beth Elson, Ghassan Schbley Prepared for the Office of the Secretary of Defense Approved for public release; distribution unlimited NATIONAL DEFENSE RESEARCH INSTITUTE The research described in this report was prepared for the Office of the Secretary of Defense (OSD). The research was conducted in the RAND National Defense Research Institute, a federally funded research and development center sponsored by OSD, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community under Contract W74V8H- 06-C-0002. Library of Congress Cataloging-in-Publication Data An economic analysis of the financial records of al-Qa'ida in Iraq / Benjamin Bahney ... [et al.]. p. cm. Includes bibliographical references. ISBN 978-0-8330-5039-7 (pbk. : alk. paper) 1. Qaida (Organization)—Finance. 2. Terrorism—Iraq—Finance. 3. Terrorism— Finance. I. Bahney, Benjamin. HV6433.I722Q357 2010 363.32509567—dc22 2010028999 The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. R ® is a registered trademark. Cover image (right) by AP Photo / Petros Giannakouris. © Copyright 2010 RAND Corporation Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND documents to a non-RAND website is prohibited. RAND documents are protected under copyright law. For information on reprint and linking permissions, please visit the RAND permissions page (http://www.rand.org/publications/ permissions.html). Published 2010 by the RAND Corporation 1776 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 4570 Fifth Avenue, Suite 600, Pittsburgh, PA 15213-2665 RAND URL: http://www.rand.org To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: [email protected] Preface This monograph conducts a series of economic analyses on two col- lections of documents detailing the administration of al-Qa‘ida in Iraq (AQI) during 2005 and 2006 in Anbar province, Iraq. The doc- uments contain information on the group’s finances, payrolls, and organization. The records show that AQI was a bureaucratic, hierarchical orga- nization that exercised tight financial control over its largely crimi- nally derived revenue streams. Using attack reports and AQI’s spend- ing data, we find that attacks statistically increased at a rate of one per every $2,700 sent by the provincial administration to a sector group within the province, suggesting that AQI paid not only for materiel but also for important expenses related to organizational sustainment, such as compensation and rents. AQI members were paid less and simul- taneously faced a much greater risk of death than the general Anbar population, which suggests that financial rewards were not a primary reason for joining the group. Our findings imply that financial inter- diction is one useful tool for slowing and disrupting militant attacks, but that neither interdiction nor material demobilization incentives on their own will be effective in ending a militant group. This research was conducted within the Intelligence Policy Center of the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secre- tary of Defense, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community. iii iv An Economic Analysis of the Financial Records of al-Qa‘ida in Iraq For more information on the RAND Intelligence Policy Center, see http://www.rand.org/nsrd/about/intel.html, or contact the director (contact information is provided on the web page). Contents Preface ............................................................................. iii Figures ............................................................................. ix Tables .............................................................................. xi Summary .........................................................................xiii Acknowledgments .............................................................. xix Abbreviations .................................................................... xxi CHAPTER ONE Introduction ....................................................................... 1 Financing Militant Organizations ............................................... 2 Individual Returns to Militancy ................................................. 4 Empirical Work on Militant Finance and the Financing of al-Qa‘ida ....... 6 The Contribution of This Monograph ........................................... 8 How This Monograph Is Organized ............................................. 9 CHAPTER TWO AQI and the Political and Economic Environment in Anbar Province ......................................................................11 Anbar Province ....................................................................11 AQI: A Primer .....................................................................12 Politics and Security in Anbar ...................................................17 Tribes and Security in Modern Iraq ..........................................17 Insurgency, Tribes, and the Security Forces in Anbar Province: 2003–2007 .................................................................19 The Economy of Anbar ..........................................................25 v vi An Economic Analysis of the Financial Records of al-Qa‘ida in Iraq CHAPTER THREE Auditing al-Qa‘ida in Iraq .....................................................29 Area of Operations ............................................................... 30 AQI in Anbar’s Organization, Bureaucracy, and Division of Labor ........31 AQI’s Division of the Anbar Operating Area ................................31 The Bureaucracy of AQI in Anbar ............................................32 A Change in Emirs .............................................................33 Division of Labor ...............................................................33 Financial Flows ................................................................. 34 Revenue-Generating Activities ................................................. 34 Expenditures and Funding of Subsidiary Units ...............................39 Administrative Decisionmaking ............................................... 43 CHAPTER FOUR The Economics of AQI’s Compensation .....................................45 Payrolls .............................................................................45 Risk ................................................................................ 48 Per Capita Household Earnings ...............................................52 Household Earnings ............................................................53 Considering Discount Rates and Lifetime Payments ...................... 54 The Many Motivations of AQI Members ................................... 56 CHAPTER FIVE The Flow of Expenditures and the Pace of Attacks ........................57 Monthly Patterns ..................................................................59 Weekly Patterns ...................................................................61 Changes in Spending and Changes in Attacks ............................. 66 The Cost of Militant Activity..................................................67 Caveats to the Analysis .........................................................69 CHAPTER SIX Implications .......................................................................73 Implications About Organization and Financing Methods ..................74 Implications About Spending and Attacks .....................................75 Compensation as a Guide to Motivations ......................................76 Threat Finance or Threat Economics? ......................................... 77 Contents vii APPENDIX A. Anbar Province ..............................................................79 B. Time Line of Events in Anbar Province ................................81 Bibliography ......................................................................85

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