DTIC ADA534744: An Economic Analysis of the Financial Records of al-Qa'ida in Iraq

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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
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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
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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