We hear a lot about its cash flows, which are surely large for a terrorist group, but tiny for a state. Early on in ISIL’s existence, one heard a great deal about its oil revenues, and recent estimates apparently extrapolated from one province in one month put revenues at $500 million per year from oil alone, yet oil and gas extraction is not sustainable as a funding source. Oil production is dropping because the group lacks engineers and because its infrastructure is being bombed. And what oil ISIL can sell must go at an enormous discount relative to world market prices, because of sanctions and physical constraints on transporting the product to world markets.

An alternative source of funding that has received much attention is the looting of antiquities, since it controls territory in an area profoundly important to world heritage. But looted treasures cannot possibly fill this kind of gap. In the long run supply is limited; in the shorter run, if the group flooded the market with antiquities to raise cash (which they haven’t yet done, as far as we can tell) prices would crash unless demand for such goods is highly elastic, which seems unlikely.

So ISIL is left with what has been revealed as its main funding source: extorting funds from the population under its control. This is standard practice for rebel groups, showing up with guns at roadblocks and businesses and demanding payment or confiscating goods. But extortion, too, is unsustainable as the most productive residents flee, taking their capital with them (both human and physical), inflation erodes the value of taxes that are collected and people exposed to excessive taxation stop investing in productive activities.