ISIS sees dramatic fall in revenue as air strikes target oil production

ISIS' rule in the Middle East could be weakening due to a significant drop in its monthly revenue, a US-based analysis firm said today.

The militant group is introducing new taxes and levies to compensate for its loss of income, which has dropped from around $80 million a month to $56 million, IHS said.

Masked, black-clad Islamic State fighters march along a street in a territory under their control in the Middle East in a show of force.Reuters

Oil production in Islamic State-controlled areas dropped to 21,000 barrels per day from 33,000 barrels between the middle of last year and March 2016. Analysts attributed this fall to damage sustained by production facilities as a result of air strikes by the US-led coalition and Russia.

"Islamic State is still a force in the region, but this drop in revenue is a significant figure and will increase the challenge for the group to run its territory in the long term," said IHS senior analyst Ludovico Carlino in a report.

The report said around 50 per cent of ISIS' revenue comes from taxation and confiscation, 43 per cent from oil and the rest from drug smuggling, sale of electricity and donations.

However, the territory under ISIS control has declined by about 22 per cent since mid-2014, while the population of that territory has fallen from 9 million to around 6 million. IHS senior analysis Columb Strack said this meant: "There are fewer people and business activities to tax; the same applies to properties and land to confiscate".

ISIS has therefore begun allowing people sentenced to corporal punishment under Shariah law to be spared in return for cash payments, the report said. It suggested this was a sign of financial insecurity.

"Our research has found that the Islamic State is increasing taxes on basic services and coming up with new ways to get money from the population," Carlino explained.

"These taxes include tolls for truck drivers, fees for anyone installing new or repairing broken satellite dishes, and 'exit fees' for anyone trying to leave a city".

ISIS is also apparently imposing fines on people who are unable to answer questions about the Qur'an correctly.

The report follows revelations in January that the militant group had cut fighters' salaries in half due to "exceptional circumstances" as the pressure of air strikes intensified.

Additional reporting by Reuters.