Mosul: ISIL's Economic Engine
Mosul is the largest Sunni city in Iraq, with nearly two million residents prior to the Islamic State's takeover in June 2014. Mosul has long held strategic importance to ISIL and its predecessors, and the group is known to have operated underground in the city prior to taking total control in 2014. The city's economy is more diverse and developed than other cities once held by the Islamic State, with an active manufacturing and industrial sector, airport, and major regional markets. As such, it was a critical component of ISIL's extortion and taxation revenue streams which helped to fund the group's military operations and bureaucracy.
Mosul was not the only city targeted by the group in its summer 2014 offensive across Iraq, but it was the group’s most important strategic gain. In a matter of days, ISIL seized sovereign control over the city in June 2014, and used the victory as a symbol to legitimize ISIL leader Abu Bakr al-Baghdadi’s declaration of a global caliphate. ISIL organized a relatively expansive bureaucratic state in Mosul and exerted uncontested control over the city since its capture in 2014, until operations began to liberate the city began in October 2016. To this extent, Mosul provides a clear opportunity to identify the economic impact of the group in its most strategically important Iraqi city.
Nighttime lighting levels in Mosul fell nearly 89 percent in the first few months after ISIL takeover of the city, comparing January 2014 to January 2015 year-over-year estimates. Viewed from space — as collected in the video below — the city appears to quickly go dark.
ISIL established the Diwan al-Khidamat in Mosul responsible for providing public services to locals, including electricity, sanitation, water, and construction. The Diwan al-Khidamat struggled to sustain electricity supply in Mosul, in part because Baghdad was able to cut off access to the national power grid in Mosul soon after the militants seized it in June 2014. By January 2015, electricity was available for only two hours every three days, according to one local report. By January 2016, the Government of Iraq had resumed provision of hydroelectric power to Mosul from the Mosul Dam, relieving some of the power shortages in the city. But ISIL continued to leverage access to electricity within the city to its advantage, threatening in May 2016 to cut off access to electrical generators in the city as a means of controlling residents' access to outside news of coalition advances across Iraq, which threatened the group's information dominance over the city.
Under ISIL control, electricity levels at hospitals operate much closer to their pre-ISIL levels than other types of infrastructure. Mosul General Hospital, or the Ibn Sena Hospital, stands out in particular in that it turns almost entirely dark following ISIL's takeover of the city. Local reporting from January 2015 at this hospital noted that there was a shortage of doctors and medical supplies, and that the facility could no longer provide treatment for incoming patients. After March 2015, however, the hospital's lights turn back on and largely revert to the mean relative to other hospitals. This suggests some form of intervention around that time period, perhaps by ISIL, which was forcing doctors across the city to treat its wounded fighters.
ISIL attempted to prevent residents of Mosul from fleeing its caliphate, with limited success. Researchers used the Oak Ridge National Laboratory's ORNL LandScan estimates of Mosul's population in 2008, 2015, and 2016 to explore the extent to which Mosul's population fluctuated in response to ISIL's takeover of the city. This analysis was restricted to the urban core of Mosul as opposed to its full environs, so total population figures might fall slightly below other published estimates.
Pre-ISIL estimates of Mosul's population show that nearly 1.2 million people inhabited the urban core of the city in 2008. By February 2015, we estimate, the city's population fell by more than 300,000 people after only a year of ISIL control over the city, or nearly 30 percent of its pre-ISIL population. Between mid-2015 and mid-2016, researchers estimate, an additional 220,000 people fled Mosul. Combined, our most-recent estimates suggest that Mosul's population was nearly cut in half under ISIL's reign, even before massive flows of internally displaced persons began during Mosul's liberation. It suggests that despite ISIL's efforts to limit population movements out of the city, Mosul's residents still fled in the hundreds of thousands while the group retained total control of the city.
The timing of ISIL's takeover of Mosul in June 2014 roughly corresponds to the end of the local wheat and barley harvest, and before the fall planting season for these crops in preparation for the subsequent harvest in the spring of 2015. Researchers tracked the average Normalized Difference Vegetation Index (NDVI) for all areas within 5 km of Mosul's urban core, as a proxy for agricultural productivity in Mosul's immediate environs over time.
NDVI values in the spring of each year are driven by the extent of agricultural areas planted in the fall of the year prior, as well as irrigation and damage to these fields over the course of the winter. With this in mind, we see that our NDVI estimates suggest that ISIL's takeover of the city had little impact on the 2014–2015 growing season and harvest. Peak NDVI values in March and April 2015, representing the point in time during the growing season with the highest intensity of vegetated cropland, were roughly comparable to their 2014 pre-ISIL levels. Despite the disruption to seed distribution caused by ISIL's takeover of the Ministry of Agriculture in Mosul, Ninewa's farmers benefited over this growing season from an abnormally wet winter in late 2014 and early 2015.
As a result, the 2015–2016 growing season represents a cleaner test of ISIL's impact on agricultural activity around Mosul. By the time farmers began planting their wheat and barley crop in the fall months of 2015, ISIL had controlled local stockpiles of seeds and fertilizers for more than a year, and out-migration from the city discussed in the prior section likely reduced both the supply of farm labor and demand for agricultural goods. Rainfall during this growing season also approximated more-normal levels. As a result, we see a decline in agricultural productivity across Mosul in 2016, with peak NDVI falling nearly 18 percent below the prior two years' harvests.
Unlike other cities across ISIL's territory, Mosul experienced relatively limited ground fighting over the course of ISIL's tenure in the city before liberation in 2017. However, it received a steady barrage of coalition airstrikes against ISIL's leadership and financial nodes in the city. Researchers used crowdsourced analysis of commercial satellite imagery to map buildings, roads, and other infrastructure in Mosul that were damaged or destroyed over time under ISIL's control.
Analysis suggests that ISIL's takeover of the city, while relatively quick, did involve modest amounts of violence and destruction. Alternatively, this may have represented ISIL asserting its control over the city — particularly to the extent that the bulk of these instances of damage are concentrated on Mosul’s Left Bank, which is where most of the city's ethnic minorities lived pre-ISIL. By January 2016, the level of damage to the city had escalated moderately as a result of the growing air campaign against the group which included deliberate targeting of leadership and financial facilities within Mosul city.
ISIL moved to centralize Mosul's robust informal markets by constructing covered markets and instructing vendors operating open-air markets to work specifically from ISIL-owned locations within the city. This brought a considerable portion of Mosul's informal economy within the formal reach of the group's taxation schemes. At the same time, ISIL began providing certain services, such as free public transportation on buses, which might have decreased the cost of getting to and from markets and other businesses throughout the city. Indeed, reports from the spring of 2015 indicate that, "[d]espite the harsh social rules, the markets remain full... everything remains available there." For its part, ISIL capitalized on centralizing local markets by charging vendors an annual rent for stalls in its markets.
The best known of these markets is one in the larger Bab al-Toob market neighborhood (pictured above) near the center of Mosul’s Right Bank inhe western half of the city, and built directly on top of the ruins of the oldest police station in Ninewa province. ISIL converted a former police station into a market containing 60 shops selling fruits and vegetables.
RAND's analysis of Mosul's economy under the Islamic State precedes the beginning of operations to liberate the city in the fall of 2016. Therefore, it focuses on the effects of ISIL's uncontested control of the city for over two years since it first conquered Mosul in June 2014. Overall, researchers found that ISIL control had a relatively modest impact on the city's markets and commercial economy, which continued to function at pre-ISIL levels, but a larger detrimental impact on the city's electricity and rates of population outflow.
The city's economy is more diverse and developed than other cities once held by the Islamic State, with an active manufacturing and industrial sector, airport, and major regional markets. As such, it was a critical component of ISIL's extortion and taxation revenue streams, which helped to fund the group's military operations and bureaucracy.
After establishing control, the Islamic State moved to build a dense bureaucracy capable of implementing public services; maintaining local security; and raising funds through taxation, extortion, and direct intervention in local industries and factories. ISIL's investments appear to have paid off in some sectors of Mosul's economy. Analysis of satellite imagery suggests that Mosul's markets were more active after ISIL takeover than immediately prior, and that ISIL oversaw new construction in the main market area of the city. Thermal data on the heat output of industrial areas within Mosul (described in greater detail in the full report) also suggest that local factories remained active on average. Commercial vehicle traffic on Mosul's roads persisted. In all, commercial activity within Mosul appears to have persisted at levels roughly comparable to life before ISIL takeover.
Despite this early economic stability, Mosul began to show some signs of economic strain before efforts to liberate the city began in 2016. Analysis of nighttime lighting over Mosul reveals that electricity consumption was staggeringly low within the city; the group proved unable to bring fuel resources into the city to match pretakeover levels of electricity. Efforts by the Islamic State to directly intervene in Mosul's cement industry appear to have dampened thermal and nighttime lighting activity at one major industrial facility (the Badush Cement Factory) in the long run. Population estimates based on remote sensing data suggest that nearly 200,000 people fled the city between February 2015 and March 2016, despite Islamic State efforts to prevent residents of its caliphate from fleeing.
These conclusions about ISIL's economy during its control of Mosul are particularly relevant in comparison to RAND's analysis of ISIL's governance over Raqqah's economy. As the symbolic capital of the Islamic State, Raqqah represents a critical test of ISIL's promise to build an economically prosperous caliphate in a smaller, more ethnically homogeneous city than Mosul.