they have paid the price for the city's growth with less and less space to call home that story and so much more on our website, al jazeera.com. >> in a little more than two years i.s.i.l. has become a major player in the conflicts raging in the middle east. in that time the group has overtaken al qaeda as the biggest foreign terrorist threat in most americans. smuggling of oil mountain territory it controls in are syria and iraq. howard shatz is a senior economist at the think tank rand, studied organizational structure ever i.s.i.l. when it

was still known as al qaeda in iraq. why it's able to maintain its start as the world 's most affluent terrorist organization. i.s.i.l.'s got a ready source of revenue that does not depend as much on a donor network, does not depend on countries that give you money through the back door. they've got a bit of a business going. >> slu >> absolutely. they have always been that way. right now their revenue portfolio includes oil as you said and then also ex tors and extortion and taxation much as a state would do. >> ransom, a major part of their revenue? >> ransom has always been a nontrivial but small part of it. nothing compared to extortion,

oil, money they stole from banks whether they took over cities throughout iraq and syria. >> you have estimated last year that i.s.i.l. produced over 150,000 barrels of oil a day, that's huge. that amount has changed significantly since then. what's their current production load and what's the best way to cut into that revenue stream? >> so the best estimates of currently production are around 30 to 40,000 barrels per day. at least that was before october, the major air strikes tidal wave 2 started. the number of ways to cut into their revenue is, stopping them from producing, then stop them from moving that oil, that was the air strikes were about, they couldn't move the oil beyond the trucks. other than that, stop them from smuggling the oil to the potential buyers, the buyers could be anywhere.

a large portion of their cells are within their territory, very difficult to stop. and then sales to syria and beyond their territory to other countries. >> back in august 2014 when the oil strikes began, back then oil was over $100 a barrel. now it's only $35 a barrel. having? if you buy oil from i.s.i.l. you pay at substantial discount than you would in the regular market. >> absolutely. when the global oil price fell, so did the price they would receive for their own oil. refined products are also subject to world pricing. whatever they sell inside their territory is a little bit different because that's delinked. they basically have a monopoly. but threefn there ar

even there, there are connections to the world price. it also hurt iraq a great deal, it wasn't a one way bet against i.s.i.s. >> family members who have been killed, you are right if enough family members are captured and killed these prices start to add up. tell me how that works into a targeted strategy of defeating i.s.i.l. >> sure. that's a side benefit to a targeted strategy. what we did find both when they were al qaeda in iraq and then islamic state of iraq and then when they were i.s.i.l. they basically have a promise. they have a payroll and they continue to pay family. payroll was based on family size. they continued to pay families if a person was detained or killed. what we saw was that their payroll costs were mounting throughout the 2000s when u.s. operations became very large. so they either stopped paying, that would hurt morale, they are

breaking their promises to their members' families and it also hurt operations when they were running low on money. we found a statistical relationship between money they spent to a certain area and level of attacks in that area. so as we degrade their ability to raise money, we are also degrading their ability to conduct operations and hurting morale, which the members are finding their primaries are not good. >> the lower price of oil, the fact that ransom is a smaller part of things, the limits we are trying to put on money going in and out, and there are changes within the gulf states that make it a crime to send money to i.s.i.l. fighters, are they substantially degraded from where they are a year ago? >> they are degraded, i wouldn't say substantially degraded. air strikes, before them it was

estimated they were making as much as $40 million a month. let's say even if these air strikes cut them to $20 million a month, and we really don't know the overall effect, that's still a lot of money and probably more than they are paying out in payroll. the oil is just one piece, whatever we do with oil has not touched the money they raise from extortion and taxation. we have degraded them, they have less money but ultimately the way to cut their finances is to take back territory. >> howard shatz is a senior economist at the and corporation and professor at the party and graduatrandgraduate school. >> coming up i'll talk about if drastic measures could yield the moss dramatic results.

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♪ in a little more than two years isil has become a major player in the conflicts rage in this middle east n that time the group has overtake end al qaeda as the biggest foreign terrorist threat in the mind of most americans isil's medioric rise has been financed in part by smuggling of oil in the territory it controls in syria and iraq. howard is a senior economist at the think tank rand and studies the finances and organizational structure of isil back when it was still known as al qaeda in iraq. he says oil is isil' main source of revenue for eights operations which is why it's ale to maintain its stature at, quote, the world's richest terrorist organization. good it see you, thank you for being with us, that's very distinct difference between al qaeda and isil. isil has a ready source of revenue that does not depend as much on a donor network, does not depend on countries that give you money through the backdoor. they have got a busines bit of a business going.

>> absolutely. and they have always been that way. donations have always been a small part of their total revenue port joel folio. right now it includes oil, as you said and then also extortion and taxation, movement like a state would do. >> ransom has become a smaller part or is till a major part of their revenue? >> ransom has always been a nontrivial but small part it have. nothing compared to extortion, taxation, nothing compared to oil. nothing compared to the amount of money they stole from banks when they took over cities throughout iraq and city syria. >> there through your work with rand you estimated last year that isil produces over 150,000-barrels of oil a day. that's huge. that am has changed significantly since then. what is their current production load? and what is best way to cut in to that revenue stream? >> so the best estimates of current production are around 30 to 40,000-barrels a day. at least that was as of october

before the major wave of air strikes known as tidal wave two started. the best way to cut in to that he have knew, there are a number of ways, one way is to stop them from producing. second way is to stop them from moving the oil. and that's really what those air strikes were about. to stop them from being able to move the oil from the fields, the trucks and then from destroying the trucks so they couldn't move the oil beyond that. other than that, stopping them from smuggling the oil to potential buyers and those potential buyers may be anywhere, right now all of the evidence indicates that a large portion of their sales are within their territory. very difficult to stop. but then sales also to syria and beyond their territory to other countries. >> back in august 2014, when the air strikes began, back then oil was over $100 a barrel. oil is now $35 a barrel, what kind impact is that having on them? i would suppose if you are buying oil from aisles you are buying it at a substantial discount to the price that you

would pay on the world market. >> absolutely. that's right. because there is much more risk involved. you are engaged in an elicit act. when the global oil price fell so did the price that they would receive for their oil. now, in terms of refined products any refined products they sell outside of their territory are also subject to world pricing. whatever they sell inside their territory is a little bit different because that's delinked they basically have a monopoly even there there are connection to his the world price that giants decline in world oil prices hurt them. it also hurt iraq a great deal. so it wasn't just a one-way bet against isis. >> you race the issue you of isil's payroll that includes the families of members who have been killed. you write that if enough members are captured and killed these costs start to add up. tell me how that work in to a targeted valencia strategy of competing isil. >> sure. that's side benefit to a

targeted strategy. what we did find both in we were al qaeda in iraq and then islamic state of iraq and then aisles, is that they basically had a promise, they have a payroll and they continued to pa pay families. payroll was based on family size, they continued to pay families if their personal was captured or killed. when u.s. operations became very large they eager stopped paying and that would hurt morale, they are breaking their promises to their members' families and it also hurt their operations when they were running low on money, we found a statistical relationship between the amount of money that they sent to a specific area and the level of attacks in that area. so as we degrade their ability to raise money, we are also degrading their ability to conduct operations, and we are hurting their morale because members are finding that their promises are not good. >> so at this point, for i'll you are describe today attacks

on oil infrastructure, transport inning infrastructure are. immaterial list trying to put on money getting in out and changes in some of the gulf states in terms of law that now make it a crime to send money to isil fighters, are they substantially did hdegraded family from wherey were a year ago? >> they are degraded. ill not say substance trail degraded. i the recent oil strikes harmed their ref news, before the airstrikes it was estimated they were making as much as $40 million a month. let's say even if these airstrikes cut them to $20 million a month. and we really don't know the overall effect. that's still a lot of money and still probably more than they are paying out in payroll. the oil revenue is just one piece. and it hasn't, whatever we have done with oil has not touched the money they raise from extortion and taxation so we have degraded them. they have less money, but

ultimately the way to cut off their finance is to take back territory. >> howard, good it to talk to you, thanks so much for all of this information, howard a senior economist at the rand corporation and a professor at the party rand graduate cool. bleeding isil dry is one take bombing isil territory is another. coming up i'll look at whether the most drastic measures could yield the most dramatic results.

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>> the fight against i.s.i.l. has dominated recent presidential debates. on the republican side, ted cruz calls to carpet bombing the territory. and be ben carson wonders, is the strike quad adequate. for more on the administration's approach al jazeera america's national security correspondent jamie mcintire joins me from washington. jamie, good to see you. let's begin with the president's plan, coalition air power. a small number of special operations forces and help for local forces. give us a report card if you will on the u.s. fight against i.s.i.l. for 2015. how would you grade it and why? >> reporter: well, i guess so far as giving a grade, would i give it for satisfaction a c minus d plus. for effectiveness, maybe a

higher grade maybe a b plus it's not perfect and i say that because this is a very oven satisfying strategy. i don't know how many times i saw members of congress go up to the hill and basically urge very frustrated members of congress to be patient, that this strategy is going to work in the end. but i have to say a year into this now it's just beginning to get the sense of maybe we're turning the corner, maybe the strategy of squeezing i.s.i.l. on the ground, gradually denying them territory, enabling those local forces especially now that we're seeing that the iraqi forces are able to do more in their own backyard, in ramadi. gives you some indication that perhaps this strategy is beginning to produce the desired result. >> jamie talk to me about two months ago the president authorized the sending of several dozen special operation forces ground troops if you will to syria. the administration said at the time that they would advise local forces fighting the

islamic state and not play odirect combat role. so what role are they playing in this fight? >> well, you know a lot of people when they heard they were going to go to syria and fight i.s.i.l, what could 50 or fewer special operations forces could do against i.s.i.l? i think they also had the idea if these force he were not on the front lines they would be calling in air strikes or providing tactical support. what they are really doing on the ground there is looking for forces that the u.s. could or should support. the peshmerga forces in the north, u.s. has a long relationship with them but they have no rich with these troops with these fighters in syria. they needed to get people on the ground, look people in the eye, try figure out who's worth supporting who should we drop ammunition to. >> right. >> who is actually effective on the ground and who by the way might not be changing sides at the time of battle turns. >> whether these critics are out

there saying, we don't know who to give the information too, are you talking about 50, there a likelihood that more would be sent? >> if they are able to find the troops that the u.s. is support and they are having success and the u.s. can give them ammunition and help them more, the u.s. could send in more special operations forces. what they're doing in iraq which is occasionally partnering with them on special raids. right now the u.s. is not at the level of comfort with the fighters in syria as it is with the level of fighters in iraq. >> let's talk about cost. the pentagon says we have spent more than $5.3 billion, that roughly comes out to $11 million a day, a lot of money. and americans are wondering what has all the money accomplished. let's think about this in terms

of what the military targets have been and how successful they have been. >> i don't have to tell you ali that war is an expensive business. a new aircraft carrier is moving into the region. an aircraft carrier even when it's not at war, costs about $1 million a day to operate. some of the aid on the ground, you know the u.s. has had more than 8,000 air strikes, coalition air strikes since the starts of this. and they've become more and more effective as the u.s. has gotten better intelligence. we have seen more and more strikes that go against i.s.i.l.'s oil operations not just those fuel trucks they bombed, but to cut off the flow of funds. these air strikes have been very effective in enabling the troops ton ground move. the only way they could make progress. you can see that because the contrast is in afghanistan where

the u.s. is not providing air strikes to local afghan forces fighting taliban, they are having a heck of a time, they are not seeing the kind of progress as the forces in iraq. >> the actions since 2014 are starting to pay dividends but there is nothing about criticism from obama's own party and the republicans, is it staying the course with respect to a certain strategy? >> it certainly looks like it. it certainly are looks like there will only be minor changes to the strategy, the liberation of ramadi and fallujah and raqqa. as far as the presidential campaign goes, i think anybody would do this, there might be lots of ideas floated out, but once that candidate is actually

in the office of president and has to make those decisions a lot of times it looks different. not unusual for some of the items floated during the campaign and touted during the campaign to be discarded after the oath of office. >> it's fascinating to me, at these debates, because i go to them all, wow, that's the first time i've ever heard that item. any administration where there's a war of some sort going through, and thought through these veenlts. these eventualities. >> we're here to fully get into the nuances of everything that's going on, not just in this country, but around the world. getting the news from the people who are affected. >> people need to demand reform... >> ali velshi on target.

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