Is ISIS running out of money?

How ISIS makes its millions
How ISIS makes its millions

ISIS militants are having to work harder to finance their war in Syria and Iraq as low oil prices and Western military action choke off a key source of income.

Oil revenue helped fund ISIS' rapid land grab in both countries, but the sharp fall in prices late last year, and the discounts the terrorist group has to offer buyers, are cutting into that stream of cash.

"The collapse in international oil prices since mid-2014 is likely to have pushed down their margins still further, reducing oil's contribution to the extremist group's overall income," risk consultancy Verisk Maplecroft said in a report this month.

ISIS still controls the majority of Syria's oil fields -- about 60% of the country's production. But Western air strikes targeting the group's oil assets have damaged its infrastructure, destroying wells, makeshift refineries producing gas and diesel, as well as fuel convoys.

Verisk Maplecroft estimates that the group's oil income has plunged to around $500,000 a day from as much as $1.6 million last summer.

Related: Is ISIS the most successful terrorist brand ever?

The killing of ISIS commander Abu Sayyaf during a raid by U.S. special forces in Syria last week is also likely to hit ISIS funding.

Pentagon officials say Abu Sayyaf was in charge of oil and gas financing, and had taken an increased role in ISIS operations, planning and communications.

With oil income falling, ISIS has been forced to look elsewhere for cash.

Experts say the group now relies more heavily on "taxation" -- effectively extortion -- within its territory.

Verisk Maplecroft said ISIS is imposing a tax of up to 50% on Iraqi government salaries, which Baghdad has continued to pay to many public sector employees now living in areas controlled by the terrorist group.

"It is estimated that this de facto income tax alone has raised the equivalent of hundreds of millions of dollars," according to the report.

Vehicles passing through ISIS territory are being charged 10% of the value of their cargo, while shops must hand over 2.5% of annual revenue, the risk consultants said.

But the tax system may be sparking a backlash against ISIS from people who have seen public services collapse. The report cites Mosul, the largest city under ISIS' control in Iraq, where water and electricity supplies have been severely curtailed under ISIS rule.

Related: 'Money, guns, girls': How ISIS recruiters win in the West

-- CNN's Tadhg Enright contributed to this article.

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