Islamic State (IS) continues to lose both power and territory, even though terrorist attacks in the Middle East are still taking place. But there is another development that should not be underestimated: the caliphate’s funding sources are gradually beginning to dry up. The money is running out to such an extent that, as reported by the US State Department, illegal operations with IS involvement have been increasing in Syria and Iraq. It must be acknowledged that if this is the case, a significant amount of credit should be awarded to Washington’s diplomatic initiatives.

The caliphate could still rely on significant control over the most devastated areas of Iraq and Syria until the end of 2016, but the situation has changed. Not only has IS lost the most important battles, it is also becoming increasingly fragmented, as explained by the memo issued by West Point's Combating Terrorism Center (CTC). The memo reports that IS is breaking up into small groups that are being forced to find new sources of funding. This interpretation is confirmed by the intelligence agencies of European countries that note an increase in border operations in the territories of Syria and Iraq by IS in order to obtain financial resources, exploiting the current destabilisation of the two countries. The caliphate is continuing to peddle drugs, but it has shifted its scope of action in Iraq and Syria to include relics, arms and ammunition, all of which are raided and then exported. But that's not all. Another one of IS’s objectives is to use the banking channels of the two countries to recycle money, a target that has met with great success so far.

The drop in funding for IS by the Persian Gulf countries, which have often flirted with terrorist organisations, was significantly affected by an event that took place in July of last year: the trip taken by the American secretary of state, Rex Tillerson, who headed to Qatar. During that visit, Doha signed a memorandum with Washington that aimed at shutting off capital flows to terrorist associations. According to United States diplomats, it was a considerable victory, which did however owe something to the fact that Qatar had previously been left isolated by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt. “Without this change of scenario”, a long-serving American diplomat admitted on request of anonymity, “it would have been impossible for us to negotiate any kind of agreement”. Evidence has shown that Tillerson, who acted in Qatar without direct instructions from president Donald Trump, demonstrated unexpected diplomatic skill and managed to shut down (at least for the time being) what was once one of the most important crossroads of international terrorism. Qatar had every interest in trying to rid itself of that perception on the global stage, and the US was no longer prepared to tolerate Doha effectively acting as a safe haven for terrorist associations.

As a sizeable cross-section of Washington’s diplomatic community pointed out, the American manoeuvring in Doha probably “came late”. And the next move to stem international terrorism is still very much up in the air. It may turn out to be true that Doha is on the path to redemption, but one should not make the mistake of considering Qatar to be the “Israel of the Gulf”, as Seth Frantzman of The Hill reminded us. And it is equally true that the other countries in the area are still very ambiguous in their loyalties. Saudi Arabia, the United Arab Emirates and Bahrain haven't taken specific sides in relation to the indirect funding of terrorism. Specifically, according to American cables, Saudi Arabia remains the main funder of the Taliban, al-Qaeda, Lashkar-e-Taiba and the al-Nustra front.

Conversely, as reports published in the recent years by the Combating TerrorismCenter remind us, there are still wells the caliphate can sound. Three areas have attracted the attention of counter-terrorism experts in the US Marines: Turkey, South East Asia and Morocco. In Turkey, President RecepTayyipErdogan initially backed two terrorist organisations – Islamic State and al Nusra – during his country’s campaign against Bashar al-Assad. As was recently recalled by the Washington Post, this support lasted until the massacre in Reyhanli on 11 May 2013. That was the watershed moment when Turkey started to distance itself from IS. However, Istanbul is also accused of having supported IS during the siege of Kobani, just as it allowed caliphate fighters to receive medical assistance in Turkish hospitals and cross the border with Syria at will. Today, according to US diplomatic sources, it's not clear what game Erdogan is playing at, but it is feared that a number of sources of funding are still operational. By the same token, there doesn’t seem to be the same kind of supervision in Turkey as that now adopted by Qatar following concerted pressure by Washington.

And then there’s Malaysia and the Philippines. Although both countries have also been torn apart by terrorist attacks, they form the financial hub of Islamic international terrorism in Asia according to the CTC. The primary reasons are that they have increasingly weak governments, and their banking rules are also more lax, something that can’t be said of Hong Kong or Singapore. According to the Marines’ analysts, breaking the ties between these countries and terrorist organisations is difficult, in part because diplomatic relations are not always easily managed. Thus Malaysia and the Philippines remain the unknown variables in this scenario. On the one hand they are fighting internal destabilization, on the other they are not hindering terrorists from trading and recycling money. And, according to rumours circulating in the American capital, the State Department is considering very resolute action in 2018 with the final aim of closing every possible channel for international terrorism in South East Asia. Will it succeed? Only time will tell, but a partial victory can already be claimed as attacks and fighter recruitment seem to have dropped in recent years.

Finally, the situation that on paper seems the most inconceivable: Rabat has recently entered the cross-hairs of American and European diplomacy. This is somewhat unbelievable, seeing as Morocco is a stable country that usually lies outside of international terrorist circles. But although it may be true that there haven’t been any attacks there that can be pinned on IS, it is also true that the area has become one of the major foreign fighter recruitments centres from which combatants then move to Europe and become jihadi martyrs. But that's not all. The caliphate’s Moroccan cells have been and are still capable of providing funding for IS. In 2014, then Secretary of State John Kerry asked Rabat to take decisive action to stem this problem, and the results have slowly begun to emerge. There is still plenty of work to be done to ensure that Rabat is above suspicion, but its collaboration will be crucial in creating a hostile environment for terrorism, one that will then no longer be able to rely on the Moroccan territories for its initiatives.

Will diplomatic efforts manage to solve the issue of international funding of terrorists once and for all? Much has already changed since 2015, when the G20 in Antalya adopted guidelines (also approved by Russia, China and India) against the supplying of financial resources to terrorist groups. But another concerted push is still required. The objective in the next few months and years will be to close every single channel that is still open, and all signs point to the Persian Gulf. The more the flow of funds to the caliphate is stemmed, with the same being true for al-Qaeda, Lashkar-e-Taiba and al-Nusra front, the more our world, which has mourned so often in recent years, will be made safe.

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