The Islamic State’s Dollars and Cents

by Derek Davison

Last August, the Islamic State (ISIS or IS) put out a video that would’ve thrilled most gold bugs if it had been produced by just about anybody else. Called “The Rise of the Khilafah and the Return of the Gold Dinar,” the video unveiled to the world IS’s brand new gold dinar coins, each worth (at the time) around $130, along with their new silver dirham and copper fulus coins.

The coins were inscribed, in Arabic, with the phrases “The Islamic State” and “a caliphate on [according to] the path [doctrine] of prophecy.” The images on the coins evoked fundamentalist jihadi sentiments: the crescent moon, the date palms of Arabia, al-Aqsa Mosque, the Minaret of Jesus at the Umayyad Mosque in Damascus, weaponry, seven stalks of wheat (from a Qur?anic verse), and a map of the entire world. IS had talked back in 2014 about its intentions to mint currency. It even started minting coins last summer, though these were reportedly just gold-plated, not pure gold as the group said they would be.

The video went on kind of a rant about fiat currency, with the same arguments about inflation and the “intrinsic value” of gold that you might expect to hear from any supporters of the gold standard). According to The Economist:

“The Rise of the Khilafah: Return of the Gold Dinar,” makes a bizarre sales pitch for Islamic State’s new gold currency. Covering a dizzying range of topics, from the importance of gold as a medium of exchange to “the dark rise of bank notes, born out of the satanic conception of banks”, it argues America has been able to avoid hyperinflation and maintain its military hegemony largely thanks to the petrodollar system. Islamic State hopes that with the introduction of what it is calling the dinar, all oil will be paid for with gold instead of being priced in dollars, which would “mark the death of this oppressive banknote” and bring America “to her knees.” Charts showing the gradual increase of the American money supply and the devaluation of the dollar are provided as evidence of the dangers of printing money. A rotation of gold-loving financial analysts is featured. Even Ron Paul, a former libertarian presidential candidate, makes an appearance denouncing inflation as theft.

Goldbuggery aside, the introduction of these coins made some sense for the Islamic State from a tactical point of view. After all, IS wants to be a genuine state that does business in the global economy (at least until it conquers the globe, I guess). Nobody anywhere would accept paper money printed by the Islamic State, for obvious reasons, but a coin that’s actually made out of gold, which could be melted down to remove traces of its origins? That’s a different story.

I’m not sure what exactly has happened between last fall and now. But apparently the destruction of the US dollar and the return of a global gold standard is going to have to wait awhile, because IS is reportedly using a different currency these days:

Within the last two weeks, the extremist group started accepting only dollars for “tax” payments, water and electric bills, according to the Raqqa activist, who asked to be identified by his nom de guerre Abu Ahmad for his safety. “Everything is paid in dollars,” he said. His account was bolstered by another ex-Raqqa resident, who, like Ahmad, also relies on communications with a network of family and acquaintances still in the city.

Actually I have a pretty good idea of what happened to IS recently: a decline in its geopolitical fortunes. Last month, IS reportedly halved everyone’s salary,across the board. Lower oil prices are part of the picture, as are coalition airstrikes on IS oil infrastructure, strikes on IS infrastructure generally, and a decision by the Iraqi government late last year to stop paying government salaries to people living in territory controlled by the extremist group. IS is struggling to find the money to repair and replace military hardware and to provide rations for its fighters. Part of its move into Libya, which may trigger another Western military intervention, appears to be an effort to stake out some new funding sources amid the chaos of the Libyan civil war.

The Islamic State’s struggle to pay its most basic bills is a big deal. That it’s resorted to using good old American paper money instead of its own currency is not such a big deal, but it has symbolic importance. IS likes to harken back to history, or at least its version of history—the video unveiling those coins talked about the caliphate’s use of “real money” as opposed to Europe’s corrupt introduction of paper banknotes, for example. This is lousy history: banknotes originated in China back when China was the known world’s economic superpower, and the verdict is pretty clear on both their stability as currency and their usefulness from an economic standpoint. But it makes for a compelling bit of propaganda.

But if we go back with IS to a time when the Islamic caliphate was a real thing, then we’ll also be going back to a time when a caliph, or any other Islamic ruler, had two ways to let his subjects know who their ruler was: by ensuring that his name was invoked during the khutbah, the sermon delivered during communal Friday prayers at local mosques, and by minting coinage (sikkah in Arabic) with his choice of slogan. Effective coinage conveyed a lot of information to anyone who might come across it: the name of the local ruler, the name of the local ruler’s overlord (if applicable), and maybe a detail or two about the ruler’s ideology (some coins might be inscribed with the names of early Sunni caliphs, or Shi?a imams–or both). Those planned IS coins were definitely meant to convey an ideological message.

Now the meaning that IS money conveys is some combination of “we’re broke” and “George Washington is our idol.” That’s not really a message the group would like to be sending.

Derek Davison

Derek Davison is an analyst covering U.S. foreign policy and international affairs and the writer/editor of the newsletter Foreign Exchanges. His writing has appeared at LobeLog, Jacobin, and Foreign Policy in Focus.