Islamic State Reportedly Minting Coins as It Struggles to Function Like an Actual State

Social media murmurings and a recent tabloid article have suggested that the Islamic State, also known as ISIS or ISIL, is preparing to mint its own currency in gold and silver coins.

There is reason for skepticism, particularly after reports that the group had developed its own paper currency earlier this year were quickly debunked — but a statement that emerged Thursday that is said to have been issued by the terrorist group's treasury appears to substantiate the notion.

It's official - Islamic State is going to start minting its own gold and silver coins. — Charlie Winter (@charliewinter)November 13, 2014

The idea of the Islamic State developing currency or other legitimate signs of statehood is not so far-fetched, according to experts who say that its leaders will have to manage the complexity of administering banking, education, and public utility sectors if they want to establish an actual nation-state.

"We've forgotten that this is not a military struggle. It's an ideological struggle with a proto-state," Anthony Cordesman, chair of strategy at the Center for Strategic and International Studies, told VICE News. "But they haven't forgotten, because they can't."

Muslim scholars make the theological case against the Islamic State. Read more here.

He noted that the Islamic State has already started performing some of these duties — altering the education system and justice system in the territories it occupies, and putting a financial system in place that is directed according to religious law. It has also established an oil export business through its control of fields and refineries in Iraq that, against the efforts of the United States and its allies, is selling crude at bargain-basement prices. Last month, the energy consultancy IHS estimated the Islamic State's oil production at $800 million a year.

"To some extent this has already been a serious project for them," Cordesman said. "When you look at the areas they're occupying, they have to deal with some critical problems like water and water purification and electric power, and they have to run in the area they're occupying something like a banking system so people can move money and buy things."

"Somebody has to be managing this money at a very sophisticated level," he went on. "They've obviously been altering the education systems, with textbooks, Islamic purification, restrictions on the education of women. They've been conducting the equivalent of a local purge in the justice system, so they have essentially taken over many of the elements of the rule of law."

Islamic State video shows militants enforcing Sharia law in Kirkuk province. Read more here.

VICE News was in ISIS-controlled territory when it rebranded itself the Islamic State and declared a caliphate.

But the Islamic State's shift from acquiring territory to governing it may prove more difficult than its leaders expected when they exuberantly declared a new Islamic caliphate this summer in the portions of Iraq and Syria that they had seized. For one thing, the logistics of transitioning from an insurgent movement into a governing body can divert an organization from its mission.

Such is the view of Ilan Berman, vice president of the American Foreign Policy Council, who likens the Islamic State's predicament to that of Hamas in 2006, when it held parliamentary elections in the Gaza Strip and soon found itself distracted by its responsibility over garbage piling up in streets and the salaries of civil servants.

"ISIS has acquired lot of territory," Berman told VICE News, "but to hold it, it will have to take its eyes away strictly from jihad, and it's not clear they can do well."

Islamic State releases video allegedly showing woman being stoned to death by her father. Read more here.

The group's assumption of governance seems piecemeal and ad hoc.

"I haven't seen evidence they're really taking over functions in any real way — like collecting garbage and having police forces and fire forces," Stephen David, a professor of political science at Johns Hopkins University, told VICE News. "It doesn't seem to me the mentality or culture of ISIS lends itself to the day-to-day running of a government."

But while the Islamic State has a long way to go before it functions as a legitimate state, it appears to be operating better than the Iraqi government in at least one essential way.

"Among other things, they're paying their fighters regularly and more than the Iraqi military," Cordesman said.

Another challenge for the Islamic State lies in its rigid implementation of Sharia law, an elaborate, ancient, and often contradictory legal system that could be difficult to implement in absolute fashion, particularly in the 21st Century. In the interpretation of radical Islamist groups such as the Islamic State, the law can be used to justify brutal punishments and heinous human rights abuses, such as forced marriage and the taking of slaves.

Women abducted by the Islamic State feared trapped in sexual slavery. Read more here.

"Sharia covers everything," Cordesman said. "It's supposed to create a perfect Islamic society, to cover every aspect of social behavior: marriage, education, banking, commercial operations, debt, criminal activity, enforcement of the justice system."

While the Islamic State attempted to apply the most uncompromising interpretation of Sharia at first, going so far as to shut off electricity in Mosul during Ramadan fasts to ensure that everyone was praying, it has sometimes been forced to loosen its strictures in order to govern. Roughly 6 million people live in territory controlled by the insurgents, an area that rivals the United Kingdom in size.

"Obviously the type of expansionism and rampant brutality that has so far worked well as a protest movement works less well when trying to have a sustainable state," noted Berman. "Nobody is going to stick around if you're beheading people left and right."

Follow Colleen Curry on Twitter: @currycolleen