LONDON (Reuters) - U.S.-led air strikes have had a substantial impact on the money Islamic State (IS) makes from oil, and have helped force the militant group to cut its fighters' pay by up to 50 percent, a senior U.S official said on Monday.
Daniel Glaser, assistant secretary for terrorist financing at the U.S. Treasury Department, said the strikes had hit the group's ability to extract, refine and transport oil from territory it controlled in Iraq and Syria.
"When you look at difficulties that we know that they are having with respect to the transport, with respect to the extraction, I think it's fair to say they are no longer able to make money the way they used to be able to," Glaser told a London conference.
The strikes had also targeted cash storage sites which had "literally incinerated millions of dollars".
"(IS) has cut salaries to its fighters in (its de facto capital) Raqqa by up to 50 percent," Glaser added.
The cash squeeze on IS had also been intensified by the decision of the Iraqi government to cut off paying salaries to its employees in IS-held territory, as this amounted to some $2 billion a year, Glaser said.
"We see indications that our efforts to disrupt (IS) sources of revenue are bearing fruit, both because of targeted air strikes against (IS) financial and commercial activities and due to our efforts to decrease liquidity into (IS)-controlled territory," he added.
IS has declared a self-styled caliphate across areas of territory it controls in Iraq and Syria, imposing its own harsh interpretation of Islamic law.
Glaser said the US had estimated it made some $500 million a year from oil, along with hundreds of millions more from taxation and extortion to go with the hundreds of millions it had seized from banks when it captured Iraqi towns and cities.
He said IS still had a lot of money but cutting its income stream would hamper its efforts.
"It's not cheap to run a caliphate, it's not cheap to run a war," Glaser said. "You need to pay your fighters. They are having a harder and harder time doing it."
Reporting by Michael Holden; editing by Stephen Addison