LONDON - The shocking decline in oil prices is not only hitting federal and provincial treasuries in Canada and elsewhere, it's also sapping the war chests of both the Islamic State of Iraq and the Levant and the Iraqi government.

Defence Minister Rob Nicholson says the impact of falling crude prices on the extremist organization was a topic of discussion today as the 21 countries in the U.S.-led coalition battling ISIL extremists met in London.

It was estimated by U.S. officials last fall that ISIL was making as much as $1 million per day by selling oil through a vast smuggling network in the Middle East.

Who was facilitating the sales and who was buying the crude has been the subject of an intense, largely behind-the-scenes international hunt by the U.S. Treasury Department, which aims to choke off the group's money supply.

Oil revenue is one of the reasons coalition airstrikes have targeted refineries that were overrun by militants last summer.

ISIL is also financed through kidnapping and ransom, as witnessed over the last few days in the plight of two Japanese hostages, whose captors are demanding $200 million to spare their lives.

Donations are also solicited via the Internet from sympathizers, many of them in the Persian Gulf.

The collapse of oil prices has meant ISIL has "suffered quite a bit," Nicholson said in a conference call Thursday.

He provided no statistics to illustrate the claim.

Much of the Harper government's public messaging has related to the military campaign and Nicholson was unclear about what specifically Canada is doing to halt in concert with its allies to halt the smuggling of oil and attack the terrorist group's sources of revenue.

He did say that coalition nations agreed on Thursday that there has to be more information-sharing in that area.

Iraqi Prime Minister Haider al-Abadi said his country is also struggling as oil prices hover in the US $48 per barrel range. As much as 80 per cent of the country's budget is made up of petroleum revenues.

"This has been disastrous for us," al-Abadi said at the conclusion of the one-day conference. "I cannot stress this any more and I explained this to our partners."

He said he's been assured "there will be a program to deal with our crisis," but was not clear what that meant.

"We do not want to see a reverse our of military victory due to our budget and fiscal problems," the prime minister said.

— By Murray Brewster in Ottawa

News from © The Canadian Press, 2015