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Iraq's worsening security woes hit local economy

Friday - 7/26/2013, 6:56pm  ET

In this photo taken on Wednesday, July, 10, 2013, people shop at a market in Baghdad, Iraq. A spike in violence is spilling over to Iraq's struggling economy, with an increasingly murky future making customers reluctant to spend and the re-emergence of sectarian threats forcing costly changes to the way business is done.(AP Photo/Karim Kadim)

SINAN SALAHEDDIN
Associated Press

BAGHDAD (AP) -- Sunni truck driver Obeid Manaa had been hauling goods from neighboring countries to Baghdad for years but won't go near the Iraqi capital after a Shiite militia gave a very specific warning.

"If you enter Baghdad again we will chop your legs off," one of the militiamen told a fellow Sunni truck driver recently. Now Manaa transfers his shipment to Shiite drivers to carry in.

A spike in violence is spilling over to Iraq's struggling economy, with an increasingly murky future making customers reluctant to spend and the re-emergence of sectarian threats forcing costly changes to the way business is done.

The wave of violence is the deadliest since Iraq teetered on the edge of civil war half a decade ago. The bloodshed is linked to rising sectarian divisions between Iraq's Sunni and Shiite and friction between the Arabs and Kurds, dampening hopes for a return to normalcy nearly two years after U.S. forces withdrew from the country.

Just this week, 14 Shiite truck drivers and crew were killed with bullets to the head at a fake checkpoint set up by militants along a highway in a northern Sunni area.

Some Shiite neighborhoods in Baghdad, meanwhile, are again becoming off-limits to Sunnis, particularly after word began spreading that Shiite militiamen were setting up fake checkpoints of their own. While the Interior Ministry has denied the claims, the threats remind Iraqis of the dark days of 2006 and 2007 when retaliatory killings between the sects were a daily routine. Insurgent attacks since April have killed more than 3,000 people, including more than 500 since the start of July.

So truck drivers like Manaa have found ways to avoid the violence.

Two safe zones were set up west of Baghdad in the towns of Abu Ghraib and Fallujah, where Sunni drivers can hand goods over to Shiite counterparts safely. Another unloading area is located in the Iraqi capital's western Sunni-dominated Ghazaliyah neighborhood.

"Some Sunni drivers are willing to take the risk and enter Baghdad for the money, but I'm not," said Manaa, a 33-year-old father of four who uses the handover spots.

He used to earn about $1,200 to $1,300 for each shipment from Jordan to Baghdad, but says his income has now dropped by some 80 percent because he doesn't unload in Baghdad.

Sectarian tensions have been boiling for months, inflamed by protests that began in December by Iraq's Sunni minority over what they see as unfair treatment by the Shiite-led government.

Violence surged after an April crackdown by security forces on a Sunni protest camp in the northern town of Hawija that killed 44 civilians and a member of the security forces, according to United Nations estimates.

The unrest risks eating into much-needed economic growth, which the World Bank had been predicting would reach 9 percent this year.

Sunni merchant Ekram Khairi has not traveled to Baghdad from his northern city of Mosul since the Hawija attacks, although the Iraqi capital has for years been his only destination for buying plastic products at wholesale markets for resale back home. He also quit coming to the capital in 2006, when sectarian bloodshed was at its peak, but began returning in 2008 as security started to improve.

"I can be easily singled out by my accent," said Khairi, a 41-year-old father of four. Since April, he's been ordering goods by phone and Baghdad merchants send it to him by trucks. That makes it tougher to judge the quality of the goods and choose what might sell best."

Baghdad-based merchants say business hasn't been this bad in years. They say the country's economy, which started to improve in recent years on the back of an oil boom, is starting to feel stagnant because of the unrest.

"I used to issue 50 receipts a week as of last year," Hassan Ferari Shahin, who deals in marble and granite, said as he flipped through the remaining papers in his receipt book. "But since late December, we've issued only 38."

Shahin said people still have money, but "customers are afraid about tomorrow." He said sales were down nearly 75 percent since the beginning of this year compared with the same period last year.

The Iraqi market was badly hit during the height of insurgency and sectarian bloodshed that erupted following the 2003 U.S.-led invasion that ousted Saddam Hussein. Hundreds of thousands of Iraqis fled the violence during that period by moving abroad or to the relatively peaceful northern Kurdish region, which is largely autonomous. Those who did stay mainly spent money only on necessities. Businesses closed early for security reasons and shipments of goods between provinces were frequently attacked by insurgents or criminals.

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