The business of insurgency: the expansion of Iraq's shadow economy.

• Author: Looney, Robert E.
• Position: Organized crime

MEDIA ATTENTION on the insurgency in Iraq has tended to focus on dramatic incidents or horrific acts of violence. At the same time, policymakers in the United States and other coalition countries have often viewed the insurgency in largely political terms. Yet, particularly worrisome is the convergence of large segments of the Iraqi insurgency with elements of organized crime. Unfortunately, improved anti-terrorism effectiveness has resulted in increased criminal activity by several significant groups within the insurgency.

So while the political and military aspects of the insurgency have received most of the world's attention, the insurgency's subtle shift toward increased reliance on criminal activity has implications that are just as important for the Iraqi economy. Increased criminal activity is effectively stifling attempts to expand the formal sector. This, in turn, presents a major challenge to the newly elected government: how to stop and reverse the insurgent-led deterioration of the economy and the vicious cycle it has created. It is safe to say that a successful attack on criminal activity in Iraq is as important in determining the country's future as the outcome of the current anti-insurgency campaign. One might even venture to say they are largely one and the same.

Organized Crime, Iraqi-Style

INSIDIOUS CRIMINAL activity is not new to Iraq. In fact, as recent revelations coming out of the United Nations Oil for Food scandal show, criminal activity has long been pervasive in all areas of Iraqi society, from the highest levels of official power to the lowly smuggler trying to eke out an existence during the period of sanctions in the 1990s. Under Saddam, Iraq became what Iraqi sociologist Faleh Abdel Jabar calls the family-party state, dominated by close family members and tribal associates.

In this environment, the Ba'athi regime became more an organized crime syndicate than a political organization. Those who ran the family-party state, having lost their political and economic prerogatives after the war, organized the initial uprising through exploiting the extensive infrastructure used for sanctions-busting under the old regime.

In time, looters, ex-convicts and nihilistic, jobless youths began coalescing into gangs, realizing that banding together gave them a collective power to mug, rob and otherwise get a Darwinian foothold in the local economy of a leaderless land. And at the same time, the tribes that dominate much of society outside Baghdad include clans that specialize in thievery and are trafficking in much of the artillery and heavier weapons left behind by the collapsed Iraqi army. Ironically, the sheer profitability of criminal activity in Iraq may be negating the effectiveness of standard political solutions to the insurgency, such as increasing Sunni representation in the government or neutralizing foreign fighters.

With segments of the insurgency's financial needs matching or in some cases overriding its political motivations, an increasing amount of time and effort of these groups is devoted to creating "in house" criminal capabilities. This shift in insurgent activity demands greater anticrime capabilities on the part of the Iraqi government. Unfortunately, the Iraqi police infrastructure suffered greatly from damage and looting in the aftermath of the war. Although significant progress was made by the Coalition Provisional Authority (CPA) in rebuilding and reopening police stations, as well as in providing basic training and a limited amount of equipment, much more remains to be done, particularly in developing specialized capabilities to tackle organized crime and drug trafficking.

Complicating matters is the near impossibility of establishing effective anticrime programs in an environment of rampant corruption. The prestigious Transparency International Corporation ranks Iraq as the most corrupt country in the Middle East. The country's current ranking is 129th out of 145 nations worldwide, with the country's corruption actually worsening between 2003 and 2004.

Instability, high unemployment and corruption have created a volatile mix that is ideal for organized crime. Police and border security capabilities are unlikely to be focused intensively on criminal activity while the insurgency continues to disrupt police activities and divert resources. Even more ominous are signs of the development...