| MOSUL, Iraq
MOSUL, Iraq A spruced-up Baghdad is welcoming Arab leaders this week to declare that war is over and Iraq is open for business. To Um Qassim, carrying her shopping beside a rubbish-filled creek four hours drive from the capital, it is a cruel joke.
In her home city of Mosul, out of view of visiting dignitaries, al Qaeda still controls the streets and people like her still whisper about death.
"They killed my neighbor three days ago, and later they sent his family a message saying, 'We are sorry, your son was not targeted, he was killed by mistake,'" she said quietly to Reuters, trying to catch her breath as she hauled two heavy sacks of food home from the market.
Arriving in Mosul from Baghdad, you feel the sinister lurch of going back in time to 2006 or 2007, the days of sectarian slaughter when Iraq's militant gangs stalked the streets and killed tens of thousands of their countrymen.
The familiar signs, long-since vanished from Baghdad, are all still here: the towering concrete blast walls, the dirt obstacles piled in the centre of the roads to slow down racing attackers, the buildings wrecked by the impact of shells.
Razor wire is rampant like a weed, shrapnel crunches under foot and the garbage lies rotting in heaps, because war makes basic civic duties like cleaning the streets seem like lunacy.
This is not the Iraq that Prime Minister Nuri al-Maliki's government is touting now that U.S. troops have pulled out and oil billions are rolling in. Hundreds of millions have been spent smartening up the capital for this week's Arab League summit. New lines have been painted on the pavement and palms planted in the highway dividers.
Baghdad's ministers describe Iraq's crippling infrastructure problems as an opportunity to invest. Occasional explosions are dismissed as the last throes of isolated cells trying to show they are still relevant in a country where the overwhelming majority is committed to peace.
But during a visit of several days in Iraq's third largest city, security officials and residents of Mosul painted a picture far worse than commonly understood from Baghdad.
Far from being furtive and on the run, al Qaeda and its allies maintain a hold over economic and political life that shows little sign of loosening. Residents speak fearfully.
Um Qassim's family of nine are Shi'ites from the small Shabak minority, one of the many ethnic groups that share Iraq's most diverse city. They have had to abandon their home and move into two rooms across town.
"They have displaced all the Shabak from their houses to eastern Mosul. Whoever resists, they kill him or bomb his house," Um Qassim said.
As she began speaking to Reuters, her husband approached, clearly agitated: "Be careful, do not mention your real name," he said. "Keep in your mind that they can reach us anytime."
Shop owners say they are forced to pay protection money to the militants. Security officials say the fighters are raising millions of dollars per month here, which they use to fund bomb attacks across Iraq.
"They keep coming, every three months, to take $300 - $100 per month - always at the same time but not the same person," said a pharmacist, who spoke to Reuters only when his shop was empty and became silent whenever a customer entered.
"They are very organized and very polite. I cannot get rid of them. The pharmacist next door refused to pay. They planted a bomb inside his pharmacy and one of his workers lost his leg."
MAP OF WAR
Mosul is the unofficial capital of "the Islamic State of Iraq" or ISI, an al Qaeda-run fief whose influence stretches over a swathe of Iraq known as the peninsula - towns along the empty desert between the Tigris and Euphrates north of Baghdad.
The implications for Iraq's security at the national level have become clear in the months since the U.S. troops withdrew. Every three or four weeks since December, al Qaeda and the ISI have managed to stage a spectacular day of coordinated bombings across the country, each time detonating dozens of bombs, killing scores of people and wounding hundreds.
In the latest day of attacks, on March 20, more than 40 bombs were planted in 20 towns and cities across Iraq. The death toll compiled by Reuters was 52 with 250 people wounded, though the actual toll was probably higher. The damage to the official narrative of a country emerging from war was incalculable.
With civil war now emerging just across the frontier in Syria and tension between Mosul's Arabs and the neighboring autonomous Kurdish part of Iraq, instability here could become a regional issue that could spread beyond Iraq's borders.
While Iraq's Shi'ite armed groups have all announced they are laying down their weapons since the U.S. withdrawal, six major Sunni groups say they will keep fighting. Without a U.S. occupation to rail against, their rhetoric has become almost exclusively sectarian. They are fighting because they consider Shi'ites apostates who must be driven from power through force.
Like Baghdad was five years ago, Mosul is carved up into heavily fortified neighborhoods. There are "Green Zones" - protected districts open only to those who carry special security badges - and "the red zone" - everywhere else.
Government buildings and the homes of senior officials are inside the Green Zones, protected by concrete walls and heavily-manned checkpoints. Without control of the streets in the red zone, officials feel like prisoners in their own city.
"Security is totally missing in Mosul. I am a son of Mosul and cannot walk in the city. The security forces control just the main roads," said a senior security official, who declined to be named while giving an assessment that differs so strongly from the official line.
"I sleep here in a small room and cannot sleep in my own home in the Hidbaa neighborhood. When I want to leave this building I need more than eight armed vehicles to protect me."
From Mosul, the influence of the militants spreads to the Syrian border and through the Tigris provinces of Nineveh, Kirkuk, Salahuddin and Diyala, across the empty desert to the province of Anbar and the lush Euphrates valley on Baghdad's outskirts that U.S. forces used to call the triangle of death.
The desert between Iraq's two great rivers is dotted with rocky caves, and full of hills, sandy ditches and secret roads used by nomads and smugglers. Security forces say they lack the manpower to patrol it.
"Unfortunately many areas are not under the control of the security forces. Covering every kilometer is impossible," Mehdi al-Garraway, commander of federal police in Mosul, told Reuters.
"Between 2,000 and 2,500 square kilometers (about 750 to 1,000 square miles) might need to be covered by additional troops."
Because the area straddles several provinces, fighters exploit the lack of coordination among security forces. They can hide in bastions like Baaj northwest of Mosul, Qaiyara south of Mosul, Shirqat north of Tikrit and Hawija southwest of Kirkuk, and escape pursuit across provincial boundaries.
"This is a real problem that we are facing: permission is required for forces from Mosul to pursue someone into Salahuddeen or for forces in Salahuddeen to pursue someone in Kirkuk," Garraway said.
Police and troops from different regions, or even different units within a region, have little contact, making them vulnerable to infiltration or impersonation.
In a notorious incident this month, fighters disguised in uniforms and vehicles of a special police unit came out of the desert into the Euphrates town of Haditha and went from checkpoint to checkpoint, rounding up and shooting police. They killed 27, including two officers dragged out of their homes and executed in the street.
Protection rackets are now the main source of funding for militants who spend millions on weapons, safe houses, vehicles and bribes to buy freedom for detained leaders. In Mosul alone, intelligence officials say the militants generate $6-7 million in monthly revenue from extortion.
Officials recite the list: shops, guest houses, neighborhood electricity generator operators, fuel tanker drivers, cement dealers, estate agents, telecoms firms - everybody pays. Even officials themselves pay.
"Protection money, by which I mean money paid by citizens to the armed groups ... jewelers, pharmacists, doctors, merchants, contractors, all of them are paying, and there is information suggesting that the directors of the government departments are paying too," said Zuhair al-Chalabi, head of a council set up by the central government to run reconstruction projects in Mosul.
"There is no one who avoids paying protection money. There is a threat, a killing - anyone does not pay, he won't stay alive for a day," Chalabi, said.
As one merchant who asked not to be identified put it: "I am paying the 'state' (the ISI) instead of paying taxes for the government. I pay those people to protect myself because the police cannot."
Officials say there are more than 600 pharmacies, 1,350 neighborhood generator operators, 42 car parks and countless food shops in Mosul, each of which has been paying $100-$200 per month for around two years.
"This money is spent not just in Mosul but across all the other Iraqi provinces," Garraway, said. "We believe the most recent operations carried out in Baghdad were planned here in southern Mosul."
Garraway said local police, federal police and army troops in Mosul were working hard to squeeze the financial resources of the ISI by shutting parking lots and currency exchange offices, monitoring the movements of fuel tanker drivers and encouraging shops, generator owners and pharmacists not to pay.
There is little sign in Mosul of the sort of economic reconstruction projects the government is rolling out elsewhere. That plays into the hands of the militants' recruiters.
"Usually, they are attracting the unemployed youth who spends his time hanging around in the streets," said a senior Iraqi intelligence officer who supervises investigations of al Qaeda detainees. "They pay his rent, a month's salary and gifts after each operation he participates in."
Government jobs that are available are frequently with the security forces. Locals are afraid to take them.
"None of the men of Mosul dares to apply to join the security forces because he would be killed," said Mahmmoud al-Sabaawi, the leader of Sahwa, a government-backed militia, in the Mosul suburb of Qaiyara.
Many police in the area are Shi'ites from distant parts of the country, which alienates Sunni Arabs.
"Maliki keeps sending Shi'ite troops to Mosul to humiliate Sunnis. He knows that people here won't cooperate with them but even so, he keeps sending them," said Mostafa, a Sunni Arab standing at the entrance of one of the Green Zones, waiting for a relative to escort him inside.
Al Qaeda propaganda videos distributed throughout Mosul show the punishment for joining the security forces. In one video, distributed on CD, a federal policeman is beheaded on camera by a militant while another militant reads from the Koran.
Ali Raad Hassan, a married and father of three languishing in Mosul's Ghazlani jail for distributing al Qaeda videos, said he worked for the militants after despairing of ever finding a proper job despite a business degree from Mosul University.
"I have kids, diapers and milk, my monthly expenses exceed 300,000 dinars (around $250)," Hassan said, weeping. "I applied for many jobs. I applied to work in education, health, at the municipality. I never got an answer."
Of his work with al Qaeda, he said: "I swear to God that I regret it, but I could not leave the work. I wanted to leave it, but I could not."
(Additional reporting by Jamal al-Badrani; Editing by Peter Graff)