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Mosul’s Scrap Trade — How Rubbish in Iraq Could Sway Stability

scrap trade mosul
An Iraqi laborer carries scrap metal recovered from a destroyed building in the northern Iraqi city of Mosul on March 3, 2020. Photo: Zaid AL-OBEIDI / AFP

By: Sophia Akram

More than three years on from the Battle of Mosul, the city in northern Iraq is still struggling to recover from its ruinous fate. The infrastructure and the economy were left in tatters, with non-conventional actors stepping into the security vacuum left by IS. It has since become a breeding ground for rent-seeking activities, including Mosul’s trade in scrap metal.

Mosul’s post-conflict state left an abundance of rubble. The material should have been used to reconstruct the city, but it was instead monopolised by militia groups using their political connections to sell it below market value. This activity has warped the local economy, causing ripple effects that could effect lasting stability in Iraq, as described by Isadora Gotts in a report written with the Conflict Research Programme and Middle East Centre at the London School of Economics — The Business of Recycling War Scrap: The Hashd al-Shaʿabi’s Role in Mosul’s Post-Conflict Economy:

“The involvement of non-traditional actors in the trade, as well as the apparent state complicity, tells a greater story, one of deep-seated corruption and a toxic politico-economic culture”.

According to the report’s sources, after its liberation, 41 percent of Mosul’s urban area was destroyed, and 91 percent of the old city was left in ruins.

Rebuilding the city is estimated to cost around $2 billion, but the little action taken by the local and federal government has frustrated locals. As a result, citizens themselves with the UN and NGOs’ help have been central to efforts to rebuild the city. However, one of the biggest challenges to locals is the lack of economic resources in the country.

“Missing from the reconstruction conversation is a focus on the less visible and tangible dynamics that will impact the sustainability of local economic recovery”, reads the report, introducing the role of Hashd al-Shaʿabi — a Shiʿa militia group also known as the Popular Mobilisation Units (PMU) who now act as security forces for the state — their influence in the city and control over the scrap trade.

It is “representative of the broader political and economic culture in Mosul”, writes Gotts, showing how various groups are trying to “consolidate their gains within the city and secure their position in a post-conflict Iraq”.

While it might be considered rubbish, scrap metal can be repurposed into steel and is a multi-billion-dollar industry worldwide. Steel factories in the Kurdistan region in northern Iraq depend almost exclusively on scrap to produce steel rebar, fundamental to almost all construction projects.

Lack of interest in Mosul’s reconstruction from the authorities made it easy for Hashd al-Shaʿabi to control this sector.

Thus, scrap metal has significant potential for reconstruction in Mosul and the economy, but misappropriated trade saw hundreds of thousands of tons of scrap taken out of the city between just December 2018 and April 2019 alone.

The illicit nature of the way scrap is traded is a scandal that’s under investigation in Mosul, embroiling influential local politicians as well as the militia group.

The main market for scrap metal inside Iraq is Erbil, although some of it goes to Sulaimani and Baghdad. Iraqi Kurdistan’s eight steel factories and its proximity to Mosul make it a fitting landing place. In fact, much of it ends up at the Erbil Steel Company, a factory owned by the Darin Group with links to the Barzani family — a prominent family with interests throughout Iraqi Kurdistan.

Some reports suggest the scrap is also being exported to Iran, utilising Iraq’s weak border control as the overseas export of scrap metal was banned in 2016.

The Iranian links of Hashd al-Shaʿabi groups and Asaib Ahl al-Haq and the Badr Organisation, also implicated in the trade, make this notion more feasible, even though they deny involvement. The low cost of the scrap and the fact that the Iranian government subsidises energy costs for its industries, whereas Iraqi subsidies do not promote industry, further support that cross-border smuggling of scrap could be happening.

While Hashd al-Shaʿabi has used its checkpoints to monitor and direct trade, it also relied on a larger corrupt network of the specific merchants to whom scrapyard owners were forced to sell, and local politicians who would protect the players from any backlash or legal repercussions.

For instance, many involved parties, including the Badr Organisation and Asaib Ahl al-Haq, are close to the Fatah alliance, a huge contingent of the Iraqi parliament.

In another example, Nawfal al-Akoob, a former and discredited governor of Ninewa allowed Hashd al-Shaʿabi to raise their checkpoint tariffs up to 10 percent of the transported goods’ value, including scrap, for a cut of the profits.

Tariffs have led to 30-35 percent higher prices, and the checkpoints have also been used to collect bribes and a permission letter to transport scrap, which has to come from a connected person to the group. Sometimes Hashd al-Shaʿabi at the checkpoints will claim the letter is fake and confiscate the goods, says the report. In another instance, permission was granted on the condition the owner disclosed where the scrap is stored, only for it to be later looted.

Hashd al-Shaʿabi have cornered other scrap markets in Iraq, and other than the ban on overseas trade, it has little legal oversight.

The lack of regulation also creates a safety hazard in that military remnants such as explosives and contaminated material get thrown into the mix.

Scrap is protected by property rights, if scrap comes from someone’s destroyed home, it belongs to the owner of the house. Public property belongs to local governmental authorities.

Removing scrap without consent is illegal and considering it has so much potential for the country’s growth, it is also detrimental to Iraq’s future.

One example cited in the report is that of a French architectural firm’s proposal to recycle debris and scrap to rebuild 55,000 housing units through 3D printing. The project was rendered unfeasible because the illicit scrap trade had removed millions of tons of scrap leaving the city short.

For locals to be able to sell scrap themselves would part alleviate some of their economic woes. This opportunity is squandered by Hashd al-Shaʿabi‘s monopoly of the trade and scrap’s removal from the city.

Scrap is not just being looted from the rubble; it’s being taken from functional structures, such as refineries — structures that are fundamental to energy needs and the country’s future.

Asaib, for instance, took apart the refinery in Baiji apart after it retook the northern city back from IS.

The refinery was Iraq’s largest and supplied $5.5 million to $6.5 million worth of energy each month. Its decimation disrupted the oil industry, which had been keeping the economy above water.

It is also a wasted opportunity for Iraq’s economic diversification into industrial areas given the country does not have abundant non-energy related local production.

Rent-seeking activities, as described here, only increase wealth disparities, increasing vulnerability to violence and instability, and lowering resilience to conflict.

“The research seeks to understand, through the scrap metal trade, how conflict reshaped post-war Mosul on a variety of levels”, says the report’s author Isadora Gotta, speaking to Fanack.

“By tracing the monopolisation of the scrap metal market by the Hashd al-Shaabi in Mosul, this paper shows how security actors turned into economic actors, and the consequences of this transition. The impact of their growing economic role is relevant to policy, specifically discourse around reconstruction, stabilization, and corruption.

“The expanding political marketplace, as well as the toxic economic and political behaviors and patterns it entails, will further complicate any structural changes within the Iraqi system.”

Arguments on Mosul don’t always look at the underlying structures and actors that can induce conflict.
Understanding these direct and indirect destabilising factors could be vital to breaking cycles of violence.

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