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Iraqi insurgents forced underground

But even in hiding, Al Qaeda in Iraq can carry out high-profile attacks and has infiltrated security forces.

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Adding to the difficulty, a number of AQI members have joined the Iraqi Army, the police, and especially the SOI, US and Iraqi military officials say. Its leaders encouraged operatives to enlist in these security forces as spies when popular attitudes toward the group began to turn. Many other low-level members of the AQI, who'd been motivated to wotk with insurgents for financial reasons, joined the SOI because it offered a regular paycheck.

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Now as Iraqi Army Lt. Col. Walid Nouri Motlib tries to purge sleeper cells from the ranks of his unit in Anbar Province, he says he would not be surprised if one of his soldiers became a suicide bomber. "Generally when we talk about the strategy of Al Qaeda, they've lost control of their territory," he says. "Now their main activity is targeting the leaders of security troops and SOI with suicide bombers."

With greater difficulty in carrying out operations, AQI now tends to reserve its combat power for high-profile targets – such as top-ranking security or government officials – though it still detonates bombs in public places, which kill indiscriminately, Iraqi and US military officials agree. Between Jan. 1 and July 28 this year, an average of 11 Iraqis died every day as a result of suicide attacks or car bombings, according to figures from the Iraq Body Count, independent project that monitors civilian causalities in Iraq.

Even though AQI's freedom of operation has been clipped by the loss of popular support, AQI is unlikely to do more than restructure the group. Its extreme ideology makes it doubtful it'll be able to reconnect with the population.

"If [AQI members] were smart, they would say this requires kind of a strategic rethink and we need to be a more touchy-feely Al Qaeda in the future. I think there's been some very mild evidence that Al Qaeda in Iraq has done that, but not enough to really bring it back to the position where it was in 2006," says Peter Bergen, a prominent Al Qaeda expert and senior fellow at the New America Foundation, a nonprofit public policy institute in Washington.

It's rare, however, for Sunni insurgent groups to adopt the kind of social programs that Shiite groups like Lebanon's Hezbollah and, most recently, the Mahdi Army in Iraq have used. The group will most likely struggle to create a convincing "hearts and minds" program, if it even tries one at all, says Mr. Bergen.

"Its ideology gets in the way of it making real-world, political accommodation," he says, explaining that they reject the majority of the world's Muslims as true believers.

Indeed, AQI's core principles played a large part in alienating the local population. Even in the predominately Sunni Anbar province the group's ultraconservative interpretation of Islam disenchanted locals."They started killing by basing their ideology on religion. They should behave like their Prophet [Muhammad], but they do the opposite of what Muhammad did," says Sheikh Hatem Nouri, an SOI leader in Anbar Province. "It's a very bad ideology, and Islam has nothing to do with these people."