BAGHDAD (AP) -- Al-Qaida's Iraq arm is gathering strength in the restive northern city of Mosul, ramping up its fundraising through gangland-style shakedowns and feeding off anti-government anger as it increasingly carries out attacks with impunity, according to residents and officials.
It is a disturbing development for Iraq's third-largest city, one of the country's main gateways to Syria, as al-Qaida in Iraq makes a push to establish itself as a dominant player among the rebels fighting to topple the Syrian regime.
The show of force comes as Mosul residents cast ballots in delayed local elections Thursday that have been marred by intimidation by militants. Al-Qaida's renewed muscle-flexing is evident in dollar terms too, with one Iraqi official estimating that militants are netting more than $1 million a month in the city through criminal business enterprises.
Mosul and the surrounding countryside, from where al-Qaida was never really routed, have emerged as major flashpoints in a wave of bloodshed that has killed nearly 2,000 Iraqis since the start of April -- the country's deadliest outbreak of violence in five years. Gunbattles have broken out between militants and security forces, and several candidates have been assassinated.
Just since the start of last week, attackers in and around the city have unleashed a rapid-fire wave of five car bombs, tried to assassinate the provincial governor and killed another local politician and four other people in a suicide bombing.
The violence increased as Thursday's elections approached in Ninevah and neighboring Anbar province. Iraqis elsewhere went to the polls in April, but the Baghdad government postponed voting in the two provinces, citing security concerns.
Other Sunni militant groups, including Ansar al-Islam and the Army of the Men of the Naqshabandi Order, are also active in Ninevah. Mosul is the capital of the Sunni-dominated province.
Al-Qaida's growing power is particularly worrying because it is thought to be behind the bulk of the bombings across Iraq and because it is trying to assert itself as a player in neighboring Syria's civil war. The head of al-Qaida's Iraq arm last week defied the terror network's central command by insisting that his unit would continue to lay claim to al-Qaida operations in Syria, too.
"We're definitely concerned about it," said a U.S. diplomat about the deteriorating security situation in Mosul. The diplomat, who wasn't authorized to speak on the record, said al-Qaida's Iraq arm sees an opportunity to try to build support in the area and is "out blowing things up to show that the government can't protect and serve the people."
Al-Qaida's growing strength in Mosul is painfully clear to businessman Safwan al-Moussili. Traders like him say they are once again facing demands from militants to pay protection money or face grave consequences. Merchants say that practice had largely disappeared by the time American troops left in December 2011.
"They tell us: 'Pay this amount.' And if it's higher than before, they say something like: 'You recently went to China and you imported these materials and you made such and such profits,'" he said. "It seems they know everything about us."
Small-scale shop owners, goldsmiths, supermarkets, gas stations and pharmacies are all being hit up for money these days.
Al-Moussili and his fellow businessmen feel they have little choice but to pay up. About two months ago, he recalls, one businessman refused to pay, and insurgents planted a bomb inside his shop that killed the man.
"That forced everybody to pay, because we don't see the security forces doing anything to end this situation," he said.
A Mosul food wholesaler, who referred to himself only by the nickname Abu Younis out of concern for his security, said he and other traders resumed paying $200-a-month kickbacks to al-Qaida three months ago after finding threatening letters in the market hall where they operate.
Al-Qaida focused its operations in historically conservative Mosul following setbacks in Anbar province in 2006. It soon became the only major Iraqi city with a significant al-Qaida presence.
The U.S. urged Iraqi Prime Minister Nouri al-Maliki to focus his resources on Mosul to wipe out al-Qaida and prevent the insurgents from reorganizing there. Instead, the government shifted resources at a key moment to crush al-Maliki's armed Shiite rivals in the southern city of Basra, which prevented a decisive defeat of al-Qaida.
Over time, the militants, exploiting ethnic tensions in the Mosul area between Arabs and Kurds, were able to reinforce their position.
Michael Knights, an analyst at the Washington Institute for Near East Policy who closely follows regional security issues, said al-Qaida in Iraq has long generated cash from businesses such as trucking and real estate, and through extortion of large firms such as mobile phone companies.