Summary

Sinjar and Zurbatiyah are two Iraqi trading centres that also serve as trafficking hubs, linking the country to Syria and Iran respectively. Both carry substantial legal commerce and are points where multiple illicit flows converge, yet illicit trade has taken a different shape in each. Drawing on 20 structured interviews conducted in August 2025 with civil society, business and government respondents, this brief examines how trade was governed at the two sites between 2019 and 2024.

Two dimensions of governance stand out: whether the armed groups, political parties and business elites that control trade cooperate or compete with one another, and whether the state retains authority over legal trade. Together, these shape how resilient illicit trade is to enforcement. Where illicit trade is embedded in cooperative governance and local economies, enforcement alone is likely to fail and to harm the people it is meant to protect. The sequencing of enforcement, political settlement and livelihood support therefore needs to differ from place to place.

Key Findings

• In Sinjar, armed factions, regional political parties, tribal leaders and business elites all influence legal, informal and illicit trade. Despite intense political rivalry, respondents described relations among those involved in trade as primarily cooperative, and Baghdad has been unable to arbitrate or exert control.
• This cooperation has allowed illicit trade in Sinjar to expand and become entrenched. Smuggling routes through the mountains are easily rerouted, armed groups levy informal taxes with ease, and government forces share in smuggling revenue, leaving few actors who can be singled out for enforcement.
• Respondents reported significant community acceptance of illicit trade in Sinjar, driven by poverty and economic necessity as much as by weak law enforcement.
• At Zurbatiyah, one of Iraq’s busiest Iran-facing crossings, actors affiliated with the Popular Mobilisation Forces (PMF) dominate formal access but operate amid significant competition. The federal government retains a real role in legal commerce, while armed groups hold more influence over illicit and informal trade.
• Respondents perceived a decline in illicit trade through Zurbatiyah, possibly linked to the ASYCUDA customs system introduced in late 2023 and to tighter restrictions on access to US dollars. In contrast to Sinjar, they noted strong community disapproval of illicit trade.
• Rivalry among armed actors leaves Zurbatiyah’s illicit trade more exposed to enforcement, but it also leaves room for networks to consolidate control if state institutions are not strengthened. Within Iraq’s power-sharing settlement, enforcement also tends to be selective, falling on actors who upset the balance.

Policy Implications

• Before choosing a response, policymakers working in areas of contested governance should establish whether the actors governing trade cooperate or compete, and whether the state retains authority over legal trade. The same policy instrument will yield different results in different places.
• In Sinjar, a cohesive political settlement and legal economic alternatives should come before enforcement. Sustained Iraqi and foreign investment in formal employment is needed before community dependence on illicit channels can diminish, and before enforcement can reduce illicit trade without displacing livelihoods.
• Cooperative arrangements in Sinjar can be targeted without harming livelihoods at two points: the informal taxes and protection payments that armed groups levy, and the financial flows through banks and hawala networks that sustain them. Iraqi authorities should coordinate with Syrian and Turkish counterparts on cross-border financial monitoring.
• International diplomatic support for accountable governance arrangements in Sinjar that exclude armed groups is more likely to reduce illicit flows than enforcement alone. The 2020 Sinjar Agreement already commits Baghdad and the Kurdistan Regional Government to this goal.
• At Zurbatiyah, enforcement should be expanded to target the networks and individuals that profit from illicit trade, through a clear, rules-based approach that constrains all actors. Asset disclosure for border officials, independent audits, expanded customs automation and transparent hiring would strengthen institutions at the crossing.
• The Iraqi government’s disarmament campaign could reduce informal and illicit trade by removing the actors best placed to shape it, provided vetting and audits stop their replacements inheriting the same arrangements. International partners can reinforce this through sanctions, anti-money-laundering measures and technical assistance to the Central Bank of Iraq.

This policy brief was published as part of the XCEPT project ‘Contested Cross-border Spaces, Illicit Flows and Order in the Contemporary World’.