Iraq does not tax its citizens, but Abu Jassem al-Juburi, who runs a gas station in Mosul, still hands over a chunk of his income every month to the group that holds sway there: Al-Qaeda.

Dramatically weakened nationwide since it wrought vicious attacks at the height of Iraq's sectarian war from 2006 to 2008, the terror network's front group here still retains influence in the northern city.

The Islamic State of Iraq is widely described by businesspeople, officials and security leaders as a mafia-like organisation that extorts cash from Mosul residents in a bid to fund attacks.

"If I keep the gas station open, Al-Qaeda gunmen demand I give them free fuel and make financial contributions, claiming to fight the occupation," Juburi said, referring to US forces in Iraq as many locals here still do, eight years after the invasion that ousted now-executed dictator Saddam Hussein.

"If I close it, the security forces accuse me of cowering to terrorists, of creating supply problems, and they threaten to throw me in prison for a week or two. So, I pay."

"It is a cruel dilemma," concluded the 50-something, whose gas station lies in the west of the city, 350 kilometres (200 miles) north of Baghdad.

Mosul, home to 1.6 million Iraqis, is capital of Nineveh province. The south and west of the city is largely made up of Sunni Muslims, while the rest of Mosul is home to Sunnis, Kurds and Christians.

The city, for centuries a trading hub in the Middle East, translates loosely as "the junction" in Arabic. During Saddam's rule, it was home to a large pool of officers in his army and security services.

Now, many of the city's traders and businessmen profess to paying around $150 a month in "tax" to the ISI.

"Strangers come to me and extort money," said the 40-year-old operator of a private neighbourhood electricity generator who asked to be named only as Abu Mohammed, or "father of Mohammed", for fear of retribution.

"They tell me, 'If you do not want to see your family, or if you want your generator to catch fire, then don't pay'. Of course, I give in," he says, blaming authorities for failing to improve security.

Mosul officials openly acknowledge how much power the ISI has in the city.

"Al-Qaeda forces entrepreneurs, industrialists, traders, pharmacists, all of them to put their hands in their pockets to finance their activities," noted Abdul Rahman al-Shammari, head of the security committee on the Nineveh provincial council.

"The activities of Al-Qaeda in the province, and particularly in Mosul, is due to the long border with Syria and the fear of the city's residents in denouncing the terrorists."

Much of that is due to distrust of the security forces, Shammari said, and their perceived infiltration by ISI fighters. In addition, while the province's policemen are largely made up of locals, many of the soldiers posted to the area are from Iraq's Shiite Muslim south.

Mosul is one of the most violent cities in the country. In 2009, 557 attacks resulted in 757 deaths, according to the independent NGO Iraq Body Count, with a per-capita level of violence much higher than the capital, which has four times as many residents.

The IBC did not immediately respond to an AFP request for up-to-date figures.

Despite its reduced profile nationwide, ISI is still able to recruit in Mosul's mosques, arguing that it is the only group "resisting the occupiers," said a police commander who declined to be identified.

"But threats remain their strongest means of persuasion," the officer said.

"If a businessman refuses to pay, they kill his son in front of his home. If he still stands firm, they will blow up his house to make an example of him for others."

He added that ISI leaders in Nineveh were able to organise attacks from jail and had sufficient power to have non-compliant prison guards killed.

"The family of each detainee receives payment from Al-Qaeda, and the group promises to build him a house for when he is released," the officer added.

But while they raise funds in Mosul, the focus of their attacks remain Baghdad, according to defence ministry spokesman Major General Mohammed al-Askari.

"Al-Qaeda's leadership is in Mosul, the bombs are made in Diyala (a province in central Iraq), the funds are provided by Sunnis in the north and west of the capital, and operations today are concentrated on Baghdad," he said.

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