President George W. Bush and his advisers like to say that sovereignty has been returned to the Iraqis. But the heart of the Iraqi capital, where the symbols of power are most concentrated, belongs to America. Enclosed inside a maze of blast walls, protected by Abrams tanks and Apache helicopters, the 10 square kilometers of the Green Zone contain some of Baghdad's finest real estate--the local equivalent of the White House, the Washington Monument and other prime sites in downtown Washington. Many Iraqis, including senior ministers and the mayor of Baghdad, want the Americans to move out of town. But the Americans won't budge, and don't have to.
Far from being dismantled, the Green Zone is expanding. NEWSWEEK has learned that at least five U.S. security and construction companies are planning to build compounds on the zone's perimeter, eventually to be incorporated into the rest of the area. That's because the fight for space inside the zone is intense. A small U.N. team lives in the Green Zone, and plans are underway to build a future U.N. compound within the area. Key command centers for the 140,000-strong American military force occupy several of the most prominent buildings. Favored embassies and foreign companies are there, too. "Two thirds of the whole question of occupation is in those homes and those buildings [inside the Green Zone]," says Iraqi Finance Minister Adel Abdel Mehdi, whose office is in charge of negotiating the issue with the Americans. "The question of sovereignty--but also of security and national dignity, and even economic prosperity--is there."
Safety is the main sticking point--for the Americans, but also for the Iraqi interim government. Ministers like Mehdi don't want to be seen as American stooges, which is one reason they'd like to see the Americans leave the Green Zone. But they don't want to get blown up or otherwise murdered, either. Investors and other outsiders also need a place in the capital where they can feel safe. "Hand it over? No way," said one U.S. official. "The government wouldn't want that either. Anybody who comes here, they all want in. Who wouldn't? It's the safest place in town."
The Green Zone is certainly a world unto itself. Women in shorts and T shirts jog down broad avenues, and the Pizza Inn does a brisk business from the parking lot of the heavily fortified U.S. Embassy. Near the Green Zone Bazaar, Iraqi kids hawk pornographic DVDs to soldiers. Sheik Fuad Rashid, the U.S.- appointed imam of the local mosque, dresses like a nun, dyes his hair platinum blond and claims that Mary Mother of Jesus appeared to him in a vision (hence the getup). On any given night, residents can listen to karaoke, play badminton or frequent one of several rowdy bars, including an invitation-only speakeasy run by the CIA. At the Green Zone Cafe--where contractors toting 9mm pistols smoke hookahs while an Iraqi drummer provides entertainment--a sign on the door warns customers to empty their weapons before consuming alcohol.
To some, the Green Zone feels like a vast isolation chamber. One recent night at a saloon called The Bunker, a resident contractor asked, "So, what's going on out there in Iraq anyway?" He hadn't left the Green Zone in six months. "It's like Plato's republic in here, all of these well-meaning, smart people who want to do the right thing," says one security contractor and Green Zone regular. "But they never leave here and they have no idea what's happening in the country they're supposed to be building. It's totally absurd."
The war often intrudes. In mid-August a 13-foot FROG missile loaded with more than 300 pounds of explosives detonated on the roof of a U.S. Embassy building, causing massive damage but killing nobody. Other attacks, such as a mortar strike last June that hit a bus just outside the zone, have succeeded only in killing innocent Iraqis. Several thousand Iraqis live inside the zone and, with rare exception, U.S. officials have no idea whose side they're on. "The thugs and looters remain, and many of them are not very nice," says Lt. Col. Richard Allinger, a longtime Green Zone resident. Security guards sometimes get out of hand themselves. A recent spate of shooting incidents between blue-uniformed security forces inside the Green Zone led to a confidential report, "Blue on Blue Violence: Target Practice or What?"
The siege mentality of American occupiers feeds anger among ordinary Iraqis. Baghdad's mayor, Alaa al-Tamimi, has asked the Americans to withdraw not just from the Green Zone but also from other barricaded ghettos--sort of mini Green Zones--because they are an affront to Iraqi dignity, but also due to the severe traffic problems they create. Several key bridges and thoroughfares are off-limits to ordinary Iraqis. Even Abu Nawas Street, a tree-lined avenue across the Tigris River from the zone, has been closed since last year, when hotels there barricaded themselves behind blast walls and razor wire. Now Mayor al-Tamimi is trying to reopen the street to foot traffic. "Abu Nawas used to be the center of the life of the city," says al-Tamimi. "It will be again."
Legally, the Americans don't have to move out, at least not yet. On June 27, the day before Iraqi sovereignty was declared, L. Paul Bremer issued one of his last executive orders as Iraq's U.S. administrator. Known as Order No. 9, it extends the right of occupation forces to control properties until the Iraqi government decides otherwise. Officially, the United States is negotiating with the Iraqi government over the issue. But privately, U.S. officials say plans to move the Americans out are "fantasy."
So why doesn't the Iraqi government just demand that U.S. forces leave the area? Finance Minister Mehdi says he's been badgering the Americans. "We ask them all the time, 'When are you going to leave the zone?' " he says. "And we always get the same answer: that they are working on it, that they will inform us." But divisions within the government have complicated matters. Prime Minister Ayad Allawi is allegedly in favor of keeping the Green Zone the way it is, at least for now, partly because insurgents have targeted him and other officials. (Expansion plans for the zone include one to extend it by a full kilometer later this month in order to attach a complex of ministry buildings.) And pressing the issue forcefully could jeopardize vital American backing. "They would pay a price: potential curbs in U.S. support, friction on questions of aid. Iraq does not want to confront the U.S.," says Anthony Cordesman, a strategy specialist with the Center for Strategic and International Studies in Washington. But until Iraq demands otherwise, the biggest symbols of national sovereignty will remain in American hands.