Karbala, Iraq, Dec 24, 2019 (AFP)

Anger over Iran's stranglehold on Baghdad's political system has helped propel an unprecedented protest movement -- and now Iraqi activists are hitting the Islamic Republic where it hurts, with a goods boycott.

Tehran has held enormous sway over its neighbour since dictator Saddam Hussein was toppled by a US-led invasion in 2003.

And that influence has spilled over into the commercial arena, with exports from Iran to Iraq ten times those moving in the opposite direction.

Using the slogan "let them rot", protesters who have taken to the streets since October 1 to demand wholesale political change are now shunning everything Iranian -- from fruit to sugary drinks.

For 24-year-old protester Hatem Karim, the boycott kills two birds with one stone.

"It allows us to create jobs for Iraqis and means our money stays in the country", he told AFP.

There are even hopes the boycott could help revive domestic industry, battered by forty years of intermittent war, a decade of sanctions under Saddam, and ineffectual policy since the invasion.

"We must boycott all foreign goods to support our own national production", Karim urged.

Impromptu open air markets at protest encampments have stands offering "Made in Iraq" goods to patriotic consumers, in a country where one in four young people are jobless.

- Uphill struggle -

Only Turkey exports more to Iraq than Iran, which sends products including cars, dairy and fresh produce, amounting to a total annual value of around $9 billion (8.1 billion euros).

Iraq is the OPEC cartel's second biggest oil producer, but more than half of all hydrocarbon revenues have been syphoned off by crooked politicians and their cronies under recent administrations.

The private sector is almost non-existent and industry is on its knees, with the non-oil trade balance in heavy deficit.

Numerous factories that shut during the 1990s trade embargo or because of war -- the latest devastating conflict came against Islamic State jihadists from 2014 to late 2017 -- have simply never re-opened.

Iraqi factories lack the capacity to supply national demand, warns economist Ahmad Tabaqchali at the Institute of Regional and International Studies in Sulaymaniyah.

"Either they are too small, or they are not profitable", because there is no private sector ro cover the basic needs of 40 million Iraqis.

"Nearly everything is imported", he told AFP.

And if the boycott of Iranian goods escalates, the main beneficiary will not be Iraqi industry, he says.

Turkey, Saudi Arabia and Jordan will likely gain the most.

Amman recently signed an agreement with Baghdad exempting taxes on the export of some products.

Local producers are demanding the state drastically increase import taxes to protect them.

They complain they cannot compete with Iran, whose exports have received support from a currency that has been in free-fall since the US reimposed sanctions last year.

- 'Made in Iraq' -

But the young protesters are determined to direct their apparently boundless energy into changing all that.

They have launched Facebook groups and film adverts for locally produced fizzy drinks with sparkling studio quality.

"We want a renaissance at all levels, including trade", says one protester.

In the Shiite holy city of Karbala, some 100 kilometres (60 miles) south of Baghdad, Bassem Zakri looks at yoghurts and white cheeses leaving his factory's production line.

The increasingly revered words "Made in Iraq" appear on each pot.

Production has increased five-fold since the start of the protests on October 1, reaching forty tonnes per day, he said.

One shopper in a supermarket in central Baghdad sees progress.

"Before, Iraqi products were always the most expensive, but now the price of some goods has more than halved," he told AFP.

Yet, while the boycott may gain momentum, Iranian firms may already be employing inventive ways to skirt it, according to one activist.

An online video shows him scanning the barcode of a pot of yoghurt stamped with 'Abu Ghreib' -- Baghdad's biggest dairy firm.

Mislabelled, according to the scanner, which flashes 'Made in Iran' on its screen.