This has had negative effects, either because the US/Iraqi forces are casting their net too wide and impacting all Mahdi Army members or the mainstream Mahdi Army itself is financing itself through these illegal smuggling actions and wants them to continue. Regardless, it has triggered an escalation in violence that jeopardizes the cease-fire that helped make the Bush/McCain surge strategy look successful.

In Basra:

The oil-export city of Basra became a battleground Tuesday as Iraqi forces, backed by US air power, launched a major crackdown on the Mahdi Army elements. British and US forces were guarding the border with Iran to intercept incoming weapons or fighters, according to a senior security official in Basra. [Christian Science Monitor]

As you can see they're blaming Iran to some degree, as Petraeus did recently. I'm not sure what good that does anyone, and in fact this seems more like a pushback on law enforcement more than international destabilization. Who knows, it could be Iran-guided as well. But most of the fighting seems to be in long-established Sadr/Mahdi Army controlled regions, and my guess is the recent escalation of violence is far more domestically inspired than not:

Tires burned in the [Sadr] city center, gunfire echoed against the shuttered stores and teams of fighters in pick-up trucks moved about brandishing machine guns, sniper rifles and rocket propelled grenades.

"We are doing this in reaction to the unprovoked military operations against the Mahdi Army," said a Mahdi commander who identified himself as Abu Mortada. "The U.S., the Iraqi government and SCIRI are against us," he said, referring to a rival Shia group. "They are trying to finish us. They want power for the Iraqi government and SCIRI." [New York Times]

The Basra-based official said that fighting is now centered in Mahdi Army strongholds in the neighborhoods of Tamimiyah, Hayaniyah, and Five Miles, and that there was also fighting in the neighboring provinces of Nasiriyah and Maysan. [CSM]

More attacks in Baghdad, hinting that the general revolt among Mahdi Army fighters is, indeed national:

In Baghdad, the mood was tense and some areas were deserted as clashes broke out across the city. In downtown Baghdad, checkpoints blocked sparse traffic every 100 yards.

Saeed Ammar, a government employee, said that he was standing near policemen in the Huriya neighborhood this morning when he was approached by Mahdi Army members. "They told me not to stand near checkpoints. They said, `We are waiting for the word from Moktada al-Sadr to attack the checkpoints -- it may come at any moment.'"[NYT]

Rockets fired from the capital's Shiite district of Sadr City slammed into the Green Zone Tuesday, the second time in three days.

[...]

On Monday evening, pickup trucks filled with chanting Mahdi militiamen, within sight of Iraqi forces, were forcing shopkeepers in many parts of Baghdad's west side to close in protest of US and Iraq Army raids.

On Tuesday, all shops in the Mahdi Army stronghold neighborhoods - Bayiaa, Iskan, Shuala, and Washash - were shuttered. Leaflets saying "No, no to America" were plastered on each storefront. Anti-American banners hung right next to Iraqi government checkpoints.

[...]

"The cease-fire is over; we have been told to fight the Americans," said one Mahdi Army militiaman, who was reached by telephone in Sadr City [Baghdad]. This same man, when interviewed in January, had stated that he was abiding by the cease-fire and that he was keeping busy running his cellular phone store. [CSM]

These last few paragraphs show this is the most dangerous escalation in violence in a while because it's affecting the economy and daily life of Iraqis in a way that leads to more out-of-work Iraqi youth and general anarchy.

Most importantly, the US and Iraqi governments are seemingly going to have to make a decision they've put off for years now. Do they eradicate Sadr or deal with him? Do they try for a wholly lawful state or incorporate an element of thuggery into their economy? If they want a al-Sadr free country with a totally legit economy, they may pay for it in blood.

[crossposted at Dailykos and MyDD]