SADR CITY, Iraq (Reuters) - Late into the night, a crane drops towering slabs of concrete into place, the earth shaking as U.S. and Iraqi forces slowly wall off the slum that was Baghdad's last sanctuary for feared Shi'ite militants.
Iraqis gather just beyond the pool of light, looking on from the darkness of the largely Shi'ite area that until several months ago lived in the grip of Mehdi Army militiamen loyal to anti-American cleric Moqtada al-Sadr.
This third wall that will encircle Sadr City, home to 2 million people in northeastern Baghdad, is part of the U.S. and Iraqi effort to solidify the sharp drop in violence that followed fierce fighting there this year.
"There is no Mehdi Army here. There is only the Iraqi Army," said Lieutenant Colonel Yahya Rasoul Abdullah, who heads an Iraqi army unit in southern Sadr City.
"There is only one language -- the language of the law."
Hundreds were killed beginning in March as Iraqi and U.S. forces battled Sadr's Mehdi Army, which the United States blamed for rocket and mortar attacks on U.S. and Iraqi government headquarters in central Baghdad's Green Zone.
The fighting in Sadr City was one front of Prime Minister Nuri al-Maliki's crackdown on defiant Shi'ite militias.
A May 10 ceasefire ended the fighting in Sadr City and, 10 days later, Iraqi troops pushed deep into the slum unopposed.
Fighting had been particularly fierce then, and U.S. forces built a 12-foot (3.5-metre) security wall stretching more than 3 km (2 miles) across Sadr City.
Such security walls, designed to stop suicide bombers and slow the traffic of weapons, have brought bitter debate where they have been erected around markets, public places and entire neighborhoods across Baghdad.
Some Iraqis bridle at the idea of such barriers, which cause traffic jams and can suffocate nearby businesses, saying they amount to giant prisons.
Others call them a necessary evil that has contributed to the marked improvements across Iraq, where violence has dropped to its lowest levels since 2004.
Sadr City, where attacks have dwindled to several a week in the southern portion of the city patrolled by U.S. forces, is today a far cry from what it was months ago.
The streets teem with cars and commerce, and a central market with its juice and clothes vendors bustles even on the holy day, Friday. Children find respite from the searing summer heat in the fountains in refurbished parks.
While U.S. forces say the recent battles have helped "decapitate" the Mehdi Army in Sadr City, they acknowledge that many fighters have simply fled to northern parts of the capital, which are controlled by Iraqi forces.
"There's a period of restructuring going on. They're kind of seeing who's around, what's left, what kind of capabilities they have," said Captain Andrew Slack, who commands a U.S. unit that patrols the southern part of Sadr City.
A spokesman for the reclusive Moqtada al-Sadr said this week that he would dissolve the Mehdi Army if the United States withdraws from Iraq according to a timetable.
U.S. President George W. Bush has refused to set a firm timetable for pulling out the 144,000 U.S. troops in Iraq, but spoke recently of a "time horizon" which might be part of a security deal the two countries are now brokering.
It is unclear how much power Sadr wields, however, over rogue elements within the militia who might ignore his edicts. The United States has long blamed the so-called "special groups," Shi'ite militants it says are backed by Iran, for some of the most sophisticated attacks on security forces.
U.S. officials say the battle now lies in rebuilding Sadr City, whose infrastructure and services suffered decades of decay and neglect in addition to the scars of recent violence.
Kadim al-Hashimi, who sells used cars in southern Sadr City, says there is a desperate need for jobs and basic services. Many residents only have an hour or two of grid power each day.
"The city needs many things," he said.
The United States and the Iraqi government have begun to funnel money towards reconstruction projects they hope will dissuade residents from supporting Mehdi fighters anew.
No new violence has targeted the nighttime construction of the latest wall, which Iraqi soldiers began building with U.S. protection earlier this week.
Along with an Iraqi-built wall on the eastern side of Sadr City and a canal that runs along its northern edge, the walls will encircle the area entirely. Several checkpoints will search vehicles exiting and entering the slum.
Slack, whose soldiers use night vision gear to scan the dark buildings while the giant concrete slabs are dropped into place, believes residents here will accept the barrier.
"It's keeping out elements that people don't want around anymore," Slack said.
"No one wants to live in a prison. But right now, this is useful for us," the Iraqi army's Lt. Col Abdullah said.
But Zaineb Kareem, a member of Sadr's bloc in parliament and a Sadr City resident, says the money for the walls would be better spent on basic services.
"People can't see their neighbors because of these walls. The walls have disrupted this city," she said.
Additional reporting by Khalid al-Ansary; Editing by Giles Elgood