On my third week in Iraq, we drive to Duhok, a city in the north, where the Turkish army shells the mountains every few weeks, trying to kill Kurdish guerrillas.

The Turks want to invade Kurdistan in the worst way. You can see it in Valley of the Wolves, a hit movie from 2006, produced by the Turkish military. It's their version of Rambo—Turkish commandos killing U.S. and Kurdish soldiers and breaking up an organ-harvesting racket run by an evil Jewish-American doctor played by, of all people, Gary Busey.

But we aren't thinking about the Turks or the guerrillas today. We're thinking about actresses. And how hard it is to find them.

We're in Duhok to visit Mahdi, a filmmaker from the workshop I am teaching in a nearby city with many names. (Most people call the city Erbil, but its Kurdish name is Hawler.)

Mahdi's having a difficult time getting his film started. He has his script, his equipment, and his crew. He has only one problem.

It's a love story and he needs a lead actress.

This wouldn't be a big deal in a city like Sulimaniah, but Duhok is a conservative town and the only women who will work as actresses also work in brothels. The top casting agent is a madam.

That means that young filmmakers have to pay the same rate as high-end johns (mostly foreign businessmen), and that's a lot of money when you're on a small budget. You can hire a male lead, for two days, for $50. A female lead costs around $600.

Kawa, a Kurdish cameraman, told us about the time he and his producer had to shoot some advertising spots and couldn't make it to Sulimaniah to get actresses.

So they went to the madam, found a few actress-prostitutes, and told them where to show up the next day. When one of the women realized they were filming a commercial, she said: "For a hundred dollars I'll do anything you want sexually, but I will not demean myself by doing television."

I first visited Kurdistan a year and a half ago, to film a documentary called Thank You for My Eyes about the Iraqi constitutional referendum.

Then, in May, a Kurdish filmmaker named Jano Rosebiani sent me an e-mail asking if I wanted to teach a filmmaking workshop in Iraqi Kurdistan. (Rosebiani won a director's prize at SIFF in 2002 for his film Jiyan.) The workshop—sponsored by Rosebiani's film company, Evini, and the Kurdish government—started in June. I said yes.

The U.S. Agency for International Development sponsored a similar workshop two years ago. At that time, all the students' films were about death—expressionistic tone poems about being gassed by Saddam. This time, the films are more varied. There are even a couple of comedies.

There are supposed to be 20 student filmmakers this year, 10 from the north and 10 from the south, but it's hard for the southern students to get to Hawler. The roads from Basra and Baghdad are too dangerous for driving and air travel is only a little less difficult.

So the workshop starts with just the 10 Kurdish students. They're very talented.

There's Shaida, a young woman who's made a documentary called Xanim. We watch it in her hotel room. It's a heartbreaking portrait of an elderly woman who works in the market in Sulimaniah to support herself and her 40-year-old, mentally challenged son. Xanim is critical of the government and portrays the hardship of daily life in Kurdistan, particularly for women. (The TV station KurdSat, which is owned by Hero Talabani, the wife of Iraq's president, paid for the film. When it aired, the First Lady was outraged and Shaida lost her contract with KurdSat.) After Xanim, we put in a copy of Babel someone bought from the bazaar and watch it until it stops working.

There's Zhirak, a popular video artist, who convinces 80 of his fans to drive into the dangerous Diyala province for a shoot because "it has the right kind of desert." He wants 80 identical dictators wandering around a totally flat landscape. They skirt the combat zones, put on white Mao suits, get their footage, and return unhurt.

Then there's Shakkawan, a filmmaker and translator for the Arab students. He's working on a comedy about local kids who sell gas on the black market. There is a gas shortage here, even though this country sits on top of the world's second-largest oil reserves.

The first week of the workshop is pretty normal. We have class in the morning, work with the students individually in the afternoons, and, at night, show films, eat together, and discuss what we've seen.

When the Arab students from the south start arriving, the energy changes. Because of the security situation, which changes daily, they trickle in at different times. (Two students from Basra say their flights were canceled for five days straight because of bombed-out runways.) They have a kind of brooding intensity and, once they begin to open up, really want to tell their stories about life in the south—about friends getting killed, car bombs being slipped into taxis, and armed neighborhood gangs. The southern students watch more television than the others, flipping between the BBC and Al Jazeera, often excusing themselves to call their families. Mostly, they seem tired.

The students from Baghdad say the city is completely divided and controlled by different neighborhood groups. There are checkpoints in each neighborhood and no one is allowed to move from one area to the next without approval from the various religious and political elements. If you are discovered in another neighborhood without permission, you are killed.

Things have gotten so bad that even the drinkers, known as the Seteuotin or "Alcoholics Union," have their own secure meeting places and a militia. Hussein, one of the students from Baghdad, hired members of the Seteuotin as actors. They played a militia running a neighborhood checkpoint. The actors brought their own AK-47s.

I worry about Ahmed, a 20-year-old from Baghdad who has run away from home to come to the workshop. He keeps calling his family to tell them he's at a friend's house. His brother is in the Mahdi Army, led by the cleric Muqtada al-Sadr, and would kill him if he knew he was making films. Ahmed goes off to the market every day and comes back drunk.

Sometimes in the middle of story conferences, Ahmed has to stand up. He has a bullet in his leg from when "terrorists"—his word—attacked a film shoot where he was working on sound for an Arabic director from the Netherlands. Ahmed got shot as he and the other crewmembers tried to flee.

The crew was rounded up and beaten for over an hour, then ordered, at gunpoint, to line up facing a nearby wall. They stood there, waiting to die. After what seemed like an eternity, they turned around and the men were gone. If the director hadn't lied and said he was from Iraq, he probably would have been killed.

But Ahmed says he likes his bullet—it reminds him of his first job in "cinema."

In early July, toward the end of my stay, those of us leading the workshop—one Dutch, one American, one Kurdish-Dutch, and one Kurdish-American—have a chance to get a drink with a couple of State Department officials. They wanted to visit us at the workshop, but the U.S. government puts strict limitations on their movements. The rumored bounty for an American is $1 million. So we go to them.

We meet in the U.S. compound's only bar, a hole-in-the-wall called the Edge. It isn't much, but it has decent French fries and a karaoke machine.

One of the men has worked for the State Department for 25 years but just got to Kurdistan. The other has been with State since 2001 and in Kurdistan for a year and a half. They both know a lot about the State Department but not so much about Kurdistan.

As the evening is wrapping up, I ask the million-dollar question: What do they think is going to happen in Iraq?

"Do you want to know what I'm supposed to say, or the truth?" the official with 25 years asks.

The truth, I say.

"It's over."

He says the Bush administration will ask for funding in September and that Congress will reluctantly agree, because, "It's gonna be a bloodbath, and no one wants to have to take credit for that in an election year."

He believes Iraq will never be put back together again. The only part that might survive is Kurdistan, because many top politicians want a U.S. presence to keep the Turks and Iranians from invading and making things worse.

At the end of the evening, the four of us walk across the compound, back to the street. As we approach some American soldiers sitting in the dark, we hear a semiautomatic weapon being cocked.

You know the sound. The one you hear in the movies. That metallic ka-chunk.

We jump. We freeze. And then we walk, as casually as possible, toward the front gate. This is the scariest moment of my summer in Iraq, here in the American compound.

The next day, we go to Sulimaniah to visit our film students Zhirak and Shaida. That's where I first meet a young man from Beijing named Arrow. He's part of a four-person contingent from China and, although he is the youngest of the four and has a spiky Asian new-wave hairdo, he is very much in charge.

About a week later, he turns up at our hotel in Hawler. He walks right over, says hello, and asks if I would like to have dinner with him sometime.

We finally get together the night before I leave Kurdistan. He takes me to a restaurant down the street where they pull your fish out of an indoor pond and cook it in front of you. (The fish in the pond were actually brought up from the Tigris River in Baghdad.)

Arrow tells me he works for a company called the XY Group that is both a private firm and a representative of the Chinese government. There is a lot of oil in the ground in Kurdistan, he says, "and we want to be the ones that get it out." He explains that the Chinese government thinks Kurdistan could be the next Dubai and it is willing to provide additional airport security to keep the Kurds safe. Then he leans over and tells me that he wants to open a nightclub in Ankawa and bring in some Thai and Malaysian girls. "Someday I will invite you out," he says, "and you should not refuse my invitation."

I can't help but wonder if they'll make good actresses.

A few moments later, bellboys from the hotel rush into the restaurant and tell Arrow that he is expected at a business meeting.

He waves them away and finishes his meal. Ten minutes later, he looks up and says, "We must go now."

As we walk back to the hotel, I wonder if this is all the U.S. will get for its $2 trillion investment in Iraq: a broken country where other governments can make money in oil and nightclubs.

The next night I get on an airplane back to the States. It's a long trip with a lot of checkpoints and X-ray machines and sitting around.

Sixteen hours later, I'm sitting at the Cleveland airport, jetlagged and dirty, waiting for my friend Herb to pick me up. An elderly woman in a pink jumpsuit sits down next to me.

She looks over and says, "You know, I wasn't on vacation. I was at a funeral. It was for my grandson. He died over there. You know, in Iraq."

I nod, not really knowing what to say.

"I'm sorry I told you that," she says. "But I had to tell someone."

Bill Cody produced Athens, GA—Inside/Out (1987) and directed Thank You for My Eyes (2007). He lives in Seattle and Los Angeles.