By Aseel Kami

BAGHDAD (Reuters) - At his lingerie shop in Baghdad, Ali Hussein apologizes to a customer for the high price of a Syrian sleeveless vest she wants to buy. He's powerless to sell it cheaper, he says.

Still recovering from years of war and sanctions, Iraq relies on imports from neighbors like Syria, Turkey and Iran for 95 percent of its consumer goods. Syria in particular is a key supplier of manufactured goods, fresh vegetables and fruit.

But as an uprising there against President Bashar al-Assad grinds through its 17th month, the supply of Syrian goods to Iraq is slowly drying up as Syrian businesses are forced to close and trucks struggle to cross borders that have sometimes become frontlines.

Traders in Iraq say the result is predictable: shortages of Syrian goods and higher prices.

"I used to sell this bra for 15,000 Iraqi dinar ($12.90), now I sell it for 18,000 Iraqi dinar ($15.48)," said Hussein, who imports well-known Syrian products to Iraq. His supplier closed its factory in a suburb of Damascus a month ago.

"We used to receive 50 packages in one delivery, while last week we received only four ... they fear for security on the road because a lot of trucks were looted," Hussein said.

Expecting the worse, Hussein began stocking up on Syrian goods six months ago.

Syria's export capacity is also being sapped by tough European and U.S. sanctions. Many Syrian companies have shut factories or reduced production, Iraqi trade and business officials say.

"A lot of Iraqi importers have deals with Syrian companies but they have decreased shipments from Syria by 60 percent," said Raghib Blebil, head of an Iraqi business association.

"Syria has the same disturbing situation we used to have in 2006-2007," Blebil said, referring to the height of violence in Iraq.

The flow of goods coming to Iraq from Europe through the Syrian ports of Tartus and Latakia has also been disrupted, he said. Before the revolt against Assad, Syrian ports offered lower costs for cargoes of wood, steel and grain.

Now Iraqi importers are looking elsewhere, traders say.

SHRINKING BORDER TRAFFIC

Road transport is also increasingly difficult. Iraq has three border crossings with Syria, one of which came under rebel control briefly before Assad's forces took it back.

The Albu Kamal-Qaim border checkpoint, about 300km (185 miles) west of Baghdad on the Euphrates River highway, is one of the major trade routes across the Middle East. Yet it has been closed for trade for about a year because of Syria's crisis.

The other Iraqi border points have stayed open for goods trucks, but customs sources at the two checkpoints said the number of trucks crossing had shrunk enormously in recent weeks.

"Maybe one or two trucks carrying food goods and clothes enter Iraq every few days as it is a dangerous process for Syrian traders due to the lack of security there," one source in the customs office at the al-Waleed border crossing said.

For grocer Ammar al-Rubaie, the price of fruit and vegetables has already increased 30 percent, not unusual during the Ramadan holy month. But the price of Syrian fruit and vegetables, if any is available, have gone up four or five times.

"A while ago 70 percent of the goods were Syrian, everything was entering the market," said Rubaie, sitting on a pile of empty plastic fruit boxes at his Baghdad grocery.

"Now we only have onion and eggplants from Syria, the rest are coming from Turkey and Iran. Thank God, Iraq can depend on other areas for fruit and vegetables."

Some customers say the price of Turkish and Iranian goods is also being affected by the Syrian crisis.

Larger supermarkets said they are able to stave off the impact of fewer Syrian trucks crossing the border for now because they can rely on wholesale traders with storage facilities.

"Now the effect is not so clear because the market has supplies," said Abdul-Hadi, a supermarket owner, standing near shelves of famous Syrian soaps. "But maybe in two or three months when those goods finish we'll notice the difference."

(Additional reporting by Fadhil al-Badrani in Falluja and Jamal al-Badrani in Mosul; Editing by Patrick Markey and Andrew Osborn)