MOSUL (Reuters) - When Islamic State seized the five-star Ninewah Oberoi Hotel in east Mosul it replaced wealthy Iraqi patrons with another kind of elite -- foreign fighters and suicide bombers seen as the group’s most prized members.

The Iraqi army’s recent capture of the ruined compound - renamed Hotel Waritheen (Inheritors) by Islamic State - deprived the militants of a strategic site that offers a comprehensive view across the vast city.

Yet the 11-story building fringed with palm trees is a reminder of the many dangers and uncertainties ahead as Iraqi forces prepare to expand their offensive against Islamic State into west Mosul, a far more complex battleground.

The compound, with its abandoned playground and ferris wheel, lies within striking distance of Islamic State snipers and mortar bomb operators, dug in just across the Tigris River, which once soothed hotel guests standing on balconies.

That uncomfortable reality is not lost on Iraqi soldiers, who venture into hotel rooms on high floors to spot enemy positions in the west just across the waterway, which bisects Mosul.

Curtains are peppered with bullet holes, the work of Islamic State marksmen. Iraqi security officials say the most lethal ones are foreign fighters, the kind that were put up in the hotel as a reward for their services.

The original 265-room hotel, built in the 1980s, catered to the powerful during Saddam Hussein’s rule, including military officers, government officials and businessmen rewarded for their loyalty to his Baath Party.

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One of Saddam’s former palaces, located on an island on the Tigris, was demolished in recent fighting. Another one nearby suffered a similar fate.

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Islamic State grabbed the hotel after it swept into Mosul in 2014, facing virtually no resistance from Iraqi troops, and imposed a reign of terror.

A jihadi website showed militants with their wives, covered from head to toe in black, and children at the hotel, once described on the internet as “elegantly designed to offer comprehensive 5 star services”.

Alcohol was banned but pain killers and syringes used by jihadist fighters before and after battle remain.

Old photographs on internet advertisements show elegant suites with king-sized beds, conference rooms, a sprawling swimming pool, shopping arcade and bowling alley, in sharp contrast to the current destruction.

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A rocket-propelled grenade and broken glass clutter the entrance to the health club, where the sauna and jacuzzi lie in ruins.

One soldier, who asked not to be named, studied shredded furniture and chairs piled on top of each other on lower floors, seeking clues on how Islamic State operated in the hotel.

“Conferences were held on that floor. The Daesh leadership must have held meetings there to discuss strategy,” he said, using the derogatory acronym favored by opponents to describe Islamic State.

Islamic State had its own price list for the hotel restaurant and coffee shop displayed on simple plastic menus. Cappuccino sold for the equivalent of about $1.

Beds were missing from the hotel rooms. Iraqi soldiers said militants sold them in the market as their self-proclaimed caliphate began collapsing under the pressure of the offensive, backed by U.S.-led coalition airstrikes.

Islamic State leaders, for their part, did their best to keep up morale, judging by a copy of their local propaganda newspaper left behind at the hotel. Front page headlines claim operations killed hundreds of Iraqi troops.

Another highlighted the attack on an Istanbul nightclub on New Year’s Eve.

There are no signs the hotel will be revived anytime soon, with fierce fighting expected in west Mosul.

Even if Islamic State is defeated in all of Mosul, the group is expected to stage an insurgency in Iraq, a country that has suffered from dictatorships, wars and sectarian violence that have ruined many ventures like the hotel.

The latest occupants, Iraqi soldiers, seem to have written it off as a lost cause, leaving styrofoam plates of rotting meat and rice on the floors of decimated rooms for weeks. In some areas, there were human feces.

Soldiers have a far more pressing issue to worry about - the militants watching them from just across the Tigris - with mortar attacks and gunfire keeping eastern Mosul on edge.

The only people wearing hotel slippers these days are Iraqi forces clutching assault rifles.