Key facts
- Iraq's Prime Minister Ali al-Zaidi is prioritizing institutional reforms to strengthen the state.
- Baghdad aims to improve access to the international banking system and reduce reliance on Iranian gas imports.
- A September 30 deadline is set for the disarmament of all militias in Iraq.
- US-led Coalition troops are scheduled to withdraw from Federal Iraq by September 30.
- Iraqi militias have launched approximately 600 attacks on US interests during the recent conflict.
- Iraq's PM proposed trilateral business opportunities involving Iran, Iraq, and the United States.
Iraq is seeking to redefine its foreign policy and strengthen its state institutions, moving beyond its long-standing balancing act between the United States and Iran. Prime Minister Ali al-Zaidi, who took office in April, has made institutional reform a top priority, aiming to improve the country's access to the international banking system, bolster the energy sector, and establish a state monopoly over arms.
These reforms, some of which began under the previous administration, are expected to curb Iran's influence within Iraq. The push to reform the banking sector, in particular, aims to reduce corruption and improve international access, which indirectly constrains channels used by Iran and its aligned networks. Iraq is also diversifying its energy partnerships to lessen its dependence on Iranian gas imports, which historically meet about 40% of its needs. During a recent visit to Washington, Prime Minister al-Zaidi signed numerous agreements with US firms, focusing on associated gas projects.
Reforming the security sector presents a significant challenge. Al-Zaidi has set a September 30 deadline for the disarmament of all militias and their reintegration into state apparatuses. However, these groups are deeply embedded in Iraq's political structures, making complete disarmament difficult. Despite this, even partial success in centralizing authority could grant Baghdad greater autonomy in its domestic and foreign policy.
The planned withdrawal of US-led Coalition troops by the same September 30 deadline also signals Baghdad's desire to reshape its relationship with the US, focusing on deeper economic ties. The Prime Minister anticipates an increased American economic presence, contingent on the reduction of militia attacks on US commercial interests.
Several Iraqi militias have engaged in attacks against US interests, perceiving the potential fall of Iran as a threat. A lasting end to the US-Iran conflict, potentially through a Memorandum of Understanding that lifts sanctions on Iran, is seen as crucial for facilitating militia disarmament and enabling broader economic cooperation. Sanctions relief could revive stalled projects, such as the Shalamcheh-Basra railway, and restore Iran's access to international contractors and financing.
Beyond managing relations with the US and Iran, Prime Minister al-Zaidi has reportedly proposed trilateral business opportunities involving all three nations, potentially positioning Iraq as a gateway for Iran to the West. The success of these initiatives, however, ultimately hinges on a durable agreement between the US and Iran to end their conflict.