Don’t Let Iraq Fall Victim to U.S.-Iran Rivalry

Baghdad must insulate itself from the fallout by weaning itself from exclusive dependence on two outside backers.

A customer looks at an Iranian-made washing machine at a store in the Iraqi capital, Baghdad, on Aug. 8, 2018.
A customer looks at an Iranian-made washing machine at a store in the Iraqi capital, Baghdad, on Aug. 8, 2018. (SABAH ARAR/AFP/Getty Images)

There has been a constant in Iraqi politics since the 2003 U.S. invasion: the stronger the antagonism between the United States and Iran, the weaker the Iraqi government becomes. Competition between Iraq’s two main external backers polarizes its politics and paralyzes day-to-day operations. Today, with tensions between Tehran and Washington on the rise, Iraq once again could be a political and physical battleground, upsetting its fragile internal balance and deepening regional turmoil. While the United States and Iran are likely to pursue this mutually reinforcing escalation, the Iraqi leadership does not have to acquiesce in becoming collateral damage. It must reduce its binary dependency on Washington and Tehran.

In the 1980s, Washington backed the Saddam Hussein regime in its eight-year war with the nascent Islamic Republic of Iran. To protect itself against a reprise, Tehran leveraged its ties with Baghdad’s post-2003 leadership—some of whom had found refuge in Iran as opponents of the Saddam regime—and promoted allied Iraqi militias. It thus gained significant influence in U.S.-occupied Iraq.

By 2005, Iraq was engulfed by sectarian strife; Shiite militias were attacking U.S. troops; and a Sunni-based insurgency, led by a local al Qaeda affiliate, was fighting both the occupying force and its Iraqi allies. In response, Washington launched a “surge”: an injection of extra troops aimed at defeating both insurgents and select Shiite militias and stabilizing the country. This effort was militarily successful but did little to create a more functional government.

When the United States withdrew its troops from Iraq in 2011, it changed the power balance with Iran in Tehran’s favor. Iraqi Prime Minister Nouri al-Maliki’s government relied increasingly on Iran to counter domestic opposition, which grew in the turmoil unleashed by the Syrian uprising and the civil war that followed. As Iraq’s security forces remained fragmented and hamstrung by corruption, Iraq’s jihadi network reorganized in Syria, becoming the Islamic State. This group returned to Iraq in 2014, seizing large swaths of the country.

During this time, Tehran and Washington found ways to coexist and even to tacitly cooperate in Iraq. A prime example was their parallel effort to defeat the Islamic State. In the wake of the group’s lightning military successes, U.S. President Barack Obama’s administration deployed more than 5,000 U.S. troops and advisors to Iraq and put together an anti-Islamic State coalition of 79 countries, providing military, intelligence, and advisory support to the government of Haider al-Abadi, who succeeded Maliki. While Iran was not part of this coalition, the Iraqi paramilitary groups it funded and equipped (which grew out of the earlier militias) fought on the same side.

The successful conclusion of the nuclear deal in 2015 strengthened more pragmatic political forces in Iran, reduced tensions between Tehran and Washington, and created conditions for strategic coexistence in the region, of which the fight against the Islamic State was an example. While the United States and Iran had no joint military operations room, Abadi helped coordinate between the two nominal adversaries. By late 2017, their combined efforts had defeated the Islamic State in Iraq.

When Abadi’s successor, Adil Abdul-Mahdi, became prime minister in October 2018 following parliamentary elections in May, U.S.-Iran relations had soured, and whatever common ground had existed between them in defeating the Islamic State had disappeared. The pendulum had swung from tacit cooperation to open confrontation that month, when U.S. President Donald Trump withdrew from the Iran nuclear deal and launched a “maximum pressure” campaign of sanctions. So far, Tehran has adhered to its commitments under the agreement, but pressure is building in Tehran to impose a cost on Washington for its aggressive policy of economic coercion.

Instead of reviving its nuclear program, Iran could respond asymmetrically against U.S. interests in the region. This option arguably could be more attractive to Tehran, given the multiple U.S. assets in Iraq and Iran’s ability to use proxies or allies to conceal its direct responsibility.

A senior Iranian national security official told us last year that Iraq is indeed the likeliest theater for any asymmetric response. “We can add more fuel to the fire in Yemen, but that would not directly affect the U.S.,” he noted. “Iraq is where we have experience, plausible deniability, and the requisite capability to hit the U.S. below the threshold that would prompt a direct retaliation.”

The risks of open conflict are more serious now. In September 2018, the hawkish U.S. national security advisor, John Bolton, reportedly sought to retaliate against mortar attacks allegedly launched by Iran-backed Iraqi groups in the vicinity of U.S. diplomatic facilities in Baghdad and Basra with direct airstrikes on Iranian soil. What purportedly stopped him was cool-headed opposition from Defense Secretary James Mattis, who is no longer there to put on the brakes. Next time around, Bolton’s preferences could become reality.

There are less risky options available to Tehran. Iran could encourage action by allied Iraqi parliamentarians to challenge the U.S. military presence in Iraq.

After Trump’s unannounced December visit to U.S. troops at Al Asad Air Base in western Iraq, Iran’s foreign minister, Mohammad Javad Zarif, took a five-day trip to several Iraqi cities. President Hassan Rouhani followed Zarif in March. Trump’s February statement that he wants to keep U.S. troops in Iraq “because I want to be looking a little bit at Iran because Iran is a real problem” accelerated the downward slide. Iraqi President Barham Salih responded: “Don’t overburden Iraq with your own issues. … We live here.”

Abdul-Mahdi’s government may prove too weak to strike a balance between Iran and the United States, as Maliki’s used to do; and tensions may be too high for it to act as intermediary between them, as Abadi’s used to do. Legislative action to push out U.S. troops in particular could shake the Iraqi government’s already fragile majority in parliament. Deputies chose Abdul-Mahdi as prime minister after more than five months of negotiations between the two Shiite political factions that had won the largest number of votes in the May 2018 elections, Sairoon and Fatah. Today, the U.S.-Iran rivalry is inviting Tehran to leverage its relations with Fatah to prevent agreement on filling the key ministerial portfolios of defense and interior. While both sides could settle on Abdul-Mahdi as prime minister, neither he nor most of his cabinet members belong to Sairoon or Fatah, making his government particularly dependent on cooperation between the two blocs.

The United States keeps ratcheting up the pressure, polarizing Iraqi politics further.

These dynamics notwithstanding, the United States keeps ratcheting up the pressure, polarizing Iraqi politics further. In March, the U.S. Treasury blacklisted Harakat al-Nujaba, an Iraqi Shiite militia, accusing the group of receiving financial and military support from Iran’s Islamic Revolutionary Guard Corps (IRGC); in April, the Trump administration designated the IRGC as a foreign terrorist organization.

These decisions could backfire. It could further push Iran-backed paramilitary groups (which are currently operating under the umbrella of the Popular Mobilization Units and legally part of the Iraqi security forces, as well as nominally accountable to the prime minister) out of Abdul-Mahdi’s purview and bolster parallel military, governance, and political structures that would be competing with a weak central state. Moreover, several paramilitary commanders participated in the May 2018 elections, winning seats in parliament. Blacklisting them would encourage them to use their political power to challenge the U.S. presence in Iraq.

The U.S.-Iran battle is now primarily over U.S. sanctions, which Washington is trying to apply throughout the world, including in Iraq, and which Iran in turn is trying to circumvent, especially in Iraq. Not seeking to harm its Iraqi ally, the Trump administration granted the country a 45-day waiver in November 2018, allowing Baghdad to continue paying for the electricity and natural gas it imports from Tehran. To Iraqis, the short length of this reprieve came as a shock, given their heavy dependence on these imports (which account for one-third of their electricity) and given that the administration had granted 180-day waivers to U.S. allies that are key importers of Iranian oil, such as Japan, South Korea, India, and Turkey.

After lengthy negotiations, Washington renewed the waivers twice (in December 2018 and March 2019) but at the last minute and for only 90-day increments. These grace periods have put the Iraqi government on tenterhooks, rendering its balancing act between its two key sponsors even more delicate.

U.S. officials know that it will take years for Iraq to gain energy independence, yet they are putting great pressure on the government to reduce their energy dependence on Iran in short order. Iraq would have to do so by importing electricity from countries other than Iran, such as Jordan and the Gulf monarchies; improving electricity distribution through infrastructure built by foreign companies; and signing contracts with foreign companies to capture its own gas, which is going to waste at present. Washington is also seeking financial benefit, pressing the government to sign contracts with U.S. companies such as General Electric to provide such services.

The Trump administration is not just seeking Iraqi compliance with sanctions but to marshal Iraq’s active support in the campaign against Iran and is using the threat of ending loans and withholding stabilization funds to this end.

As much as secondary U.S. sanctions might hurt Iraq, however, the notion that Iraq-Iran economic cooperation will therefore end is a chimera.Over the past 16 years, the Iranians have deliberately enmeshed the Iraqi economy with their own, and they are not about to give up their investment. Preliminary figures for March 2018-February 2019 suggest that Iran’s exports to Iraq reached $12 billion—a 45 percent increase compared with the previous year—and the two countries say they aim to raise bilateral trade to $20 billion within the next few years.

Given the intensity of these trade ties, U.S. pressure to sever them may even have the opposite effect; it could empower the very group that Washington is trying to weaken: the IRGC. The more Washington threatens Iran, the more it deepens Tehran’s fear that the motive is not behavior but regime change, and the more the IRGC will invest in Iraq, which is providing Iran with strategic depth. In the same vein, the more Washington blocks formal trade channels, the richer the IRGC will become, given its hold on the black market and smuggling routes. An Iraqi official said: “Sanctions are strengthening, not weakening, Iran in Iraq. … A number of Iranian companies have already moved their headquarters to Iraq in order to circumvent sanctions.”

The Trump administration’s maximum pressure campaign could backfire by hampering Iraq’s ability to form a government. Indeed, the longer the government is paralyzed, the greater the role that will be played by Iran-backed political-military networks that made their mark in the fight against the Islamic State. Likewise, should political and economic pushing and shoving in the region lead to a U.S.-Iran military confrontation, Iraq would likely be the first theater of conflict.

The Iraqi government cannot afford to wait for a change of course in U.S.-Iran escalation or the end of the Trump administration. Nor can it afford U.S. sanctions or a cutoff of its energy imports from Iran—especially as the summer approaches and with it soaring temperatures, possibly prompting violent street protests against lackluster service provision, especially in the south.

The Iraqi leadership’s best option would be to seek to enhance its autonomy from both of its backers. One important step in this direction would be for the prime minister, president, and speaker of parliament to continue working to complete government formation by proposing candidates mutually acceptable to the Sairoon and Fatah blocs. Iraq needs a government that can speak forcefully to both the United States and Iran while resisting both countries’ pressure.

Iraq could also diversify its security and economic relations with Western countries by bringing in more European Union stakeholders, which have remained largely neutral in the U.S.-Iran rivalry. And Iraq could gradually diversify its strategic cooperation in security matters by negotiating an arrangement with Washington whereby U.S. troops would remain in Iraq exclusively under the umbrella of multinational forces (such as the anti-Islamic State coalition or NATO) while EU member states would take on the advisory and training activities the United States provides at present. The government should also seek to negotiate with Washington a system of longer-term waivers on energy imports in exchange for a realistic road map aimed at reducing Iraq’s dependence in this field. This measure will reassure Iran on its payments, decrease pressure on Baghdad, and allow the government to focus on improving electricity infrastructure and gas capture.

In the face of U.S. sanctions on Iran, EU member states are enjoying a high degree of consensus on Iraq policy. Sending a high-level EU delegation to Iraq would help signal Europe’s resolve to continue to treat Iraq as a privileged partner. It would mitigate the destructive impact of the U.S.-Iran rivalry. In harbingers of a healthier way forward, the Iraqi government has recently reached out to Kuwait, the United Arab Emirates, and Saudi Arabia.

Saudi Arabia recently decided to open four additional consulates in Iraq to facilitate the provision of visas. Gulf investors can also help enliven Iraq’s economy and social life with tangible projects, such as the massive new sports facility that Saudi King Salman pledged to build, which will include Iraq’s largest football stadium. It is in both Iraq’s and the Gulf’s interest to build ties that counterbalance Iranian influence. This could offer Iraq room to carve out an autonomous domestic and foreign policy.

Iraq’s current stability—with a sharp decrease in violence over the past two years—is real but fragile. Iraqi leaders have tried, in different phases, to diversify Iraq’s foreign policy, but the internal power struggle within and among political parties has always pushed them back into the U.S.-Iran dichotomy, making the country vulnerable to external power shifts. The Abdul-Mahdi government, more than its predecessors, would appear to be in a position to pull off this task because its leaders’ political survival depends on their ability to establish consensus among forces beyond their own constituencies. It is in the long-term interest of Washington and Tehran, and the rest of the region, that they succeed.

Maria Fantappie is a senior advisor at the International Crisis Group’s Middle East and North Africa Program. Between January and August 2018, she served as senior strategic advisor on security sector reform coordination to the EU mission in Iraq. Twitter: @MariaFantappie

Ali Vaez is the director of Iran Project at the International Crisis Group and an adjunct professor at Georgetown University's School of Foreign Service. Twitter: @AliVaez