When Iraqi Prime Minister Mohammed al-Sudani arrived in New York City in September for the UN General Assembly, a delicate truce was in balance between the two foreign powers that loom over Baghdad. Iraqi paramilitaries, backed by Iran, had frozen their attacks on US troops in the country. Iraq’s new leader arrived in New York City amid the lull. He was feted on a circuit of swanky receptions with western businessmen and diplomats on the sidelines of the General Assembly, as he pitched Iraq’s oil-rich but corruption-riddled economy as an investment destination.
Four months later, the Iraqi leader is condemning Iran and the US for launching deadly strikes in his country and his investment pitch to the global elite at Davos Switzerland is overshadowed by his call for the US military and its coalition partners to leave Iraq. Since the Hamas-led attacks on October 7 and the war in Gaza, Iranian-backed militias have launched at least 70 attacks on US forces in Iraq.
In early January, the US hit back with its most powerful response yet, launching a drone strike in Baghdad that killed Mushtaq Taleb al-Saidi, also known as Abu Taqwa, a senior commander in the Popular Mobilization Units, an umbrella organisation of Iraqi state-funded and Iran-aligned, Shia militias.
Baghdad hit out at the strike as “a violation of Iraq’s sovereignty”. But no sooner was Iraq chastiszing the US for the strike, when Iran launched a barrage of ballistic missiles into the Iraqi city of Erbil, killing four people, including a prominent Kurdish real estate developer and his one-year-old daughter.
Baghdad slammed Tehran’s allegation that the house struck in Erbil was an Israeli Mossad “spy center”. At Davos, Sudani called the strike “a clear act of aggression”. Iraq has recalled its ambassador to Tehran and says it will file a complaint at the UN Security Council.
The dual rebukes of Iran and the US underscore the tightrope Baghdad is walking as the war in Gaza seeps out beyond the besieged Mediterranean enclave’s borders. Across the region, Tehran and Washington are flexing their muscles, vying to outflank each other in a deadly proxy war. The shadowy conflict has taken on different flavours that reflect local and geopolitical realities.
In Lebanon, the US is trying to de-escalate fighting between Israel and Hezbollah, with both sides wary of being dragged into a wider conflict. Meanwhile, Iran-backed Houthi fighters in Yemen have made themselves targets of US air strikes as a response to their attacks on commercial shipping.
But the conflict is perhaps at its most intense, and complex, in Iraq. “The Iraqi government is weak, divided and fundamentally can’t control conflict on its borders from foreign powers,” Renad Mansour, director of the Iraq Initiative at the Chatham House think-tank, told Middle East Eye.
“It emerged as the playground of choice, where the US and Iran can fight it out. The risk of escalation here is lower for both. And they can show force and compete for influence.”
Syria, through Iraq
For Iran and its Iraqi allies who dominate Baghdad’s government, the war in Gaza has presented an opportunity to drive home their goal of expelling the US from Iraq. A former senior US official and an Iraqi official told MEE that there has beenincreased coordination between Iranian-backed paramilitaries in Iraq and Lebanese Hezbollah with that aim. According to media reports, a top Hezbollah official, Mohammad Hussein al-Kawtharani, arrived in Baghdad earlier this month to oversee the operations.
“Instead of attacking Israel, what we are seeing in Iraq are more attacks on US forces,” Andrew Tabler, a former Middle East director at the White House’s National Security Council, told MEE. The pressure building in Baghdad to expel US troops has been underlined by Sudani’s public calls for an exit since the assassination of Abu Taqwa. If he follows through, experts say it would present a strategic victory for Iran.
Roughly 2,500 US troops are in Iraq to advise and train local forces as part of a coalition to defeat the Islamic State militant group. They are mainly based in Baghdad and northern Iraq’s autonomous Kurdish region. The latter is especially important for providing logistical support to 900 US troops in northeastern Syria.
The US’s legal justification for being in Syria is also based on its agreement with Baghdad. “Erbil is crucial for supporting Syria,” Tabler said, referring to the capital of Iraq’s autonomous Kurdistan region. “The US needs to have the ability to move troops and supplies on the overland route between the Iraqi frontier and Syria.”
Speaking in Davos on Thursday, Sudani said that “ISIS is no longer a threat to the Iraqi people,” and that “the end of the international coalition mission is a necessity for the security and stability of Iraq”.
The Biden administration and Baghdad were already negotiating the future of the US-led coalition in Iraq before the war in Gaza erupted, a former senior US official told MEE, but the war changed Washington’s approach to the talks. “It doesn’t look good to be discussing a drawdown when the Iranians are attacking US soldiers with missiles and drones. So there is a sense from the administration that we need to pause these talks.”
While the US continues to conduct small-scale raids against IS cells in the region, Washington views its military footprint in northeast Syria as a key counterweight to Iran and Russia, which back the Bashar al-Assad government in Syria. “The US mission in northeast Syria depends on Iraq,” Joel Rayburn, a former US special envoy for Syria, told MEE.
The US military presence in Iraq has ebbed and flowed since the invasion 20 years ago. In 2011, the US pulled all of its forces from Iraq, only for them to return in 2014 at the invitation of Baghdad to fight IS. But in that period, Shia paramilitaries backed by Iran emerged as the most powerful armed groups in Iraq. Trained and funded by Iran, the Popular Mobilisation Units also fought IS.
Some groups, like Kata’ib Hezbollah, have been at the forefront of attacks on the US in Iraq. The group’s founder, Abu Mahdi al-Mohandes, was killed in the same US strike that assassinated the Iranian commander, Qassem Soleimani.
Today, the PMUs boast more than 150,000 fighters. They maintain vast patronage networks and many are incorporated into Iraq’s official state security apparatus, with the Iraqi government paying their salaries. They have been accused of kidnappings, assassinations and suppressing peaceful protests.
The inability of successive Iraqi governments to rein in the sweeping powers of the PMUs has sown discord between Baghdad and Washington. Not only have US forces come under attack from the paramilitary groups, but Washington funds Iraq’s security system. In 2022, Iraq received $250m in military aid from the US.
Despite sporadic outbursts of fighting between the paramilitaries and Iraq’s security services, “the cost of going against the militias for the Iraqi government is far higher than the cost of keeping them,” Abbas Kadhim, head of the Iraq Initiative at the Atlantic Council, told MEE. “For Washington, it’s an urgency because they are under attack, but it’s not a crisis for the Iraqi state. The militias are fighting in the same foxhole as the Iraqi government.”
Pay raise for Iranian militias
Sudani is supported by the Coordination Framework, a coalition of Tehran-backed Shia political parties that are tied to many of Iraq’s paramilitaries. While Sudani negotiated a six-month truce that saw attacks on US forces in Iraq stop, the PMUs have gained more influence under his rule, experts say.
“Iran-backed militias have a more visible presence on Baghdad’s streets during Sudani’s tenure,” setting up new checkpoints, Michael Knights, a fellow at the Washington Institute for Near East Policy, wrote, adding that they have also deepened their business activities.
This year, Sudani’s government passed a three-year budget that allocated $700m more dollars to the PMUs, which will allow them to add almost 100,000 new fighters to their ranks, according to analysts. But current and former US and Iraqi officials say Baghdad wants to maintain good relations with Washington.
Sudani has framed his call for quick exit of US-led coalition troops as necessary to preserve “constructive bilateral relations” with the US, which he told Reuters could include training and advising Iraqi security forces. His comments are a reflection of the unique ties Baghdad maintains to both Washington and Tehran.
The dollar trap
Iran and Iraq share a thousand-mile border. The two Shia-majority countries have an estimated ten million border crossings annually, with many Iranian pilgrims visiting shrines in Karbala and Najaf. Iraq is the second most important destination for Iranian exports and is dependent on Iran for about 35 to 40 percent of its power needs.
Iran has never shied away from flexing its economic weight over its neighbor. But Iraq’s finances are also intricately tied to the US.
The second largest producer in the Organization of Petroleum Exporting Countries, Iraq depends on its oil revenue to fund its government – including to pay the salaries of Iranian-backed paramilitaries. The proceeds from Iraq’s oil sales are deposited in the US Federal Reserve Bank of New York.
A recent US crackdown on money laundering in Iraq has helped fuel a currency crisis in Iraq, showcasing the immense sway Washington has over Iraq’s finances because of its dependence on the dollar. The US has also backed Sudani’s appeal for international investments in Iraq.
When Baghdad threatened to expel US-led coalition forces from Iraq after the 2020 assassination of Soleimani, the Trump administration threatened to cut Iraq’s access to its dollar reserves and stop issuing sanctions waivers for Iraq to buy Iranian energy, former US officials familiar with the talks told MEE.
The same officials say that cudgel is an option the Biden administration retains if demands for a US exit grow, but some question whether the administration would use it, after trying to reset relations with Baghdad after the tumultuous Trump years. “The US can’t be expelled from Iraq if it doesn’t want to be,” Rayburn, the former US special envoy for Syria, told MEE.
“If the US doesn’t have a military presence in Iraq, then the US need not do other things on behalf of the Iraqi government. Like facilitating dollar supply from the Federal Reserve, protecting against lawsuits, and issuing sanctions waivers,” he said.
While Iranian-backed militias want to expel the US from Iraq, experts say even the most hardline groups like Kata’ib Hezbollah benefit from Iraq’s economic links to the West. “Even the most anti-American leaders in Iraq realize they need some kind of relationship with the US,” Mansour told MEE. “Iraq is a lifeline for Iran. Its access to US dollars and financial markets is key.”
Kadhim, at the Atlantic Council, believes the focus among policymakers in Washington to merely protect US troop presence in Iraq is shortsighted. “Of course, Iran’s ideal goal is to get the US out of Iraq completely, but their practical goal is to make the US presence a liability,” which he says, the Iranians have already achieved.
“Basically, you have a small number of US troops in Iraq sequestered to their barracks. They can’t even go to town,” he said. “In the long run, someone is going to ask why are we here.”