Regional Struggle: Iraq, Iran and the US

Analytical Brief n. 11, March 2021

This year marks the eighteenth anniversary of the US-led invasion of Iraq. Despite billions of dollars invested in reconstruction, the situation in Iraq can best be described as unstable. In many ways this instability is the outcome of continuous conflicts triggered by the fall of Saddam Hussein and collapse of the Baathist state. If in the fourteen years following the invasion, the main source of instability was the Sunni extremists, in the last three and a half years Iraq became a new competing arena for the United States and Iran.

Both countries have significant interests in Iraq. For Iran, Iraq is a vital state in the Arab world, its importance reflects Iran’s security concerns. The Iran-Iraq war of 1980-1988 is still a vivid memory for many Iranians over forty. Iran would never accept a hostile regime in Baghdad. Neither Iranians would tolerate Iraq becoming a platform for hostile actions against Iran. Two major Shia holy cities - Najaf and Karbala - are situated in Iraq. Najaf is widely considered the third holiest city of Shia Islam (after Mecca and Medina). It is the burial place of Imam Ali, revered by Shia Muslims as the most important figure in Islam after Muhammad. Karbala is best known as the site of the Battle of Karbala in 680 A.D., one of the key events in the history of Islam. Karbala is equally the site of two very important Shia shrines - of Imam Husayn Ibn Ali and of Abbas Ibn Ali. In this regard, Iraq has sacred significance for Iranian Shiites. Iran's assistance to the Iraqi government during the military campaign against the Islamic State (IS) was largely due to the fear that Shia holy sites could fall into the hands of Sunni extremists.

In terms of economic exchange, Iraq represents an important market for Iran. Before U.S.- imposed sanctions on Iran, Iraq was Iran's second biggest trading partner after China. Estimates of trade between the two countries vary between $12 and 16 billion a year, with Iranian non-oil export to Iraq reached $8.9 billion in 2020.1

For the U.S., Iraq plays an important role as a U.S. outpost in the Middle East. Iraq has a strategic proximity to the Persian Gulf monarchies (Saudi Arabia, Kuwait, Qatar), as well as in Syria, Iran and Turkey. US have also stakes in Iraqi oil production since a number of US oil companies operate in Iraq.2

Domestic Political Struggle

Factors that affect the political situation in Iraqi are numerous. The most apparent are a vicious power struggle between different political parties and factions, the ongoing conflict between Shia and Sunni Muslims, social unrest over falling living standards and dysfunctional state administration, corruption and the strategic competition between the United States and Iran.

Parliamentary Elections

Iraq's last parliamentary elections were held in May 2018. The largest number of votes went to the As-Sairoun electoral bloc, composed of supporters of Muqtada al-Sadr's Ahrar movement (radical Shias) and the Iraqi Communist Party (IKP). Together they won 54 out of 329 mandates in the Iraqi parliament. The Sadrists performed well in all provinces except for Kirkuk and Dohuk (northern Iraqi Kurdistan), where they did not have any candidates.

Muqtada al-Sadr is a prominent Shiite cleric, son of the famous religious leader Ayatollah Mohammad Sadiq al-Sadr, assassinated by Saddam Hussein in 1999. In 2004-2008, al-Sadr led the Mahdi Army, an armed Shia group that fought against the US forces in Iraq. Despite his past religious radicalism, Muqtada al- Sadr has recently positioned himself as an Iraqi nationalist and criticized Iran. He has made several trips to Saudi Arabia and Qatar.

In the second place was the Al-Fatah movement, a political arm of the Al-Hashd al-Sha'abi militia. It received 47 parliamentary mandates. The popularity of Al- Fatah is due to Al Hashd al-Shaabi’s decisive role in fighting the Islamic State. Al- Fatah won the majority of votes in the southern provinces of Iraq where conservative-religious Shiites dominate (Nejef, Kerbela, Basra). Al-Hashd al- Shaabi is a well-armed military frorce loyal to Iran. On January 2, 2020, its leader, Abu Ali al-Muhandis, was killed by American missiles near Baghdad, along with the Iranian Qods commander, General Qassem Suleimani.

In the third place was the Nasr al-Iraq alliance of former Prime Minister Haider al- Abadi.

In the fourth place was former Prime Minister and former Vice President Nuri al- Maliki's Dawlat al-Qanun coalition, which won 25 parliamentary seats. Haider al- Abadi and Nouri al-Maliki come from the Da'awa party. Nouri al-Maliki, Prime 4 Minister from 2006-2014, is a political ally of Iran, while Abadi, Prime Minister from 2014-2018, belonged to a faction of the Da'awa Party that once found refuge in Britain. Abdi is considered a more pro-Western politician. Nouri al- Maliki's political reputation has been damaged by accusation of rampant corruption and blatant discrimination of the Sunni minority.

The Al-Wataniya coalition of secular and Sunni parties, headed by former Prime Minister Iyad Allawi (2004-05), turned out to be a loser in the elections. A disgruntled Allawi called for a re-election, citing irregularities in a number of precincts. Ayad Allawi is a former Ba'athist who broke with Saddam and became a political refugee in 1979. In the 1990s, Allawi collaborated with the CIA, the British and Saudi intelligence agencies to overthrow the regime of Saddam Hussein. He was one of the sources of information on Iraqi WMD programs that turned out to be fake. For a long time, he had a reputation of the closest American ally in Iraq.

Post-election crisis

The election results led to the formation of a new government headed by Adel Abdel Mahdi, a prominent Iraqi politician, a former oil minister and economy minister. Mahdi tenure lasted between October 2018 and April 2020. In November 2019 Mahdi was forced to resign after the eruption of widespread popular protests.

The government crisis that began in late November 2019 with the resignation of the government of Adel Abdel Mahdi, was resolved on February 2, 2020, with the appointment of Muhammad Tawfiq Allawi as the new head of the Iraqi government. However, the new Prime Minister failed to gain approval of Shia political parties, such as the Al-Hikma Party and the Dawlat al-Qanun coalition. He was unable to form a new cabinet and had to resign. In April 2020, Mustafa al- Kazimi was approved as the new Prime Minister.

The new Prime Minister is equidistant from all political parties and has not been involved in corruption scandals. Al-Kazimi participated in the 1991 Shia uprising against Saddam. As the revolt was suppressed, he fled to Britain, where he remained in hiding until 2003. Al-Kazimi is a professional journalist and for many years headed the Iraqi Memory Center, which investigates political crimes of the Saddam Hussein era. Since 2016, he has been the head of the Iraqi National Intelligence Service. According to some Iraqi analysts, since his days as the head 5 of the Iraqi intelligence, al-Kazimi maintains close contacts with the CIA and in general has a pro-Western orientation.

Social unrest, 2019/20

Mass protests in Iraq began on September 29, 2019. Protests were triggered in part by the firing of Abdel Wahhab al-Saadi, popular head of the Counterterrorism Service, who had played a major role in defeating the Islamic State. By the end of October 2019, protest rallies had engulfed Baghdad and the Shiite provinces of the south, including the holy cities of Najaf and Karbala. In Baghdad, protests were particularly strong in the poorest Shiite neighborhood of Sadr City. While previous protests of this kind were initiated and directed by Muqtada al-Sadr, the latest wave seems to have been initially spontaneous.

In October and November 2019, the protests began to take on an increasingly anti-Iranian turn. On November 3, 2019, demonstrators attacked the Iranian Consulate General in Karbala with the Molotov cocktails. In Basra, protestors attacked one of the commanders of the Al-Hashd al-Haqq detachments, part of Al-Hashd al-Shaabi. Although the Iraqi government initially tried to suppress the protests by force, killing over 500 people, later the government agreed to make concessions to the protesters. Prime Minister Adel Abdel Mahdi resigned and promised to hold new elections.

Administrative Dysfunction

The reasons for widespread discontent were economic hardships and the decline in living standards and inability of local and national authorities to adequately provide basic services, such as electricity and clean water.3

The significant fall in oil prices (which began in 2014), has exacerbated the country's economic plight and highlighted administrative dysfunction. In the absence of industry (except for hydrocarbons) and declining agriculture, the Iraqi government was forced to create jobs in civil service to absorb massive unemployment.4 This bloated system of government became a heavy burden on the Iraqi state treasury and minimized administrative efficiency.

Endemic corruption

The roots of Iraq’s present-day corruption can be traced back to the sectarian power-sharing settlement – the Muhasasa system – brokered after the US-led invasion of 2003. The new Iraqi system of government represented the different ethnic groups of the country in a proportional power-sharing structure. However, instead of leading to an inclusive system of governance, the power-sharing agreement led to weak institutional arrangements, privatization of government offices and an increasing sectarian rivalry. Post-Saddam power-sharing arrangements lacked accountability, transparency, and stability. Instead of bringing inclusivity and democratization, the Muhasasa system led to a widespread corruption, nepotism and clientelism. It resulted in the emergence of parallel power centers and networks that structurally resemble a mafia organization. Under this system, family and clan connections, individual loyalty or allegiance to a particular party or sectarian group offer a greater political influence and can hold more relevance in the political decision-making process, than the formal institutional process. Endemic corruption became one of the greatest threats to Iraqi stability since the defeat of ISIS. According to a survey conducted across Iraq by the National Democratic Institute in 2019 corruption was listed as the second biggest overall concern of respondents after unemployment. The 2020 Transparency International Corruption Perceptions index ranked Iraq 160 out of180 countries, making it one of the most corrupt countries in the world. Budget embezzlement and the selling of positions in this state have become routine.

In October 2015 the Iraqi Commission of Integrity (CoI) spokesman Adil Nouri has claimed that $500 billion or half of the government's oil income and funds for reconstruction were 'stolen' and 'vanished' from Iraq during the 8-year rule of former Prime Minister Nouri Al-Maliki. Nouri called it “the greatest case of corruption in history.” Transparency International estimated illegitimate gains from corruption in Iraq to be between $125 billion and $300 billion.5

Popular protests have already taken place in Iraq in 2015 and 2018. The novelty of the recent protests is that the majority of the protesters were Shia, despite the fact that the Shia community has actually been in power since 2005. More importantly, for the first time, protestors used anti-Iranian slogans.

The Iranian-American Rivalry in Iraq

On January 2, 2020, U.S. missile strike killed General Qassem Suleimani, commander of the Islamic Revolutionary Guard Corps (IRGC) Quds Special Forces. At the time Suleimani was leaving the Baghdad airport on his way to meet Iraqi Prime Minister Adil Abdul-Mahdi. On January 5, 2020 the Iraqi Parliament has passed a resolution calling on the government to expel all foreign troops from the country. This resolution, however, did not lead to a complete withdrawal of US troop from Iraq.

In July 2020, the new Iraqi Prime Minister Mustafa al-Kazemi initiated a dialogue with Washington. Two sides agreed on a compromise: the U.S. was going to scale down its military contingent in Iraq, while the remaining servicemen were to be considered as US military advisors to the Iraqi armed forces.

At the same time, certain behind the scenes arrangements were worked out between the US and Iran. As some observes concluded, the appointment of Mustafa al-Kazemi as Prime Minister and the formation of the new Iraqi government on May 7, 2020 was a result of this compromise. They point to two elements of the deal: first, Washington agreed to grant Iraq a shortened 45-day sanctions waiver to import Iranian gas. Baghdad buys gas and electricity from its neighbor Tehran to supply about a third of its power sector. Iraq imports from Iran a significant amount of electricity and natural gas needed for its production. Baghdad owes $3 billion for Iranian electricity. With Iran's shortage of hard currency, Iranian politicians are very reluctant to lose their Iraqi trading partner. Second, in April 2020, a court in Luxembourg refused to comply with a U.S. court ordering the transfer of $1.6 billion from Iranian accounts to compensate the victims of the 9/11 tragedy. Iranian assets in Luxembourg were deposited with Clearstream, a clearing company affiliated with Deutsche Boerse. According to one Iraqi source “the Americans were able to put their man in charge of the Iraqi government, and the Iranians got their money.”

The beginning of 2021 was marked by a sharp increase in attacks on US installations by Shiite militias. In most cases, fictitious groups have claimed responsibility for the attacks, but it is clear that al-Hashd al-Shaabi is behind these attacks.

On February 16, 2021, a U.S. military base in Erbil, the capital of Iraqi Kurdistan, was attacked by a missile. One civilian contractor was killed and five were 8 wounded. On March 3, a rocket attack hit Ain al-Asad base in Anbar province, the largest U.S. military base in Iraq.

Most likely, the Iranians are sending a signal to the US that their strategic patience is running out. Tehran is waiting for the new Biden administration to return to the Iran nuclear deal and lift its sanctions against Iran. However, Washington, despite its declarations, has not yet taken any concrete steps. At the same time, Erbil's attack was supposed demonstrate American vulnerability regardless of where they are in Iraq. In March 2020 the Trump administration threatened to relocate the U.S. Embassy from Baghdad to Iraqi Kurdistan. The Iranian leadership is showing “American partners” that they can reach them in Kurdistan, too, if necessary. At the same time the attacks on US installations in Iraq coincided with the increasing frequency of Yemeni Houthi rebel attacks on the Saudi infrastructure.


In the past few years Iraq has been transformed into an arena of conflict between the United States and Iran. The presence of uncontrolled and heavily armed pro-Iran militias, like Al-Hashd al-Shaabi, combined with the Iranian- American standoff, is turning Iraq into a powder keg. Efforts by several recent governments to gain Iraq's neutrality and integrate Al-Hashd al-Shaabi militia into Iraqi armed forces have not yielded the desired results.

Another source of instability is the ongoing rivalry between the Iraqi Kurds on one hand, and Shiites and Sunnis on the other. The U.S. is trying to turn Iraqi Kurdistan, run by the pro-American Kurdistan Democratic Party (KDP), into a bridgehead to put pressure on the rest of Iraq.

The conflict between Shiites and Sunnis remains another potential source of destabilization. The military resistance of the Islamic State has been broken but the conflict has not been resolved. There is virtually no reconstruction of housing, infrastructure and industry in the Sunni regions that were destroyed during the fight against ISIS. The country's second largest city, Mosul, lays in ruins. Mutual distrust of the Kurdish and Sunni minorities toward each other and toward the ruling Shia majority, has caused Sunni and Kurdish political leaders to call for the U.S. troops in Iraq to stay.

1 Since the Islamic Republic stopped providing data on its foreign trade at the beginning of 2019, the details concerning the current volume and value of Iran's imports and exports cannot be firmly determined.

2 Exxon Mobile, Chevron, Murphy Oil Corporation, Halliburton Oil Services and others.

3 Baghdad daily power supplies last for 6-8 hours. In the southern provinces power supplies last 5-6 hours a day. In a number of cities in Iraq, such as Basra, the population has no regular access to clean drinking water.

4 Today about 4.5 million Iraqis are employed by the state.

5 U4 Helpdesk Answer, U4 Anti-corruption Resource Center, Transparency International, 11 December 2020