Expectations indicate that Iraq is entering a new phase of economic pressure from the United States, aligned with Washington’s strategy aimed at diminishing Iranian influence in the region. Abbas Aqeel, a researcher specializing in Iraqi affairs, along with Mustafa Al-Taie, a strategic affairs expert, have articulated that U.S. sanctions against Iraq are anticipated as a matter of time, stemming from political and economic trends that reflect the current American administration’s stance.
Political Dynamics and the Imperative of Equilibrium
Abbas Aqeel emphasized that “American economic sanctions against Baghdad are inevitable; it’s merely a matter of timing.” He ruled out that the primary objective is to alter the political landscape or to dismantle the coordination framework, asserting that “the Trump administration seeks not to change the ruling forces outright but rather to curtail Iranian influence within Iraq.”
Moreover, Aqeel noted that “the American administration’s perspective on Iraq is not solely influenced by domestic lobbies but reflects a growing belief within the White House that Iraq has increasingly become a facet of Iranian dominance.” This view, he suggests, is also echoed within Iraq itself.
Recent sanctions imposed by the United States on several Iraqi banks have incited widespread concerns within Iraqi economic and political circles. These measures are part of broader U.S. efforts to combat terrorist financing and ensure adherence to international regulations on money laundering and illegal financial activities.
Potentially, these sanctions may hinder Iraq’s access to global financial markets, which are pivotal for its import and export operations, thereby threatening economic stability. Such penalties could also diminish public and investor confidence in local banks, leading to reduced deposits and heightened liquidity pressure. Furthermore, international financial transactions may face increased obstacles, particularly with Iraqi banks’ dealings with global financial institutions.
Economic Implications and Trade Barriers
Mustafa Al-Taie articulated that “the U.S. recognizes that Iraq serves as the economic lifeline for Iran and will thus endeavor to impose various sanctions aimed directly at Baghdad to restrict Iranian financial assistance.”
He referenced recent statements by Shakhwan Abdullah, the second deputy speaker of Parliament, as not being made in isolation but as reflective of signals received during his recent visit to the United States, highlighting a discernable American strategic outline regarding this issue.
The economic repercussions of such sanctions could be severe for Iraq, which predominantly relies on the U.S. dollar for its financial transactions; any imposition of American restrictions on financial exchanges would adversely impact the Iraqi economy, likely escalating commodity prices and diminishing citizens’ purchasing power.
Recently, Abdullah underscored that “the American administration may initiate further political and economic decisions regarding Iraq and the U.S., discussions that have occurred multiple times with the federal government.”
According to experts, trade relations between Iraq and Iran constitute a significant component of the economic landscape for both nations, shaped by extensive borders and deep-seated historical, cultural, and economic ties. This trade is categorized into two primary forms: official trade and informal or parallel trade, each with its own implications.
Officially, Iran ranks among Iraq’s largest trading partners, with annual trade volumes encompassing a diverse array of goods, including food, industrial products, electricity, and construction materials. Numerous bilateral agreements have been established to facilitate trade exchange and bolster economic collaboration in sectors such as energy, transportation, and investment.
Conversely, informal trade accounts for a substantial portion of the economic interchange between Iraq and Iran. This trade, often executed across land borders outside formal oversight, involves the smuggling of various goods, including fuel, tobacco, electronics, luxury items, as well as drugs, agricultural products, currency, and oil—all of which have incurred penalties.
The informal trade presents challenges to the Iraqi economy, as the influx of Iranian goods at reduced prices undermines local industries, simultaneously exacerbating corruption and security instability in border regions. Additionally, such trade raises international apprehensions, particularly from the U.S., due to its potential connection to financing illicit activities or entities regarded as terrorist organizations.
On the flip side, Iran significantly benefits from both official and informal trade with Iraq, as the Iraqi market serves as a crucial outlet for Iranian products, especially amid existing international sanctions against Iran. This relationship further consolidates Iranian political and economic sway in Iraq.
Security Considerations and Potential Outcomes
Abbas Aqeel posits that “the recent events in the region, particularly those surrounding Tala al-Aqsa, illuminate the emerging challenges,” noting that “the political framework established in Iraq post-2003 is unlikely to collapse, although the ruling class—particularly the coordination framework—faces real risks due to its acceptance of Iranian influence and its encouragement of armed factions, which could lead to direct confrontations with U.S. sanctions.”
Diplomatic Challenges and Iraq’s International Position
Data suggests that Iraq is encountering significant diplomatic hurdles, as U.S. sanctions could jeopardize its relationships with Western powers, potentially driving Iraq towards closer ties with Russia and China to mitigate anticipated economic losses.
Al-Taie believes that “the United States has not entirely closed the door on Iraq but demands a more autonomous stance concerning Tehran,” affirming that “sanctions may also result in diminished security collaboration between Baghdad and Washington, impacting counter-terrorism efforts, particularly considering the persisting threats from ISIS in certain Iraqi regions.”
Strategic Adjustments for Iraq’s Benefit
In light of these complexities, observers argue that Iraq must reevaluate its foreign policy to avert escalatory tensions with the U.S. by adopting a more balanced approach in its regional relations and diminishing its economic and political reliance on Iran.
Al-Taie asserts, “Iraq can sidestep the most unfavorable outcomes by implementing economic reforms that reduce its reliance on the U.S. dollar in transactions, and by strengthening ties with Arab and Gulf nations to counter the economic implications of such sanctions.”
A Pivotal Moment: Crisis or Opportunity?
Iraq appears to be approaching a multifaceted juncture, with intensifying American pressure aimed at mitigating Iranian influence potentially placing the Iraqi government in a precarious position between Washington’s demands and Tehran’s pressures. Amid these challenges, Iraq must take decisive strides to protect its economic interests and uphold political stability, thereby avoiding a descent into further turmoil.
