Iraq is quietly falling apart Analysis by Foreign Affairs

The Foreign Affairs magazine has published an article claiming that Iran’s proxies have seized power in Baghdad and are gutting the state. Caliber.Az reprints the article.

On the surface, Iraq appears to have achieved a measure of stability. The country finally has a functioning government after a yearlong political vacuum. Terrorist violence has fallen to its lowest rate since the 2003 US invasion. Even the country’s Iran-backed militias—long a source of tension with Washington—have significantly reduced their attacks on US diplomatic and military sites.

In a May 4 speech at the Washington Institute for Near East Policy, National Security Adviser Jake Sullivan credited a US strategy built on the “twin pillars of deterrence and diplomacy” for the decrease in attacks on US interests.

As Sullivan’s speech illustrates, President Joe Biden’s national security team sees a quiet Middle East as an end unto itself—including in Iraq. Although Sullivan was quick to add that he was “not pulling out the victory flag on Iraq” and that the United States still has “a broad agenda” to strengthen Baghdad’s independence from Tehran, his real metric of success was clearly the de-escalation of tensions between the United States and the Iran-backed militias that dominate the Iraqi government.

The White House believes that regional de-escalation is necessary to allow the United States to focus on its competition with China. But in Iraq, this approach promises to have long-term costs: the US desire for calm is being exploited by Tehran’s allies to destabilize its politics.

Iraq may look calm, but looks can be deceiving. The country is actually entering a uniquely dangerous period: Iran’s allies have achieved unprecedented control of Iraq’s parliament, judiciary, and executive branch, and they are rapidly rigging the political system in their favour and looting the state of its resources.

Washington’s complacent attitude toward these events is only setting it up for costly involvement later. Iraq is the world’s third-largest oil producer and a country whose collapse could destabilize the entire Middle East through the spread of refugees and terrorism. Great-power competition has never been an excuse to tune out the threats facing the country—and it shouldn’t be one now.

Triumph of the militias

Iraq has passed through numerous dark moments since 2003, but arguably none were as devoid of hope as the present time. Yes, Iraq has a government led by Prime Minister Mohammed Shia al-Sudani and the Coordination Framework, a political bloc closely allied with Iran. But this is only because the actual winner of the October 2021 election, Shia cleric Muqtada al-Sadr’s populist movement, quit the parliament in June 2022.

The Sadrists took this step after the judiciary, which is controlled by the leaders of the Iran-backed militias, changed the rules of government formation to benefit Tehran’s allies. As a result, the election result was rendered irrelevant and the losers were rewarded with victory—even after they rioted to overturn the results and fired drones at the prime minister’s house.

The Coordination Framework’s subsequent monopolization of all branches of the Iraqi government is unprecedented in the country’s post-2003 history. It is ruling with a level of unchecked authority that Iraq has not seen since the days of Saddam Hussein. Sudani is a puppet: while the prime minister is an experienced public sector manager and a hard worker, he leads Iraq in name only and is openly disparaged by Tehran’s allies in Baghdad.

The real powers are three warlords, each closely tied to Iran, at the top of the Coordination Framework: US-designated terrorist Qais al-Khazali, the head of the Iran-trained Asaib Ahl al-Haq militia; former Prime Minister Nouri al-Maliki; and the leader of the Iran-founded Badr Organization, Hadi al-Amiri.

For many years, these three politicians were partly held in check by a patchwork of opponents. During the US occupation from 2003 to 2011 and again during the war against the Islamic State (ISIS) from 2014 to 2019, Washington worked assiduously to prevent the militias from gaining control of too many levers of state power.

Iraqi protestors have also acted as a check on the power of the Iran-backed groups—their mass demonstrations in 2019 brought down the militia-controlled Prime Minister Adel Abdul-Mahdi. And during Iraq’s most recent elections, Sadr tried to rally a cross-sectarian and multiethnic majority to form a cabinet that excluded the Coordination Framework.

Today, these sources of opposition have all fallen away. Sadr’s electoral gambit failed due to the judiciary’s intervention, and his movement is now out of power and licking its wounds. The Iran-backed militias also have nothing to fear from the cowed and despondent youth protestors. Meanwhile, the United States is distracted by its geopolitical struggle with China and has reduced its goals to simply de-escalating tensions across the Middle East—no matter the long-term cost to US interests in the region.

Rigging the system

The implications of the Coordination Framework’s takeover of the Iraqi government are already clear. The bloc now has free rein to consolidate sweeping control of the country, pillage Iraqi state resources, and suppress dissenting voices. And its ascendancy shows no signs of waning: the Coordination Framework now dominates the country’s cabinet and controls the parliament until the next scheduled election, in October 2025.

Most important, the group directs the actions of the judiciary to an extent that has not been seen since Saddam’s fall. Iraq’s most senior judge, Faiq Zaydan, is a close ally of the warlords at the top of the Coordination Framework. Under his leadership, Iraq’s Supreme Court has intervened decisively in the country’s politics to perpetuate the militias’ power.

At precisely the moment the Coordination Framework needed to block Sadr’s 2021 electoral victory, the court changed the rules of government formation—ruling that Sadr needed a two-thirds supermajority in parliament, rather than a simple majority, to form a government.

The Coordination Framework is also using its unchecked power to embed itself in other Iraqi state institutions. The Iraqi National Intelligence Service, Baghdad airport, anticorruption bodies, and customs posts have all come under the group’s control since October 2022. Iraqi state institutions such as these were already tottering, and these actions threaten to erode them further.

Iran-backed groups are using their expanding influence within these institutions to escalate efforts to silence their domestic opponents. For instance, after gaining control of Iraq’s media regulator, the Communications and Media Commission, in January, they developed plans to introduce draconian digital content regulations that promise to squelch Iraqis’ freedom of expression.

The regulations, which would require social media influencers to move to Iraqi government–owned domains and include vague definitions of unsuitable content that will serve to justify censorship, have drawn criticism from international organizations for violating the Iraqi constitution.

Finally, the Coordination Framework is looting Iraqi state resources for its own political advantage. Iran-backed groups have established a state company that is actively consolidating state assets, using much the same approach as Iran’s Islamic Revolutionary Guard Corps (IRGC). Furthermore, these groups have overseen the massive expansion of Iraq’s budget in an effort to buy the population’s support as they consolidate power.

Looting the state

The militia politicians of the Coordination Framework have long sought to control a company that can amass government land and other public assets. Their model for this effort is the IRGC’s Khatam al-Anbiya conglomerate, which has achieved vast economic and political influence in Iran by being awarded more than 1,200 construction contracts, worth over $50 billion, since its formation, in 1990. Khatam al-Anbiya has been sanctioned by the United States, the United Nations, and the European Union as a commercial extension of the IRGC.

Whenever the time has come to choose a new prime minister in recent years, the Iran-backed militias have asked each of the shortlisted candidates whether they would support the creation of a company along these lines. In 2018, Prime Minister Adel Abdel-Mahdi said yes and received militia support for his appointment as premier, but the US government prevented the formation of the company. When Prime Minister Mustafa al-Kadhimi took over as a midterm replacement premier in 2020, he had the political support to refuse to allow the company to form—and then refused again in 2022 when Tehran’s allies proffered it as the price for his receiving a four-year second term.

The Iran-backed militias finally got their way under Kadhimi’s replacement, Prime Minister Mohammed Shia al-Sudani, who announced in November 2022 the formation of “the Muhandis General Company for Construction, Engineering, and Mechanical, Agricultural, and Industrial Contracting.” The firm is named after the US-designated terrorist Abu Mahdi al-Muhandis, who was killed by a US airstrike in January 2020. This time, the United States did nothing.

No organization like the Muhandis General Company has ever existed before in Iraq. As shown in its articles of incorporation, the company is officially owned by the Popular Mobilization Forces, the Iraqi reserve army that arose during the fight against ISIS and is led by the Coordination Framework and other Iran-backed terrorists. Its remit is effectively unlimited: it can work in any sector, as its full name implies, and is essentially an empty container through which Iran-backed militias can consolidate their control over the Iraqi economy. Uniquely for an Iraqi state company, the new firm can receive free land, state capital, and state-owned enterprises, and can undertake construction and demolition without cabinet or parliamentary approval.

In December 2022, soon after it was created, the Muhandis General Company received 1.2 million acres of government land along the Iraqi-Saudi border at no cost. The acquisition was announced in the media, but went through none of the usual paperwork or red tape that typically accompanies such projects.

The project is purportedly for tree planting and agriculture—but to give a sense of scale, the area that it covers is half the size of Lebanon and more than 50 times bigger than the largest-ever planned agricultural project in Iraq’s history.

The land is also strategically located in an area where Iraqi militias have fired drones into Saudi Arabia and the United Arab Emirates on multiple occasions since 2019. And in what may be the first example of an urban land appropriation in Iraq, a PMF force also illegally expropriated a large piece of prime west Baghdad real estate on behalf of the Muhandis General Company on April 24, simply seizing a chunk of historic downtown Baghdad the size of 20 New York City blocks, the entire grounds of Buckingham Palace, or the US Capitol.

The continued growth of the Muhandis General Company would represent a severe blow to Iraq. It would also thwart US hopes for the country’s economic future. On May 31, the senior State Department official on the Middle East, Ambassador Barbara Leaf, told the Senate Foreign Relations Committee that “economic vitality for the first time is really evident” in today’s Iraq.

This potential will be strangled in its cradle if powerful militias can use their new economic power to seize any promising industry, force themselves on government contracts, and intimidate foreign investors.

Breaking the bank

Iran-backed militias are also using state revenues to cement their hold on power. The Coordination Framework–led government’s first draft budget is the largest in Iraq’s history: it proposed $152 billion in spending, a roughly 50 per cent increase from the last authorized Iraqi budget from 2021. The government has pledged to sustain this level of spending for three consecutive years—that is, right up until the October 2025 elections.

This reckless level of spending ignores the warnings of the United States, the International Monetary Fund (IMF), and the World Bank, which have called on Iraq to reduce its bloated public sector. The Coordination Framework is trying to buy the goodwill of Iraq’s political factions and its population through unsustainable spending, including the creation of at least 701,000 new government jobs—a 17 per cent increase in government employees in a single year. For example, the PMF is set to grow from 122,000 to 238,000 paid members, a 95 per cent increase in the number of state-funded militiamen in a country experiencing its lowest levels of violence in two decades.

By overloading the state with salary obligations, the Coordination Framework is laying the groundwork for future instability. Even at today’s oil prices, which are around $75 per barrel, this level of spending would wipe out most of Iraq’s $115 billion in reserves in half a decade. If oil prices drop, Baghdad will go broke even quicker. When Baghdad last found itself in dire financial straits in 2014, the world was quick to rally to Iraq’s aid because the country was vital to the fight against the Islamic State. But the Iraqi government cannot count on future such largesse. On May 31, the IMF sounded the alarm bell by predicting that Iraq would face “critical macroeconomic stability risks” in the coming years. In plain terms, this means default on payments to citizens and investors, inflation and protests, and instability and refugee outflows to Europe.

Doing more with less

For the United States, the apparent quiet in Iraq could well turn out to be the calm before the storm. This is not the first time Washington believed it was on the glide path to stability in Iraq: After the 2010 elections that saw Maliki reappointed for a disastrous second term, the United States tried to wash its hands of the country. Then, as now, Iran-backed parties managed to rig the government formation process in their favour and subsequently weakened Baghdad’s authority through corruption, militia influence, and political cronyism.

After the US military withdrew in December 2011, Iraq seemed quiet—but its political and social foundations were rotting from the inside. Two and a half years later, the United States was pulled back into Iraq to fight a bloody war after ISIS captured one-third of the country. Washington cannot afford to allow history to repeat itself.

Temporarily reducing the incidence of pinprick attacks on heavily armoured US diplomatic facilities should not be Washington’s main metric for success in Iraq. Heavily fortified US diplomatic sites were built at huge expense precisely to allow American diplomats to defend US interests and values regardless of enemy harassment.

The United States doesn’t need to send troops or billions of dollars to help reverse the dangerous trends in Iraq. US financial and intelligence capabilities can still have a significant impact on the actions of Iraqi officials—many of whom have higher political ambitions and interests in international commerce and banking.

For instance, according to US diplomatic sources, Faiq Zaydan was deeply distressed when three US Congress members sent a letter to Biden in February that named Zaydan as a potential sanctions target. The United States needs to use leverage such as this—privately at first—to signal its concern about the state of Iraq’s judiciary and its key leadership.

There is a real risk of Iraq becoming a sort of judicial dictatorship, in which governments come and go but the judiciary represents a permanent cudgel wielded by the Iran-backed militias. American officials have unrivalled intelligence on the communications and financial interests of corrupt officials in Iraq, and they should use this information more frequently to issue sharp private warnings to officials in Baghdad to amend their behaviour.

The United States also must make good on its promise to uphold American values of democracy and human rights in Iraq. In his May address, Sullivan stressed that supporting US values is one of the five pillars of the Biden administration’s Middle East policy. In Iraq today, this means pushing back on Baghdad’s draconian restrictions on social media use, investigative journalism, and political satire—all hallmarks of dictatorship in the making.

Washington needs to support investigative journalism and help protect such efforts with its good offices. The United States can also use its financial intelligence capabilities to find money hidden abroad by corrupt officials and return this money to Iraq. For instance, it can also help Iraqi authorities apprehend the real culprits behind the $2.5 billion “heist of the century,” in which officials linked to the Coordination Framework emptied an Iraqi government tax account by stealing a chequebook and writing themselves hundreds of checks.

If the United States truly wants an independent, sovereign, and economically functional Iraqi state, it should lead and give support to investigations to track down stolen money and recover it for Iraq—not just learn about cases such as these when they break in the news.

Most urgently, the United States should work to isolate the Muhandis General Company from the Iraqi economy before it contaminates the country’s investment landscape. The firm represents an attempt to strip the assets of a major industrial nation for the financial benefit of US-designated terrorists and human rights abusers, who are the primary beneficiaries of the company. To the US government’s credit, the Muhandis General Company is already the subject of considerable scrutiny by the US Treasury Department’s Office of Foreign Assets Control and the US Office of the Coordinator on Global Anti-Corruption, but this needs to be translated into sanctions designations.

The United States can position itself on the right side of history in Iraq if it continues to push back energetically against the worst excesses of the militias that stand behind the current government. Even amid its competition with China and the war in Ukraine, Washington can still use its voice and unmatched financial and intelligence capabilities to weaken antidemocratic forces and give Iraq’s youth, reformers, and anticorruption investigators the opportunity to defend the fragile democracy that still—barely—exists in Iraq.