Iraqi Prime Minister Ali Al-Zaidi has ordered the Defense Industries Commission to bypass intermediary firms and contract directly with manufacturing companies, aiming to curb funding channels linked to armed factions.
The directive seeks to tighten oversight on government procurement by eliminating middlemen networks, which informed sources state serve as vital economic pipelines for various armed groups.
The policy shift arrives amid mounting tension between the government and certain factions, driven by Al-Zaidi’s broader push to restructure the relationship between state institutions and armed formations, including their commercial ventures. Sources familiar with the matter noted that the restriction has sparked significant concern among stakeholders who rely on intermediary networks tied to lucrative state contracts.
During a visit to the Defense Industries Commission on Thursday, Al-Zaidi stressed the "necessity of dealing directly with parent manufacturing companies, and absolutely not dealing with intermediary companies."
According to a statement from his media office, the directive is designed to ensure contract transparency while eliminating intermediary loops and vulnerabilities to corruption.
Al-Zaidi affirmed that Iraq possesses the capability to manufacture its weapons and equipment needs through national expertise, stating that building an advanced defense industry represents a fundamental pillar of national sovereignty. He stressed the importance of research and development, as well as keeping pace with technological advancements in military industries.
The Defense Industries Commission, which replaced the Military Industrialization Commission established by the former regime during the Iran-Iraq War, is one of the state institutions responsible for producing and developing military equipment.
Shadow companies
The government directive has renewed focus on the network of intermediary companies active in state contracting. Sources said that these firms are linked to the economic interests of factions and exploit political and administrative influence to expand their operations inside state institutions.
Some of these companies operate within a network linked to Al-Muhandis Company - one of the formations of the Popular Mobilization Forces (PMF) - or its front companies. Sources said that these entities are used to secure government contracts and provide financial resources to armed groups.
An informed source told Asharq Al-Awsat that these companies serve as "part of a financing mechanism for armed factions operating through two tracks: first, generating revenue from contracting and state procurement, and second, laundering funds to legitimize income derived from illicit activities, including oil and drug smuggling."
The source added that the operations of these firms are not confined to a specific authority or ministry. Instead, they extend across various state institutions, leveraging political and administrative clout to secure government contracts that provide their commercial transactions with official cover.
In the political context, disputes have begun to escalate between certain armed factions and parties within the Coordination Framework. Amid these tensions, factions are accusing political and government forces of cooperating with Al-Zaidi to reduce their economic and security influence in response to external pressures.
A recent wave of reports has emerged highlighting the commercial activities of figures and leaders within armed factions, including Kataib Hezbollah, though the accuracy of these accounts could not be independently verified.
Public debate is intensifying over the shifting role of these factions from their self-proclaimed status as "resistance forces" to entities managing economic interests and commercial influence networks.
This evolution raises questions regarding the exact nature of these commercial ventures, their relationship to the groups' weapons, and the strategic cost Iraq might ultimately incur should these factions decide to drag the country into a broader regional conflict.
Hussein Allawi, an expert in political affairs, said Al-Zaidi's visit to the Defense Industries Commission carried a message regarding the need to protect public funds and developing Iraqi defense capabilities through direct engagement with international companies.
Allawi told Asharq Al-Awsat that the PM is seeking to "strengthen the defense industry file," describing it as one of the sensitive areas that demand transparency and governance to ensure the quality of weapons and equipment used in Iraq.
He added that adopting direct contracts with international corporations, in accordance with applicable commercial laws and regulations, would curb the additional costs borne by the state due to multiple intermediary loops.
Security affairs researcher Mukhlad Hazem said Al-Zaidi's decision is a major step in confronting corporate networks that exploit the influence of political or armed factions to secure government contracts.
Hazem told Asharq Al-Awsat that these networks are not a new phenomenon, but rather have extended their activities over several years.
He revealed that certain groups monopolize massive state contracts to finance their economic entities, without necessarily delivering a corresponding return in terms of product quality or adherence to execution terms.
