Iraq, like Lebanon, was dragged into supporting Iran’s war effort against its will. Unlike the Lebanese government that condemned and denounced Hezbollah’s actions, however, the government of Iraq neither prevented nor condemned the actions of the factions operating in the country, which targeted at least three Gulf countries.
We understand that the orders come from Iran and that the Iraqi government bears no direct responsibility for what happened. Nevertheless, every country has a legal obligation to prevent attacks launched from its territory. These militias are part of Iran's regional network, and days ago, Quds Force commander Esmail Qaani arrived in Iraq to oversee the operations of these factions on the ground.
Baghdad is responsible for the attacks against Saudi Arabia and its neighbors that were launched from its territory. These are Iraq militias operating on Iraqi soil.
To get a full picture, we need to understand what Iraq actually is today. It is not the Iraq of Saddam Hussein, nor the Iraq of the Americans; it is closer to an Iranian vassal. It is not like Lebanon and Yemen, in that there are more numerous Iranian militias in Iraq, and they are more deeply bound to Tehran by geography.
Baghdad funds most of these groups, and it is also said to underwrite Iran's shadow operations across the region. These militias are part of a broader military force of around half a million personnel, half of these forces are members of militias, nominally under Iraqi military command, who receive funding from Baghdad alongside money and take their orders from Tehran.
For years, Iran has sought to take control of Iraq and exploit its vast oil wealth and position. It has succeeded in creating a statelet within the Iraqi state, as it did in Lebanon and, to a lesser extent, in Yemen. Its militias in Iraq are stronger than the country's professional military- just as Hezbollah is stronger than the Lebanese army and just as the Houthis in Yemen. If Iran decided to seize full control of Iraq today, it could do so, but it is content with indirect control that allows it to avoid open confrontation with the country's legislative and executive institutions.
Having successfully infiltrated the political system, why haven't the Iranians dismantled Iraq's institutions and restructured the regime?
In my view, they eventually will, if the Iranian regime survives its current crisis. However, that moment has yet to arrive, as the Iraqi regime’s democratic facade grants it international legitimacy: a parliament is elected and it appoints the prime minister and president. It resembles Lebanon under Syrian tutelage: formal legitimacy on the surface while decisions are made in Tehran.
Can Iraq and its people be saved from Iran and the proliferation of militias? There is a glimmer of hope. The Iranian regime could be weakened by the current war and any ensuing sanctions. A second factor is the continued control exercised by the United States over most of Iraq's dollar-denominated oil revenues, which are routed to New York, where expenditures and state spending are monitored.
This week, Washington has begun deploying what could be called the "dollar weapon," suspending financial transfers earmarked for Iraqi security apparatuses and signaling a new phase of sanctions on Iranian proxies within those apparatuses.
When nearly all the American forces who had been deployed in the country withdrew from Iraq, Washington retained control over financial flows. The dollar has been used for leverage since the 2003 invasion, with UN Security Council approval at the time. As a result, 90% of Iraq's revenues derive from oil sales deposited in New York at the Federal Reserve, which sends much of these billions in cash by air to Iraq's central bank in Baghdad.
Days ago, the American government announced it had suspended a $500 million shipment to Iraq. Washington has long been demanding that (Prime Minister Mohammed Shia) al-Sudani's government dismantle Iranian proxy groups funded and armed by Baghdad. The Iraqi government seeks Washington's consent but undeniably fears Tehran's fury. Caught in this bind, it claims to be unconcerned by US threats and insists that it has sufficient dollar reserves. More likely, however, we will see the dinar weaken and finances squeezed; the Trump administration has put Baghdad on notice: it will be held accountable for its deference to Iran.
