The last of the US-led coalition forces are leaving Iraq. It’s a significant bonus for Iran. The withdrawal date, September 30, was also the date by which Baghdad had pledged to bring numerous powerful Iran-backed militias under state control. But this deadline looks certain to be missed.
This effectively means that, at a moment when Washington is engaged in a costly conflict intended to weaken Iran militarily and economically, it is simultaneously reducing its military presence in the country that has arguably provided Tehran with its greatest strategic gain of the post-Saddam era.
Iraq has its own powerful nationalist instincts and has repeatedly tried to balance both US and Iranian influence and steer its own path. But the US withdrawal now risks removing an important counterweight to Iran, leaving Tehran with a great deal of sway in Iraq’s political and economic affairs.
The irony is that Tehran did not create the conditions that made this possible by itself. It had a lot of help from Washington.
Iran’s influence in Iraq did not suddenly emerge after 2003. Like the US, Tehran had spent decades cultivating Iraqi opposition movements during Saddam Hussein’s rule. These included the Islamic Dawa Party and the Supreme Council for the Islamic Revolution in Iraq, both of which wield enormous power in Iraq today.
Perhaps the most powerful Iran-backed proxy operating in the political-military nexus is the Badr Organisation, which was created in Iran during the 1980s, supported by the Revolutionary Guards and fought alongside Iran during the Iran-Iraq war.
When Saddam Hussain was toppled in 2003 as a consequence of the US-led invasion of Iraq, these powerful organisations gave Tehran something Washington lacked – direct and intimate ties with powerful armed networks. These were now returning to shape the new Iraqi state.
Badr illustrates how those connections became institutional power. Thousands of its fighters returned to Iraq after 2003. The organisation transformed itself from an exiled militia into a major political and security player.
Iran was able to cultivate relationships across political parties, ministries, religious networks and armed groups. The fragmented political system that emerged after the hurried 2005 constitutional process was profoundly flawed. It was what is known as the muhasasa (quota) system, by which control of state institutions was divided along ethnic and religious lines. This provided fertile ground for Iran to expand its networks into government.
The rise of Islamic State (IS) also played to Iran’s favour. In 2014, Tehran provided direct military assistance to Iraqi forces and armed groups fighting the IS insurgency. Thousands of Iranian troops joined the fight, which was billed as a sectarian struggle pitting the Shia faithful against IS Sunni extremism. Qassem Suleimani, the head of the Iranian Revolutionary Guards’ elite Quds Force, arrived in Baghdad to take command of the defence of the Iraqi capital.
Meanwhile, the al-Hashd al-Shaabi (Popular Mobilisation Forces or PMF) was formed out of a disparate coalition of Shia militias, most of which swore allegiance to Iran. The PMF played an indispensable role in defeating IS. It was subsequently incorporated into Iraq’s formal security architecture in 2016. But some of its most powerful factions retained close relationships with Tehran and developed political and economic interests of their own.
In thie way Iran was able to build overlapping political, military and economic relationships, some operating outside the state and others embedded within it. This helps explain why Iranian influence has proved so difficult to unwind. Removing one militia, politician or commercial relationship does not remove the wider network.
Iran’s economic lifeline in Iraq
Political and military influence has been reinforced by economic integration. Iran and Iraq share an extensive border and substantial flows of goods, energy, pilgrims and commerce. Iraq became a major market for Iranian exports and for years depended heavily on Iran for its gas and electricity, giving the two economies connections that sanctions could complicate but not easily sever.
These links became increasingly valuable as Iran became further isolated by international sanctions. In 2022 I wrote an article, “How Iraq became Iran’s cash cow”, highlighting how Iraq provided Iran with markets, revenue and routes through which the effects of external pressure could be softened.
US authorities have attempted to close those channels, including sanctioning Iraqi individuals and businesses accused of facilitating oil sales benefiting Iran and Iran-backed militias. It’s a big problem for Washington. The US can sanction Iranian banks, target oil exports and disrupt financial networks globally, but as long as Tehran retains deep access to Iraq’s political economy, an important avenue for absorbing external pressure remains open.
The US withdrawal does not automatically give Iran greater economic control, but it removes an important source of American leverage precisely when Washington is trying to squeeze Tehran most. Tehran does not need to control Baghdad outright – merely to retain sufficient influence to preserve the networks that help it absorb external pressure.
Iran continues to benefit from the centralised nature of the Iraqi economy, in which the public sector controls 40% of jobs, according to the latest estimates from the International Monetary Fund (IMF). The IMF has warned that this has crowded out private sector growth.
This has enormous political consequences for reasons I have already outlined. – delete this bit Political factions which control ministries and institutions gain influence over jobs, contracts and resources. This creates a system of patronage which reinforces political loyalty. And many of these factions owe their allegiance to Tehran.
This system extends beyond Iran-aligned parties, but they have benefited from it. A competitive private economy would weaken the ability of Iran’s political networks in Iraq to turn control of the state into political dependency. A graduate who can build a career without party connections, or an entrepreneur who can prosper without patronage, is more politically independent. Economic reform in Iraq is therefore about more than prosperity – it is also about where political power resides.
If withdrawal gives Tehran greater room to exploit these networks as a pressure valve against isolation, Washington risks strengthening its ability to survive.
Bamo Nouri does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.