The Limits of Regional Stability: Why Iraq Will Not Benefit from the Middle East’s Latest Thaw

Following the re-establishment of relations between the Kingdom of Saudi Arabia (KSA) and the Islamic Republic of Iran (IRI), several developments have occurred, indicating regional improvements. These include the visit of a  Saudi delegation in Houthi-controlled Sana’a, Syria’s re-entrance into the Arab League, and most strikingly KSA’s foreign minister visiting Tehran. These occurrences, especially considering their relatively short timeframe, strongly indicate an improvement in the region's stability, as tensions between KSA, IRI, and their respective allies have subsided to levels not seen in a long time. Consequently, one would expect Iraq, one of the main battlegrounds of the Saudi-Iranian conflict, to benefit from this situation, potentially leading to stability and reconstruction for the country's people. However, despite some positive signs, this outcome seems unlikely. In the following paragraphs, we will discuss the reasons why Iraq's situation remains extremely tense and prone to instability.

The improvement of the security situation in Iraq, coupled with the regional thaw, has had a stabilizing effect that mostly reflects on the development of economic activities. France’s TotalEnergies announced a $27 billion project to construct a giant solar power plant, and there are ongoing talks between Iraq and Turkey on resuming the oil flows from Ceyhan. Unsurprisingly, China is heavily involved as well. Investments from the Belt and Road Initiative continue to grow, especially in the energy and transportation sectors, and are likely to do so in the future as some Western companies significantly reduce their presence, creating opportunities for other actors. ExxonMobil, for example, left the country entirely after selling its stake in the Qurna oil field to the state-owned Basra Oil Company, leaving only Shell and BP as the only western oil firms still operating in Iraq. Currently, with high oil prices, a relatively stable security situation, and improved regional relations, economic activities in Iraq are expected to grow, especially when compared to the last decade.

While these developments may appear positive, it is essential to remember that most of the returns from such activities will not benefit the Iraqi people directly. Instead, they will likely benefit the political coalition that controls the state apparatus and utilizes it for their own political gain. It is crucial to emphasize that any economic benefits will not trickle down to, for example, the reconstruction of Yazidi communities, but will rather be employed by the ruling coalition to further cement their position, especially once the nature of the current government becomes clear. The Iraqi state is currently under an unprecedented level of control by Iranian-backed Shia political parties, primarily the ruling Coordination Framework coalition. Although Iranian allies have previously exerted influence over the state, they have never reached such an extent of power. Firstly, their sway over the judiciary is effectively unlimited, as seen by the fact that the Iran-backed judiciary was crucial in allowing the Coordination Framework to capture the state in 2022, despite losing the Autumn 2021 elections. This has reached such a worrying degree that some are concerned that Iraq will become “a judicial dictatorship”. This control naturally enables the looting of state resources. Iraq’s Coordination Framework just approved the biggest budget in the country’s history: $152 billion, a 50% increase from 2021. Moreover, and most importantly, Iranian allies in the country have been studying the ways of their Eastern neighbor and have created a company that will allow the siphoning of state funds directly to themselves. The al-Muhandis General Company, created on the model of Iranian Revolutionary Guard Corps’ Khatam al-Anbiya, is owned by Hashd al-Shabi, an extremely powerful umbrella of pro-Iranian militias. The company was created in November 2022, and just a month later, it received 1.2 million acres of land for industrial development from the Iraqi state for free. This land is strategically located on the Saudi border, an area previously used by Hashdi militias, now the owners of the land, to fire missiles and Unmanned Aerial Vehicles (UAVs) into Saudi Arabia. The control over the judiciary and the creation of systems designed to siphon public money away from the state and towards pro-Iranian political forces mean that the increased economic activity stemming from regional stability will not be used to provide services and reconstruct communities, but will rather be employed in empowering the Coordination Framework and Iran.

While economic stability and the complete dominance of pro-Iranian parties on the Iraqi state may seem to imply that Iraq will follow a path of a stable but unprosperous member of the Iranian sphere of influence, there are unfortunately more reasons for concern. Although the Coordination Framework controls the judiciary and is looting public coffers, the intra-Shia opposition – Moqtada al-Sadr and his Sadrist movement – remain extremely popular. It was Sadr who won the Autumn 2021 elections, however, he ceded power to the Coordination Framework after being outmaneuvered by them and their judiciary allies, leading to violent clashes in August 2022, with some worrying they could have escalated into civil war. After Sadr instructed his movement to cease hostilities and effectively admit defeat, he has been losing power ever since. In August 2022, Ayatollah al-Haeri, a long time and crucial ally of Sadr, announced his retirement and instructed his followers to pick the Supreme Leader of Iran, Ayatollah Khamenei, as their Marja (each Shia follow a Marja, one religious leader of one’s own choice). It is crucial to explain the gravity of this move. Before, Haeri and Sadr worked in tandem for decades, one as a religious leader and the other as a political one, with mutual financial assistance, political sympathies, and common opposition to Iranian influence in Iraq. It was therefore a move worthy of the Ideas of March. Moreover, it is equally rare for Shia clerics to retire, and al-Haeri’s pick, Khamenei, is striking at least. Few Shia follow him as their Marja outside of Iran, as he has shaky religious credentials. He is in fact so unqualified that he himself argued against becoming Iran’s Supreme Leader due to being unfit for the office. Additionally, the religious leader most respected within Iraqi Shia, Ayatollah Ali al-Sistani of Najaf, would seem to be the most justified and reasonable choice for Haeri’s followers, hence his instruction to follow Khamenei is as striking as it is symptomatic of Iran’s unprecedented influence, especially since al-Sistani is staunchly anti-Iranian. Therefore, Haeri chose the significantly less qualified and respected Ayatollah, who also happens to be the Supreme Leader of Iran, making a clear statement about his political allegiance.  As a result, Sadr lost his religious support and legitimacy.

Furthermore, in April 2023, some started to claim that Sadr was the Mahdi. In Twelver Shia Islam, dominant among Iraqi and Iranian Shia, Mahdi is the Twelfth Imam who has been in concealment since circa 874 A.D., and his return will signal the re-establishment of peace and justice in the world. Sadr thus scolded his followers, as anyone claiming to be the Mahdi would commit a blunder by putting oneself on a collision course with the all-influential Najafi ulemma, and suspended the entire Sadrist movement along its social media for at least one year. It is also not improbable that this could have been an unsuccessful attempt to provoke Sadr into making the mitsake of welcoming the development. Therefore, between June 2022 and April 2023, Sadr went from possessing the biggest party in parliament to entirely suspending the movement, losing his religious backing, and his followers committing the blunder of calling him Mahdi. The problem is that he has a giant grassroot following that will not go away. While he may hide from the public eye and suspend political activities, those loyal to him will eventually seek some vehicle of political agency that will put it on a collision course with the Iranian-allied Coordination Framework. Sadr can leave politics, but the public sentiment that makes Sadrism so popular will not wither away and will seek other avenues of political agency. While there are rumors that he might return, as the Coordination Framework would be keen to use him as a kind of figurehead while they loot the state, the millions of his fervent supporters will express their strong opposition to the Coordination Framework one way or the other, making the intra-Shia political situation in Iraq extremely tense with a possibly violent confrontation probable in the future. Lastly, the complete marginalization of Sunnis within the Iraqi state continues, creating the constant risk that they will express their rejection of the state through Salafi-jihadi extremism, as they did in 2004-2008 and 2011-2019.