Top Iraqi officials were in Washington this week for the regular dialogue of the Higher Coordinating Committee of the U.S.-Iraq Strategic Framework Agreement (SFA). Inked in 2008, the SFA sets the terms for U.S.-Iraqi cooperation in a number of arenas, including security and diplomacy. Amid Iraq’s struggles with corruption and a currency crisis, this year’s dialogue focused heavily on economic cooperation. While economic issues topped the agenda, Iraq’s new government faces a host of challenges that Washington can help address.

A view of a market in Basra, Iraq, Nov. 14, 2022. Corruption and a currency crisis are hurting Iraq’s economy (Emily Rhyne/The New York Times)
A view of a market in Basra, Iraq, Nov. 14, 2022. Corruption and a currency crisis are hurting Iraq’s economy. (Emily Rhyne/The New York Times)

USIP’s Sarhang Hamasaeed looks at the key priorities for the U.S.-Iraq partnership, the challenges and opportunities for Iraq’s new government, joint efforts to address the human legacy of ISIS and how Washington can help stabilize Iraq’s economy. 

President Biden and Secretary Blinken have recently reaffirmed the United States’ commitment to the U.S.-Iraq Strategic Framework Agreement. What are the partnership’s priorities for this coming year?

This year, the United States and Iraq will aim to prioritize economic cooperation, including on energy, and climate change as primary areas of focus. Continuing cooperation in the fight against ISIS and addressing the human legacies the conflict left behind — including the return and reintegration of Iraqis in al-Hol Camp in northeast Syria — remains an important area of focus for Washington and Baghdad.  Emerging priorities include fighting corruption — particularly preventing the draining of Iraq’s wealth through money laundering and smuggling using U.S. dollars that Iraq’s Central Bank supplies at a subsidized exchange rate — and ensuring the return of stolen funds.

It is a welcome development for both countries that the strategic dialogue and meeting of the Higher Coordinating Committee for the SFA is no longer overshadowed by sensitivities and news surrounding the status of U.S. troops in Iraq, as was the case in 2020 and 2021. Prime Minister Mohammed Shia al-Sudani has affirmed the value of the remaining U.S. troops in Iraq to advise and assist Iraqi security forces. The United States retains about 2,500 troops to support Iraqi and Syrian partners in their counter-ISIS efforts.

Supporting an Iraqi democracy that delivers for its citizens is a key component of the SFA and a priority for the United States. In 2023, Iraq may organize provincial elections across the country and parliamentary elections in the Kurdistan Region. Free and fair elections are essential for Iraq’s democracy and stability, and U.S. support is critical to ensuring the credibility of the polls. Well conducted elections can help bridge the trust gap between the state and Iraqi citizens, reverse the backsliding of Iraq’s democratic institutions and engage the youth in energizing the country’s economy and politics. 

Iraq’s 2021 national parliamentary elections were widely considered to be the cleanest, most credible in the country’s history. Through U.S. and international investment, the United Nations provided vital technical support and monitoring assistance that bolstered the integrity and transparency of the process. A key takeaway from that experience is that this type of international support needs to start early, engaging the public as soon as possible to encourage new candidates to run and to bring voters to the polls.

What are the key opportunities and challenges facing Iraq’s new government and how can Washington help?

In October 2022, Iraq ushered in a new government after a year of political tensions and episodes of controlled and limited violence. The new government, led by al-Sudani, is backed by a large parliamentary bloc and a political coalition comprised of Shia, Sunni and Kurdish parties, who agreed on key priorities prior to the government’s formation. Chief among those priorities are: passing a national budget; passing a federal oil and gas law; implementing the Sinjar Agreement made between the Baghdad government and the Kurdistan Regional Government; and the thorny challenge of helping Iraqis displaced by the conflict with ISIS to return to their homes areas. 

The new government has the benefit of increased revenue due to higher oil prices amid the war in Ukraine. Despite concerns about the core of the new government coming from the Coordination Framework — which is widely considered to be backed by Iran — the United States, regional countries and the international community overall, have engaged positively with the al-Sudani government and supported continued cooperation. Last week, the government marked its 100 days in office and, for the most part, the general trajectory of al-Sudani, and to a large extent his government, has been more positive than many suspected.

This is generally good news in a country that went to the brink of civil war last August, but key challenges remain and the clock is ticking. With a growing population, high poverty, unemployment and food insecurity will only worsen amid historic disagreement over the annual federal budget and a federal oil and gas law. Meanwhile, all eyes are on when Moqtada al-Sadr might make a public move against his political opponents. Many Iraqis believe that corruption is of no less danger to Iraq than ISIS, a view that Iraqi Deputy Prime Minister and Foreign Minister Fuad Hussein affirmed when he spoke at USIP on February 10.

External challenges are always a possibility for Iraq. While Iran and Türkiye are both dealing with their own complex domestic issues, either may still choose to intervene directly in Iraq, including via military action as occurred last year. 

There are many areas where Washington can provide assistance, such as: helping stabilize Iraq’s currency; assisting government and civil society efforts to fight corruption and restore stolen funds; supporting fair and free elections; helping with climate change adaptation; modernizing the banking sector; encouraging U.S. private sector engagement in Iraq; supporting dialogue between Baghdad and Erbil to resolve their differences; and enabling Iraq to protect its skies, especially against attacks from neighboring countries. 

One of the major achievements of the U.S.-Iraq partnership is the fight against ISIS. Where does cooperation on counterterrorism stand and how can the United States help Iraq deal with the heavy human legacy of the ISIS conflict?

The U.S.-Iraq partnership in the fight against ISIS and dealing with its aftermath continues. Washington also continues to contribute humanitarian assistance to the nearly one million Iraqis who remain displaced and mostly reside in the Kurdistan Region. Washington is working with Iraq to support efforts that assist with repatriation of Iraqis from al-Hol camp in northeast Syria, psychosocial programs and community reintegration. As of this writing, eight rounds of Iraqis — nearly 4,300 individuals and 1,060 families — have been returned from al-Hol to al-Jadaa Rehabilitation Center south of Mosul. About half of those have left al-Jadaa to their original or other areas. The longer-term reintegration is a key issue that requires increased and sustained U.S. and international support to prevent the resurgence of ISIS.

In recent years, as the threat of ISIS was degraded, concerns have risen among Iraqi, regional and international policy circles over armed Shia groups. While these concerns are not currently under spotlight and these groups seem less focused on enmity with Washington for the time being, both sides still remain wary of the other.

U.S. sanctions on Russia and Iran have affected both Iraq’s oil industry and currency in recent months. How can the United States balance its economic pressure on Moscow and Tehran with its desire to help stabilize and improve the Iraqi economy?

This is indeed an uneasy balancing act for both Iraq and the United States that continues to be worked through by all sides. Washington has granted Iraq waivers in the past with regards to purchasing gas from Iran, but Deputy Prime Minister Hussein also said the priority is to protect Iraq’s banks and institutions from U.S. sanctions even as Baghdad acknowledges owing funds to Russia and Iran. He indirectly suggested that Russia could hold off on seeking those funds until a later date, as it did with other countries.

At USIP, Hussein said Iraq pursues its interests without choosing sides or using one relationship against the other. China, Russia and Iran are economically and politically engaged in Iraq and throughout the region, competing with the United States. Iraq has the opportunity to work with all actors as long as global and regional dynamics do not force binary choices — something Iraq cannot afford at this juncture.

With support from the United States, Iraq has come a good distance in reconnecting and reintegrating with the region, even moving toward a convening and, potentially, leading role. In public statements, al-Sudani has said that Iraq is preparing for hosting new talks between Iran and Saudi Arabia. Recent visits of foreign leaders and diplomats, including the pope in 2021, and hosting the Gulf Cup 25 and the Baghdad Conference for Cooperation and Partnership are boosting Iraqi confidence that it’s role and balancing act could become constructive exercises in Baghdad asserting its voice as a convener and mediator in the region, not simply just trying to avoid trouble from rivals. 

The question is can this last and what could derail it? There are both domestic and foreign pressures that could halt or even reverse this progress. Topping that list is Iran and its evolving calculus on how it views the importance of Iraq’s stability amid its own domestic and foreign challenges. Iran’s deepening partnership with Russia — especially supplying Moscow with armed drones for its war in Ukraine — could be the gamechanger, as Europe is increasingly aligning with the United States toward a more hardline policy on Iran. This includes potential European terrorist designation and sanctioning of the Iranian Revolutionary Guard Corps. With Europe and the United States converging, Iran may lash out against European or U.S. interests in Iraq, or elsewhere in the region. 

In Iraq, there are skeptics about the new al-Sudani government — or what these skeptics consider to be a “Coordination Framework government” — and how it is attempting to generate the perception of an overly friendly posture toward the West. The al-Sudani government and the political coalition that stands behind it have the opportunity — many in Iraq consider it the last opportunity — to learn from the past. This means it would need to seek real reforms and inclusive governance, share power and resources, and resolve differences through dialogue, instead of creating the kind of grievances that gave rise to ISIS, triggered the Kurdish independence referendum and pushed tens of thousands of Shia youth to the street during the 2019 protest movement. The United States continues to support Iraq and its success, but success requires real efforts by Iraq's leaders and institutions as well. If the al-Sudani government shows credible approaches and steps to free the country from internal and regional elite capture, the United States and others in the international community will meet it halfway. 

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