On April 15, 2024, Iraqi Prime Minister Mohammed Shia al-Sudani led a high-level delegation to the United States comprising ministers of oil, finance, trade, and electricity. The central bank governor and five Iraqi businessmen were also among the envoys. During the visit, al-Sudani met with President Joe Biden to discuss matters of mutual interest. He also met with US Secretaries of state, defense, and treasury, the national security advisor, officials from the US Chamber of Commerce, and senior executives from oil and industrial companies. The Iraqi premier’s US visit addressed several key issues of concern for both sides. Among the most prominent were:
1. The future of American presence in Iraq:
Discussions revolved around US presence in Iraq and the future of coalition forces. On this matter, the prime minister notedthat Iraq had reached a framework for joint security dialogue with the United States, which involves elevating the matter to the US-Iraq Higher Military Commission. The latter is set to assess capabilities and operational conditions to subsequently determine a timeline for the withdrawal of US troops from Iraq.
The issue of US presence in Iraq is a pivotal point in the countries’ bilateral relationship. Since assuming office as prime minister, al-Sudani has faced increasing pressure from Iran-aligned armed factions and their political representatives from the Coordination Framework (or CF, Iraq’s political coalition for Iran-backed militias) to expel the Americans. Pressures intensified after a targeted drone strike by the US military killed deputy commander of operations for Baghdad, Mushtaq Talib al-Saeedi, also known as Abu Taqwa, on January 4, 2024. Subsequent retaliatory airstrikes targeted Iraqi Hezbollah brigades’ commanders Abu Baqir al-Saadi and Arkan al-Alaywi, in response to the killing of three American soldiers at the Tower 22 base in Jordan.
For the US, pulling its troops from Iraq is not currently considered a strategic option. Withdrawal at the present moment is likely to consolidate the influence of Iran-backed armed factions, further enhancing their control over the country’s decision-making centers through their political representatives in the parliament and provincial councils.
Stronger influence of armed factions loyal to Iran could negatively impact the geopolitical situation in the region, especially in light of US rivalry with Iran. Consequently, the US might lose a significant sphere of influence in the Middle East and one of its main points of contention with Iran. US withdrawal would also be an acknowledgment of Iranian victory: One that would potentially result in turning Iraq into an Iranian province.Moreover, US withdrawal does not only disrupt geopolitical power balances but also raises questions within the US regarding the efficacy of the US presence in Iraq, which was established in 2003, and whether it has achieved its objectives.
For the Iraqi prime minister, the issue of the US presence in Iraq represents a major challenge for his government. Despite repeatedly expressing Baghdad's desire for complete US withdrawal from Iraq, he – unlike Iran-backed armed factions and the CF, does not want a total withdrawal of US forces from the country. That is because al-Sudani recognizes that Iraqi security forces are not yet capable of entirely confronting ISIS. Although Iraqi security forces and the Popular Mobilization Forces (al-Hashd al-Shaabi) primarily combat ISIS on the ground, the prime minister unerstands that US forces provide advanced surveillance and reconnaissance capabilities, especially in remote areas where ISIS operates. Additionally, the US forces in Iraq are capable of providing precise and preemptive intelligence to thwart terrorist attacks by ISIS, capabilities that Iraq currently lacks. Al-Sudani also fears that any US withdrawal from Iraq amidst the current escalation involving most Popular Mobilization Forces factions may create a security vacuum. The latter would then be exploited by ISIS for larger-scale attacks and potential control over remote areas of the country.
2. Economic cooperation:
Economic matters took precedence on the agenda of the Iraqi prime minister's visit to Washington. This is evidenced by the accompanying delegation which comprised of the ministers of finance, energy, and oil, as well as the governor of Iraq’s Central Bank. Prime Minister al-Sudani discussed several economic issues with the US president, notably increasing US investments in the Iraqi economy, particularly in the oil sector. Iraq also signed 18 memoranda of understanding (MoU) with US companies in the fields of oil, energy and technology, electronics, and automobile manufacturing.
Despite al-Sudani's efforts to enhance US investments in Iraq, particularly in the oil sector, the US-Iraq economic relations continue to face challenges. First and foremost is the United States’ dissatisfaction with China’s growing influence in Iraq. China has significantly bolstered its activities in the Iraqi energy sector, securing 87% of all contracts for oil, gas, and energy projects awarded by the country to foreign investors during 2022. Moreover, China has acquired stakes in fields such as Al-Ahdab, Halfaya, Rumaila, and West Qurna-1 through the China Petroleum & Chemical Corporation, or Sinopec. This has contributed to diminishing US investors’ appetite for the Iraqi oil industry — one of the largest in the country.
Furthermore, US sanctions imposed on the Iraqi financial and banking sector pose one of the most significant challenges between the two countries. In mid-2023, the United States imposed restrictions on Iraq's access to its USD 100 billion of foreign currency reserves, held in the US. This enables the US Federal Reserve to implicitly control Iraq’s dollar transactions and requests for US dollars. The Federal Reserve insisted on linking the Iraqi Central Bank’s electronic platform with the international financial messaging system known as SWIFT, to track the dollar flow and transactions and ensure no transfers end up in countries and entities facing United States sanctions, mainly neighboring Iran.
Although Iraq complied with US requests and took action against several Iraqi banks accused by the US of facilitating dollar transfers to Iran and its affiliated armed groups, the US kept its restrictions on Iraq's banking sector. Iraq’s restricted access to its foreign currency reserves resulted in significant increases in prices of essential commodities, food and vegetables ranging from 5% to 20%, while prices of medicine rose 13%. Inflation has exceeded 6% by the end of the third quarter of 2023.
3. The relationship between Baghdad and Erbil:
Al-Sudani and Biden discussed the problematic relationship between the central government and the Kurdistan regional government. The latter hopes Washington will exert pressure on Baghdad to resolve outstanding issues. These include the semi-autonomous region’s share of the federal budget, and the issue of oil exports through the Kirkuk-Ceyhan pipeline. The 600-mile long pipeline has been shut for more than a year after Baghdad filed a lawsuit against Ankara for giving Kurdistan independent pipeline access to export its oil without its approval.
Ahead of al-Sudani’s visit to Washington, US Ambassador to Iraq Alina Romanowski and Iraqi Oil Minister Hayan Abdul Ghani discussed the issue of resuming oil exports from Kurdistan. Moreover, the Kurdistan regional government also hopes that US support for developing Iraq’s security and military capabilities would include its Peshmerga forces, and providing them with defense systems to repel Iran’s attacks on their sites.
4. Tension in the region:
During Al-Sudani’s visit, Iraqi and US officials discussed the ongoing war in Gaza and the necessity of reaching a ceasefire. On April 15, US President Joe Biden said that “the United States is committed to a cease-fire that will bring the hostages home and prevent the conflict from spreading further.”
Regarding the Iranian attack on Israel, which occurred on April 14, the Iraqi Prime Minister emphasized the importance of restraint in the Middle East. In an interview with the US’s Public Broadcasting Service (PBS), al-Sudani said “Iraq rejects the use of its airspace by any country. We don't want Iraq to be involved in the conflict.” He reiterated that an escalation of the conflict “will bring the region into a dangerous position, and no one will be able to control its repercussions."
The Iraqi Prime Minister finds himself in a real dilemma because of the recent escalation between Iran and Israel. On one hand, he does not want Iraq to become a battleground for a regional conflict between Iran on one side and Israel or the United States on the other. Since taking office, al-Sudani has hoped for stability in Iraq to be a key feature of his tenure so as to be able to address the economic problems plaguing the country. However, the escalation between Iran, an ally of Iraq, and Israel, if it escalates, will contribute to dragging Iraq into an open war in the region.
The Iranian attack on Israel, which occurred during al-Sudani’s trip to Washington, has had implications on the prime minister's visit. The timing of the attack aside, subsequent suggestions of Iraqi armed factions’ involvement under the umbrella of the Iran-aligned Popular Mobilization Forces have caused embarrassment for the Iraqi prime minister. This may have prompted him to avoid criticizing the US’ intervention in shooting down Iranian missiles and drones over Iraqi airspace. "Our security capabilities are still developing, so they cannot protect our airspace," al-Sudani stated, thus, implying his tacit acceptance of US action to intercept Iranian missiles and drones in Iraqi airspace.
Future of Relations
While the Iraqi prime minister’s recent visit to the US is likely to usher in positive developments on some issues, other matters are likely to remain unresolved. This can be clarified as follows:
1. Continued presence of US forces:
Al-Sudani’s US visit is unlikely to result in a breakthrough in this issue, given the US insistence on maintaining military presence in Iraq. Additionally, the US forces’ interception of dozens of Iranian attack drones and missiles, highlights the importance of US presence for offsetting Iranian influence in the region. However, a bilateral agreement is likely to be reached through the US-Iraq Higher Military Commission, including a reduction of US forces in Iraq. However, a consensus is likely to be reached in the medium term rather than immediately, and after regional tensions escalated by the Israeli war on Gaza subside.
2. Facilitating dollar transfers to Iraq:
Al-Sudani’s US visit is likely to lead to an understanding about a joint mechanism between the Central Bank of Iraq and US Department of Treasury for checking Iraqi banks’ compliance, setting procedural standards for dollar transfers to these banks, and monitoring the disbursement of transferred money. This possibility is reinforced by an announcement of the formation of a joint US-Iraqi team that will review violations by Iraqi banks subject to US Treasury sanctions and take corrective actions.
It is also likely that Iraq will press for pledges from the US to renew exemptions from sanctions imposed on Iran’s energy trade. Iraq imports electricity and gas from Iran that total between a third and 40% of its power supply. Therefore, any US sanctions on energy imports could cripple the Iraqi power grid, especially in the country’s sweltering summer, when demand for electricity in Iraq soars. Iraqi concerns can be understood in light of past experiences with US handling of energy issues: In 2023, the US obstructed Baghdad's efforts to import energy by delaying approvals to transfer Iraqi funds to pay for Iranian gas. This led to Iran cutting its exports in half in May 2023, exacerbating Iraq’s electricity crisis at the start of summer, when the load on the grid peaks.
In conclusion, the development of US-Iraqi relations primarily hinges on the repercussions of the ongoing war in the Gaza Strip— a pivotal point in all outstanding issues. Achieving agreements on these issues will require a stable and calm geopolitical climate, which is currently not available amidst the current situation in the region. This, along with approaching US elections, makes a new and comprehensive framework for relations between Washington and Baghdad unlikely at the present time.
