Executive Summary
The US has threatened economic pressure on Iraq to ensure the exclusion of Iranian-backed militias in any future government coalition. However, Iran’s influence goes beyond formal participation in government and relies on the role of the Popular Mobilisation Forces (PMF) within the Iraqi Armed Forces, economic interdependencies, dense social networks, and deep-rooted patronage structures.
Key Points
- The US has threatened to restrict Iraq’s oil revenues – over which it has maintained de facto control since 2003 – to ensure the exclusion of Iranian-backed militias in the next government.
- The Coordination Framework – the largest Shi’a political bloc – has nominated controversial former PM Nouri al-Maliki for Prime Minister, raising concerns of enduring Iranian influence.
- While likely to delay the government formation process, exclusion will not realistically deter Iranian influence, which largely operates outside formal frameworks.
Analysis
Al-Maliki – previously accused of aggravating sectarian tensions – has historical links with the Islamic Republic. Combined with the electoral victory of several Iranian-backed militias in the November 2025 elections, this poses a key problem for the Trump administration’s Iran policy.
The US has threatened to restrict Iraq’s oil revenues to deter the inclusion of Iranian-backed militias in any future coalition and to press for their disarmament. Simultaneously, it has sought to block al-Maliki’s return to the premiership. This economic pressure is significant, given that Iraq’s oil dollars account for some 90 % of the government budget. Moreover, since 2003, these revenues have been managed through an account by the Central Bank of Iraq at the Federal Reserve Bank of New York, giving the US substantial leverage over Iraq’s financial stability.
Iran, set back by regime change in Syria, a weakened Hezbollah, and domestic protests, relies on Iraq as a vital economic partner – particularly to evade sanctions. Nonetheless, Iran’s economic relationship with Iraq involves a particular interdependency regarding energy.
Balancing between the US and Iran will prove difficult, given that the Iranian-backed Popular Mobilisation Forces (PMF) – a Shi’a paramilitary umbrella organisation within the Iraqi Armed Forces – wields significant influence over the Iraqi security apparatus. Consequently, Iran and its proxy militias in Iraq will likely continue to frame the PMF as essential to preserve Iraqi sovereignty.
The Trump administration’s hardline Iran policy – which have included attacks on its nuclear infrastructure and a recent military buildup in the Arabian Sea – have led to the Coordination Framework to concede to some US demands. However, given the institutionalised power of the PMF, demands to disarm and dismantle Iranian-backed militias will likely remain a contentious issue.
Policy Implications
- It is plausible that the Coordination Framework concedes to US pressures regarding the inclusion of 58 Iraqi MPs listed by the US as having ties to Iran. However, it remains to be seen whether al-Maliki’s nomination remains standing. Nonetheless, it is likely that this will significantly delay the government formation process.
- Even if Iranian-backed MPs are excluded from governance, Iran’s influence primarily operates through the PMF’s semi-autonomous position, as well as through a mixture of economic interdependencies, dense social networks, and patronage structures. Washington’s demands to dismantle and disarm the PMF remain unlikely to be fulfilled immediately, but will likely influence government formation discussions.
Shi’a elites – including the PMF – might comply rhetorically, but not necessarily operationally. Given Iraq’s unique position between Washington and Tehran, this would be in line with the long-standing tactic of employing double narratives of de-escalatory signalling internationally and an anti-US narrative domestically.