Washington Draws a Line for Iraq’s New Leader

Iraq’s new prime minister, Ali Al-Zaidi, will meet U.S. President Donald Trump in Washington, D.C. on 14 July – shortly after America’s Independence Day on July 4th. Trump will no doubt highlight America’s struggle for independence and will press Al-Zaidi to make Iraq independent of Iran, but is Trump ready for an Iraq that is independent of America?

It’s a good question because the same day the White House released the terms of the 14-point U.S.-Iran Memorandum of Understanding (MOU), The New Arab reported the U.S. delivered to Iraq “a series of political, economic and security conditions that the Iraqi government must meet in exchange for US support and to avoid what one official described as ‘major sanctions.’ ” Thus, the U.S. is threatening sanctions on Iraq as it considers waiving sanctions on Iran.

In short, Washington demands the disarmament of Iran-linked militias, preferred access to major projects and contracts for U.S. companies, and for Iraq not to be a platform for attacks on other states in the region.

America tends to view Iraq only through the lenses of conflict, terrorism, or competition with Iran, all important issues, but they do not define the full potential of the relationship. Today, Iraq and the United States have an opportunity to build a partnership centered on economic development, energy security, and regional stability.

Al-Zaidi (a 40-year-old businessman and political newcomer with no prior government experience) was sworn in on 14 May 2026. He was nominated by the  Coordination Framework after the November 2025 elections and a prolonged stalemate, and is illustrative of the “third generation” of Iraqi politicians.

During the stalemate, Washington suspended cash payments from Iraq’s oil revenues, halted security assistance, and suspended cooperation with Iraqi security agencies. U.S. Treasury Secretary Scott Bessent warned that those who enable militia violence “will be held accountable.” Al-Zaidi was promptly nominated for the premiership, and Trump congratulated him, calling the development the start of a “tremendous new chapter,” and inviting him to Washington, DC.

Al-Zaidi promised to make Iraq “a balanced country, regionally and internationally,” though it remains to be seen if Washington is interested in balance or allegiance. Related: IMF Downgrades Global Economic Growth Forecast To 3% Amid Iran War

Al-Zaidi’s visit to Washington is the first high-level trip under his government, and he will meet administration officials and congressional leaders. The agenda focuses on security/economic cooperation, advancing state control over weapons and militia disarmament and integration), and attracting U.S. investment, especially in energy and infrastructure. He will be accompanied by Iraqi business leaders.

U.S. Key Concerns

The U.S. traditionally views Iraq through the lens of countering Iran, protecting American personnel and interests, and advancing stability that supports broader regional goals (including maximum pressure on Iran, and support for Israel.

• Iran-backed militias and the Popular Mobilization Forces (PMF): These groups operate outside full state control, retain independent military capabilities, control economic assets, hold political influence, and have attacked U.S. forces/personnel. The U.S. wants concrete action to expel militia affiliates from state institutions, cut their access to Iraqi budgets and salaries, and achieve real disarmament or integration under state authority. Trump has emphasized the Iraqi government must be “free from terrorism.” 

The Americans should remember  what happened when it suddenly dissolved the Iraqi armed forces in May 2003: it dismissed 400,000 armed men, many of whom joined the anti-U.S. resistance. A smart plan for militia disarmament, demobilization, and reintegration (DDR) will provide opportunities for militia leaders and members to transition to positions in the police or military or become political parties with some economic assets intact.

• Economic and governance issues enabling militias: Money laundering, militia financing networks, and an environment that deters legitimate investment. Some of Al-Zaidi’s prior business ties (e.g., Al Janoob Islamic Bank for Investment & Finance was banned by the Central Bank of Iraq from dealing in dollars in a money laundering crackdown) drew scrutiny, though the U.S. did not sanction Al-Zaidi or the bank

• Counter-ISIS and transition of security ties: Completing the shift from the U.S.-led coalition mission now in a phased drawdown, with some forces remaining in Kurdistan to late 2026, while ensuring Iraq does not become a safe haven or proxy battleground. In April 2026, U.S. Secretary of War Pete Hegseth noted U.S. troops would be “hanging around” in the Middle East, though it remains to be seen if that still holds considering terms of the U.S.-Iran Memorandum of Understanding that envisage the U.S. military departure from the region.
• Iraq as an Iranian foothold: Preventing Baghdad from serving as a reliable rear base or logistical hub for Tehran’s Axis of Resistance, though Baghdad also wants to avoid serving as the operating base for U.S./Israeli operations against Iran. Baghdad will be particularly sensitive about this, given the discovery of two secret Israeli bases on its territory (that the Americans likely knew about) to support the assaults on Iran.

Iraqi Key Concerns

Al-Zaidi’s government faces domestic fragility, economic pressures, and the need to balance competing external powers while delivering results after a long political deadlock.

• Economic revitalization and investment: Iraq remains heavily oil-dependent with budget strains, a bloated public sector, infrastructure needs, and halted or disrupted exports at times. Al-Zaidi has pledged sweeping economic and financial reforms and sees curbing militia economic influence as key to attracting foreign (especially U.S.) capital in energy, infrastructure, and other sectors.

• Regional connectivity provides a promising avenue. Iraq increasingly sees itself as a potential transportation and commercial hub connecting the Gulf states, Türkiye, and the wider Middle East. Infrastructure initiatives, such as the Development Road project linking ports, railways, roads, and industrial zones, could transform Iraq into a vital trade corridor. Such development would not only boost Iraq’s economy but also promote regional stability, as countries linked by trade and investment tend to have stronger incentives to maintain peaceful relations.

• State monopoly on weapons and militia integration: This is a centerpiece of Al-Zaidi’s program. Some factions (e.g., Asaib Ahl al-Haq, Kataib Imam Ali) have signaled willingness for partial steps like placing weapons under state control or separating from the PMF structure, however, progress is limited, and powerful groups (e.g., Kataib Hezbollah) have resisted or set conditions, so the U.S. troops may have to exit in September as planned before more progress is possible. Iran has issued warnings about “red lines” regarding the Axis of Resistance and PMF restructuring.
• Political and internal stability: Al-Zaidi’s cabinet is not yet complete  (key sovereign ministries like defense and interior are vacant) , he relies on the consensus-based Shia Coordination Framework, and must avoid fracturing the political order or triggering internal conflict. Militias have deep roots from the anti-ISIS fight, parliamentary seats, and economic networks.
• Balancing U.S. and Iranian relations: Al-Zaidi must navigate U.S. demands for militia curbs while maintaining ties with Iran and avoiding escalation spillover from regional conflicts (e.g.,  Iranian attacks against Iranian Kurdish opposition groups in Iraq’s Kurdistan Region.)
• Regional security and sovereignty: Iraq places a high priority on protecting its sovereignty. Most Iraqis, across political lines, want Iraq to avoid becoming an arena for conflicts among outside powers. Al-Zaidi will likely highlight Iraq’s need for constructive relations with all major partners while retaining the freedom to make decisions based on Iraqi national interests. Far from opposing America, this stance reflects one of Washington’s justifications for the 2003 invasion: the creation of a sovereign Iraq. Respecting that independence while sustaining cooperation can strengthen the bilateral relationship.

• Iraqi leaders frequently emphasize there should be no unauthorized military actions inside Iraq; no use of Iraqi territory for regional escalation; and recognition of Iraq as an independent actor rather than an arena for U.S.-Iran competition. Baghdad may consider demanding a “dual-key” mechanism where Iraqi approval is required for any U.S. military action.

Possible Areas of Agreement and Cooperation

Both sides have incentives for pragmatic engagement, especially with Al-Zaidi positioned as a consensus figure acceptable in Washington and Tehran.

• Iraq is one of the most reliable partners in the fight against terrorism, which has touched almost every Iraqi household, and wants continued U.S. intelligence, training, and counterterrorism support against remnants of the Islamic State while avoiding being drawn into a U.S./Israel-Iran confrontation. It wants security cooperation, but without the visible foreign military activity that is a reminder of the post-2003 occupation; preventing Iraqi territory from being used for attacks on neighbors, such as Saudi Arabia; and avoiding retaliation against state institutions by Iran-aligned armed groups. Baghdad would be receptive to U.S. or United Nations technical or programmatic support for militia DDR efforts.

• Iran will inevitably arise and remains the most sensitive topic. The U.S. is concerned about the influence of Iran-backed armed groups and networks inside Iraq. American officials will continue to demand that Baghdad impose state control over weapons, improve accountability for armed factions, and ensure the protection of U.S. personnel. Iraqi leaders, however, operate under real constraints: a long-shared border with Iran, extensive economic and social ties, and a complex domestic political environment in which many factions have links to Tehran. Policies that seem straightforward in Washington can carry significant complications inside Iraq, where influence comes through incentives, alignment of interests, and respect for internal balances, not coercion. 

•  Iraq is not only an area of influence for Iran, but also a potential threat. Given Iraq’s evolving regional role and Iran’s new position driven by the U.S.-Iran MOU, understanding Iran’s concerns in Iraq will be crucial to avoid a noisy-rollout of a zero-sum approach that damages Iraq’s stability and causes doubt about American intentions. 

• Iraq remains economically linked to Iran, particularly in electricity and natural gas imports, though electricity imports were ended in March 2026 and natural gas imports were paused in March 2026. Baghdad would have to secure waivers or flexibility regarding sanctions if it desired to resume energy imports while it developed domestic energy production, and appreciation of Iraq’s geographic and economic realities. Al-Azidi may remind Trump that America and Iraq both have problematic neighbors, but Iraq cannot cut off Iran any more than the U.S. can cut off Mexico.

• Economic partnership and investment: U.S. companies and support for energy sector development (oil/gas, potentially diversification), infrastructure, and private-sector growth. Al-Zaidi’s delegation of business leaders signals a forward-looking attitude. Reforms reducing militia economic dominance could unlock more U.S. capital and trade. Increased involvement by foreign countries in strengthening energy security, and promoting infrastructure development, reshape Iraq’s strategic thinking toward a more long-term approach.

In late June, Al-Zaidi announced, “US companies will receive top priority if they want to do business in Iraq,” and “the relationship with the US will transition from military to economic,” words that will please Trump and give him an opportunity to link that to more jobs in America and to try to offset public disaffection with the U.S./Israel attack on Iran

• Governance and institutional strengthening: U.S. support for Al-Zaidi’s economic/financial reform agenda and efforts to assert state authority, which aligns with reducing corruption and the influence of parallel militia power structures.

Also in late June, security forces arrested dozens of “politicians, lawmakers and senior government officials” following Al-Zaidi’s pledge to tackle entrenched corruption. A successful effort will increase public confidence in the government, improve the investment climate, and buy the prime minister some time and space to make the compromises necessary to bring the militias under state control. And if some of the arrested include allies of Iran, all the better in Trump’s eyes.

• Regional stability dialogue: There is a shared interest in preventing broader conflict spillover into Iraq and maintaining Iraq as a stable actor. High-level talks could cover regional de-escalation and coordination.

• Strategic partnership reset: Building on past frameworks for enduring bilateral ties in security, economy, and diplomacy, framed as a “new chapter.”

Al-Zaidi has a delicate balancing act. Iranian pressure against rapid militia changes could limit what he delivers, while insufficient perceived progress in Washington on militias could lead to withheld support, reduced aid/investment, or renewed pressure. Militia economic and political entrenchment makes full, rapid disarmament unlikely; partial or cosmetic steps are more probable. Domestic legitimacy and coalition politics add constraints, and Washington must recognize that the “democracy” it demands from Iraq means decisions are not made at strongman speed and must satisfy numerous local stakeholders.

U.S.-Iraq cooperation may hinge on the progress in the negotiations between Washington and Tehran during the 60-day ceasefire. If things are going badly in Washington’s estimation, Trump may press Al-Zaidi to support renewed U.S./Israeli military action against Tehran, which may unravel Al-Zaidi’s reform agenda, be a setback for U.S. goals in the Middle East, and create space for others, notably China, to offer respect and predictability rather than threats and disorder.

By James Durso for Oilprice.com

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