In July, millions of people gathered in the Iraqi city of Najaf to participate in the funeral procession for Iran’s supreme leader, Ali Khamenei, underscoring the deep cultural and political ties between Iraq and Iran. Official figures estimated that approximately 3.8 million Iraqis lined the streets in intense summer heat, with mourners competing to be near the coffin. Alongside the crowds, Iraqi leaders, including Prime Minister Ali al-Zaidi, stood in solemn attendance with the Iranian president at the Imam Ali shrine, a sacred site in Shia Islam.
Just six days later, al-Zaidi met with U.S. President Donald Trump in Washington, D.C., marking a stark contrast in the complex web of Iraq’s domestic and international relations. During the meeting, Trump praised the rapport between the two leaders and described Iraq as “very well represented.” Al-Zaidi reiterated his commitment to disarming Iran-aligned militias and combating corruption, while also inviting American companies to invest in Iraq.
Despite repeated U.S. demands over the years directed at successive Iraqi prime ministers—including Haider al-Abadi, Adel Abdul-Mahdi, Mustafa al-Kadhimi, and others—to curb militia influence and corruption, little progress has been made. According to a government insider, Iranian influence in Iraq has expanded over time, despite significant American support. The apparent shift in pressure this year coincided with severe economic difficulties in Iraq, exacerbated by regional tensions such as the closure of the Strait of Hormuz and attacks on oil infrastructure.
A key point of U.S. leverage lies in Iraq’s dependence on oil revenues, which are held in accounts at the Federal Reserve Bank of New York. The U.S. halted shipments of physical U.S. dollars to Baghdad in April, sending a clear message to the Iraqi government. After al-Zaidi ordered pro-Iran militias to disarm in June, the dollar shipments were reinstated in July, highlighting the fragile economic balance underpinning Iraq’s political decisions.
In Basra, Iraq’s southern port city, signs of gradual economic and social activity coexist with ongoing political tensions. Governor Asaad Al Eidani, who took office in 2017, has pursued infrastructure improvements such as road paving, sewage expansion, and extended electricity supply. He has also fostered ties with neighboring Gulf states, hosting regional events that attracted visitors from Kuwait and Saudi Arabia. Nevertheless, relations remain fragile; the Kuwaiti consulate in Basra remains abandoned after it was stormed by locals and militias in April following suspected retaliatory airstrikes linked to militia activities.
Observers note the contradictions faced by Iraq: the challenge of disarming well-armed militias with strong Iranian ties, the economic necessity of maintaining U.S. support, and the entrenched corruption that hinders reform efforts. Many view it as unlikely that these militias will relinquish their weapons or that Iran will withdraw its support, especially amid ongoing regional conflicts involving the United States and Israel.
Among ordinary Iraqis, these tensions play out in daily life. One older man in Basra expressed that Iran represents a vital protector of Islam and Arab nationalism. When asked about fears of economic collapse due to curtailed oil sales, he said the U.S. would not abandon its interests in Iraq and would ensure the country’s economy remained afloat. This sentiment encapsulates Iraq’s precarious position: caught between two opposing powers, deeply dependent on both for survival.