Iraq is a Middle Eastern country where Iran supports an array of armed groups. Iran has lost its closest state ally (the Assad regime in Syria) and its strongest proxy militia (Hizbullah in Lebanon), making it desperate to preserve its influence in Iraq. Some Gulf officials describe Iraq as a lost cause: the militias are too strong and too interwoven with the state to be uprooted.
The Popular Mobilisation Forces are Shia irregulars who coalesced a decade ago to fight Islamic State. Grand Ayatollah Ali al-Sistani, the Shia world's pre-eminent cleric, has seen his authority undermined by Iraqi politicians ignoring his appeals for reform; his representatives no longer give Friday sermons, so as not to expose his dwindling influence. Iraq's Shia warlords had too many business interests to risk entering the fray when Israel struck Iran in June 2025. Iran has cut gas supplies to Iraq, causing midsummer outages.
Iraq and Syria have had a poisonous relationship for decades. By the 1970s rival Baathist regimes ruled in Damascus and Baghdad: Hafez al-Assad dismissed Saddam Hussein and his allies as a "gang"; Saddam accused Syria of treachery. After America invaded Iraq in 2003, Bashar al-Assad sent busloads of jihadists from his prisons into Iraq. The rise of Islamic State in 2014 prompted the growth of Iran-backed militias in Iraq, many of which fought beside the Syrian dictator.
Ahmed al-Sharaa, Syria's interim president, once waged jihad against American occupiers in Iraq and spent five years in Iraqi prisons. In Shia-majority Iraq, where Iran holds great sway, his jihadist past is not easily forgiven. Muhammad al-Sudani is one of the few Arab leaders yet to roll out the red carpet for al-Sharaa. Iraq's intelligence chief has claimed that 10,000 IS fighters are at large in Syria, up from 2,000 a year ago. A vast concrete wall 350km long now runs along the once-porous Iraq-Syria border. American officials have begun transferring up to 7,000 high-risk IS detainees from prisons in north-east Syria into Iraq.
Iraq hosted a desultory Arab League summit in 2025, at which only five of the 22-member club's heads of state attended. Ahmed al-Sharaa, Syria's new president, could not attend because of threats from pro-Iranian militias, and flew to Riyadh instead.
Iraq's population was around 46m according to a census in 2024, young and growing by nearly a million each year. There are now 20m more Iraqis than there were before the American invasion.
Under prime minister Muhammad al-Sudani, who took office in October 2022, Baghdad is enjoying a construction boom. By post-2003 standards, Iraq has never been as calm. Since taking office his government has built 20 new bridges and overpasses in Baghdad, opened at least four new hospitals (including Iraq's first dedicated cancer centre and a Korean-designed intensive-care hospital) and built or rebuilt over 1,700 schools. Half a dozen posh hotels are set to open. BP has resumed operations and talks are under way with ExxonMobil and Chevron.
Improved security, reforms in the banking sector that have made credit more accessible, and oil and construction revenues that once flowed to Beirut or Geneva are all contributing. Al-Sudani oversees powerful investment committees that can swiftly approve projects, cutting through Iraq's sluggish bureaucracy.
Al-Sudani has digitised many government services. The passport office in Baghdad issues new travel documents within 45 minutes. Government salaries are no longer paid in cash; payments for government services can be made only with a bank card. Five years ago almost no one in Iraq had a bank card; today they are essential. Annual customs income had never exceeded 900bn Iraqi dinars ($690m) until 2023; in 2025 it is expected to exceed 3trn dinars, thanks to digitisation ending the practice of importing containers of iPhones labelled as bananas.
Al-Sudani has avoided direct confrontation with the Iranian-backed militias that dominate much of Iraq's politics and economy. Embedding militias at the heart of government has probably contributed to Iraq's stability—but it comes with costs. Many have formed companies and are bidding for government contracts, raking in fortunes through state procurement and the energy sector. Iran's proxies in Iraq stayed out of its 12-day war with Israel in June 2025, perhaps vindicating the approach. Yet the militias remain a law unto themselves. In July 2025 fighters from Kataib Hizbullah, a militia with close ties to Iran, raided an office at the ministry of agriculture to protect a director accused of corruption. Al-Sudani promised to bring those responsible to justice but has not done so. The failure of Iraqi forces to rescue Elizabeth Tsurkov, a Russian-Israeli researcher kidnapped in Baghdad by Kataib Hizbullah in 2023, highlights the limits of the prime minister's power. Over 10m Iraqis draw government pay cheques—among the world's highest public-to-private employment ratios—and al-Sudani has done little to slim down the civil service.
Iraq's semi-autonomous Kurdish region in the north has its own government, the Kurdistan Regional Government (KRG), whose autonomy was enshrined in Iraq's 2005 constitution. It is dominated by two ruling families: the Barzanis, who control the Kurdistan Democratic Party (KDP) in Erbil, and the Talabanis, who control the Patriotic Union of Kurdistan (PUK) in Sulaymaniyah. Jalal Talabani, the PUK's co-founder, served as president of Iraq.
A KDP-backed independence referendum in 2017 backfired, prompting the central authorities in Baghdad to recapture the oil-rich district of Kirkuk. A Kurdish decision to export oil directly to Turkey, bypassing Baghdad, briefly boosted revenue, but in 2022 Iraq's federal court ruled the scheme illegal. Budget disputes between the Kurds and Baghdad persist. The KRG has been broke for years: public salaries go unpaid for months, while the ruling families invest in high-rises and gated compounds.
In August 2025 a violent power struggle between Bafel and Lahur Talabani—cousins from the PUK's founding family—engulfed Sulaymaniyah, with armed drones and tanks deployed in the streets and at least five killed. Both grew up in London after their family fled Saddam Hussein's campaigns against the Kurds. Lahur was jailed; a wider crackdown on dissent followed. Media, protest and social media are all tightly controlled by the two ruling parties.
Iraq has no alternative to the Strait of Hormuz for the bulk of its oil exports, which ran at about 3.3m barrels a day (b/d) before the third Gulf war. After Iran closed the strait in early 2026, Iraq's government and the leaders of the autonomous Kurdish region hastily agreed to reopen the Kirkuk-Ceyhan pipeline, which can carry a modest 250,000 b/d to Turkey—a fraction of pre-war exports. Iraq was also shifting some oil by road through Syria, a costly and inefficient method.
Asaib Ahl al-Haq, one of Iraq's most powerful militias, has taken control of Iraq's education ministry. The group has turned campuses into ideological factories for its movement and a recruitment ground for its militia. Top engineering students are siphoned into its drone programme. Pro-militia student unions get lavish funding. Higher grades are bought through connections to the party. Faculty posts are handed to loyalists, and debate is stifled. Iraq's universities were once among the finest in the Middle East; their reputation has begun to sink.
Iraq's sixth general election since the American invasion in 2003 was due in November 2025. The Shia Co-ordination Framework, an umbrella group for Iran-backed factions, is the dominant bloc in parliament. Qais al-Khazali, who heads Asaib Ahl al-Haq, is a kingmaker; whoever becomes prime minister will most probably have him to thank. Forming a new government after elections can take six months or more.
"May the forces of evil become confused on the way to your house."