With US troops departing, Iraq looks beyond balancing Washington and Tehran

With US troops departing, Iraq looks beyond balancing Washington and Tehran Submitted by Zahra Ladha on Tue, 07/28/2026 - 09:12 Strengthening institutions, banking reforms and the prospect of a US-Iran agreement could give Baghdad greater strategic autonomy Iranian President Masoud Pezeshkian walks alongside Iraqi Prime Minister Ali al-Zaidi during a welcoming ceremony in Tehran, 23 July 2026 (Iranian Presidency/AFP) Off For several years, officials in Baghdad have maintained a careful balancing act – taking some measures in response to US pressure to reduce Iran’s informal influence in Iraq, while maintaining strong bilateral ties with neighbouring Tehran. This dynamic has constrained Baghdad’s ability to pursue domestic economic and security reforms, or chart a more autonomous foreign policy. However, a combination of recent attempts to strengthen Iraqi state institutions, the upcoming withdrawal of US-led Coalition troops from Federal Iraq and the prospect of a US-Iran settlement could allow Baghdad to redefine its relationship with both Iran and the United States.

According to Iraq's Prime Minister Ali Falih Kadhim al-Zaidi, the new administration’s priority is strengthening the Iraqi state through a programme of institutional reform. This includes improving Iraq’s access to the international banking system, strengthening the energy sector and trying to enforce a state monopoly over arms. (adsbygoogle = window.adsbygoogle || []).push({}); Zaidi, the current prime minister of Iraq since April, is a former banker.

He was chairman of Al-Watania Holding Group, a multinational conglomerate, and the former chairman of Al-Janoob Islamic Bank, one of the country's larger private financial institutions. Some of these reforms are also likely to restrain parts of Iran’s influence in the country. Baghdad’s push to reform its banking sector - which began under the previous administration - aims to reduce corruption and improve access to the international banking system.

“While this is not Baghdad’s stated objective, these banking reforms constrain channels through which Iran and Iran-aligned networks exercise influence,” affirmed Hayder al-Shakeri, research fellow at Chatham House. Iraq has also used its relationship with the US to expand energy partnerships and reduce its reliance on Iranian gas imports. (adsbygoogle = window.adsbygoogle || []).push({}); Diversifyi…