Washington can sustain its influence in Iraq through less control and stronger economic cooperation.
According to Atlas Diplomacy, the article “The Future U.S. Strategy in Iraq: Less Control to Better Preserve Influence,” published in Strategic Council on Foreign Relations, examines Washington’s strategy following the withdrawal of American troops from Iraq. The analysis emphasizes replacing direct pressure with economic cooperation, financial reforms, and stronger Iraqi state authority over armed groups. The following is a summary of the article.
The end of the international anti-ISIS coalition’s mission in Iraq offers an opportunity to redefine relations between Baghdad and Washington. As American troops withdraw, the United States will have less capacity for direct intervention, but it will retain financial, intelligence, and defense instruments. The central challenge is to use these tools to exert sustainable influence rather than impose political decisions. Expanded trade, infrastructure investment, and cooperation in the energy sector may offer a more durable basis for influence than a military presence.
American economic influence derives particularly from the dollar’s role in Iraq’s financial system. Iraqi oil revenues pass through dollar-based channels, and the country’s banks depend on access to international financial networks. Yet restricting dollar flows to compel Baghdad’s political compliance could undermine Iraqi sovereignty. A more effective approach would link financial access to banking transparency, anti-money-laundering measures, and sanctions compliance without calling into question Iraq’s ownership of its oil revenues.
The principal security challenge concerns the future of Iran-aligned armed groups and the position of the Popular Mobilization Forces within the state. Attempting to disarm all these groups immediately and simultaneously could trigger internal conflict and instability. A gradual, Baghdad-led process is therefore preferable: groups that recognize state authority could enter formal institutions, while independent command structures, unauthorized operations, and heavy weapons are progressively restricted. Debate over legislation governing the Popular Mobilization Forces adds to the complexity of these reforms.
According to the published text, Prime Minister Ali al-Zaidi’s plan to reorganize armed groups is scheduled to run from October 2026 through June 2027, although some factions want more time. A temporary arrangement to halt attacks and avoid strikes against these groups also depends on containing tensions. Meanwhile, concerns in Iraqi Kurdistan about security, the future of the Peshmerga, and the potential return of ISIS demonstrate that restructuring Iraq’s security order cannot be reduced to a unilateral decision.
In relations between Iran and Iraq, geography and economic ties make the complete elimination of Tehran’s influence unrealistic. Iraq can trade with Iran while remaining a partner of the United States. The essential distinction lies between legitimate political and economic relations with Iran and parallel armed structures operating beyond Baghdad’s authority. By recognizing this difference, Washington could support stronger state institutions and independent Iraqi security decisions instead of forcing Iraq to choose between the two countries.
Washington could tie incentives to measurable progress in state control over weapons, banking oversight, and efforts to prevent sanctions evasion. In return, investment, defense cooperation, and access to financial markets could expand. This would differ from punitive pressure because it would rest on shared interests between Baghdad and Washington. Economic agreements and memoranda announced during the Iraqi prime minister’s July 2026 visit also illustrate the scope for a broader partnership.
Ultimately, continued American influence in Iraq need not depend on preserving direct control. A partnership grounded in economic interests, respect for Iraqi sovereignty, and stronger accountable institutions could help prevent Iraq from becoming a theater of proxy conflict involving Iran, the United States, and Israel. Success would depend both on Baghdad’s ability to advance reforms and on Washington’s willingness to accept independent Iraqi decisions, even when they do not fully align with American preferences./ Source
