For decades, Iran has worked to control Iraq, using money, militias, and political pressure. This has allowed Tehran to use Iraq as a source of cash and power, helping fund its activities in the Middle East. Iran-backed groups have controlled key Iraqi government positions and attacked U.S. and Israeli forces, all while enriching themselves through Iraq’s oil industry.
But now, Iran’s grip on Iraq is slipping. Iraq’s government, once fully under Tehran’s influence, has started to show signs of independence. Prime Minister Sudani, who has long been supported by Iran, recently made key deals with the United States, including stopping an arrest warrant on the U.S. president and releasing a hostage held by an Iran-backed militia. Even Iraqi militias that once attacked U.S. bases regularly have been silent for months, likely out of fear of retaliation.
This shift comes at a time when Iran is already losing influence in the region. It has suffered major setbacks in Lebanon and Syria, and now, Iraq might be next. If Iran loses control over Iraq, it will not only suffer financially but also face a serious blow to its image and power in the Middle East.
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Iraq’s Economy: A Cash Machine for Iran
One of the main reasons Iran wants to keep Iraq under its control is money. Iraq is rich in oil, and unlike Iran, it is not under international sanctions. This allows Iran to use Iraq as a financial lifeline. Tehran’s forces smuggle Iranian oil into Iraq, where it is disguised as Iraqi oil and then sold globally. Iran-backed militias also steal oil from Iraq, using fake companies and illegal pipelines to siphon off profits.
Iran’s economic control over Iraq does not stop at oil. Iranian businesses dominate industries such as transportation, construction, and even religious tourism. The Iranian Revolutionary Guard Corps (IRGC), which runs many of these businesses, makes billions by winning Iraqi government contracts. Even the Popular Mobilization Forces (PMF), an Iraqi militia organization tied to Iran, receives over $3 billion in salaries from the Iraqi government. Many of these so-called soldiers never even show up for work.
Meanwhile, Iraq’s economy suffers. The country’s resources are drained by corruption and theft, leaving ordinary Iraqis struggling with poor services, unemployment, and inflation. But Iran’s own economy is in deep trouble as well. With its currency collapsing and prices rising, Iran desperately needs Iraq’s money to keep its government running. If Iraq slips out of Iran’s hands, Tehran could face an even bigger financial crisis.
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Iran’s Hidden Hand in Iraqi Politics
Iran’s power in Iraq is not just about money—it is also about politics. Tehran has spent years making sure that Iraq’s leaders follow its orders. During elections, Iranian officials have worked behind the scenes to get their preferred candidates into power. In 2018, Iran played a direct role in selecting Iraq’s prime minister, and in 2021, it used violence and political pressure to keep control after its allies lost at the ballot box.
Despite these efforts, Iraq is starting to push back. In 2025, Iraq will hold another election, and for the first time in years, Iran’s influence is being openly challenged. The United States is taking a tougher stance, refusing to support leaders who are too close to Tehran. It has also begun targeting Iran’s financial networks in Iraq, cutting off sources of funding that Iranian-backed groups rely on.
While Iran still holds significant power in Iraq, the situation is changing fast. With its influence in Lebanon and Syria weakened and its economy in freefall, Iran is struggling to maintain control. If Iraq continues to distance itself, Tehran could face one of its biggest political and economic crises in years. Iran’s days of freely using Iraq as its backyard may be numbered.
