Uncertainty Mounts Over Iraqi Dinar as Exchange Rate Faces New Risks
The Iraqi dinar has entered a period of heightened uncertainty following Prime Minister Ali Faleh al-Zaidi's return from Washington. Analysts say
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Washington Agreements and the Development Fund
During his meeting with U.S. President Donald Trump, Iraqi Prime Minister Ali Faleh al-Zaidi announced that U.S. military forces will withdraw from Iraq on September 30 this year, marking what he described as the beginning of a commercial partnership phase.
To guarantee the financial entitlements of American companies, a special fund will be established. A portion of Iraq's daily oil revenue will be allocated to this fund to finance companies investing in the country.
Strait of Hormuz and the 2027 Budget
The prolonged closure of the Strait of Hormuz is considered one of the main risks facing the Iraqi dinar.
If the strategic waterway remains closed, drafting Iraq's 2027 federal budget could become extremely difficult. Under such circumstances, the government may be unable to prepare the budget based on the current exchange rate, resulting in a wider fiscal deficit.
This scenario could prompt the Central Bank of Iraq to devalue the dinar against the U.S. dollar by adjusting the official exchange rate to between IQD 1,450 and IQD 1,520 per dollar.
Security Situation and Public Confidence
Another key factor affecting the dinar's value is the government's ability to bring weapons under state control.
If al-Zaidi fails to compel armed groups to disarm by September 30 and Iraq enters a period of internal conflict, public confidence in the dinar could decline sharply, increasing pressure on the currency and the broader economy.
Optimistic Scenario
Under a more favorable scenario, the outlook for the dinar would improve if tensions between the United States and Iran ease, the Strait of Hormuz reopens, and armed groups disarm.
In that case, the entry of American companies to develop new oil wells and increase exports could strengthen the dinar and contribute to greater market stability.
Exchange Rate Forecast
Forecasts suggest that the exchange rate could fluctuate between IQD 151,000 and IQD 155,000 per $100 from now until September 30.
However, if regional conflict continues and domestic security tensions worsen, analysts warn that the exchange rate could exceed IQD 160,000 per $100, placing the Iraqi dinar under severe pressure
Association of Banks: Central Bank's understandings with the US Treasury will reflect on the stability of the Iraqi dinar.
The Association of Iraqi Private Banks confirmed on Saturday that the Central Bank’s understandings with the US Treasury represent an important turning point in the course of reforming the Iraqi banking sector, and indicated that this development will have a positive and direct impact on increasing the stability of the value of the Iraqi dinar.
A statement issued by the association, received by the Iraqi News Agency (INA), said that "the Association of Iraqi Private Banks welcomes the important positive results that resulted from the high-level talks held by the Governor of the Central Bank of Iraq, Nizar Nasser, with officials at the US Treasury, which came as a culmination and completion of the governmental efforts made during the official visit of the Prime Minister, Ali Faleh Al-Zaidi, to the United States of America."
The association, according to the statement, praised the "strategic decision to agree on the return of (7) Iraqi banks to foreign correspondent banking channels in foreign currencies (other than the US dollar), and this is a fundamental step that confirms the success of the first phase of the banking sector reform and relicensing program led by the Central Bank of Iraq."
The association affirmed that "this important development will have a positive and direct impact on increasing the stability of the value of the Iraqi dinar, as well as its effective contribution to strengthening Iraqi banks and enhancing their soundness and ability to meet the requirements of foreign trade and financing the local market."
She pointed out that "all other banks that are still subject to restrictions can operate in other currencies when the requirements of the first phase are completed. Therefore, these banks are required to intensify their efforts and fully and quickly comply with the standards and requirements of the Central Bank of Iraq, and complete the procedures for compliance, combating money laundering and terrorist financing."
The association reiterated its "full support for the comprehensive strategy of the Central Bank of Iraq, which aims to modernize the banking sector and enhance its resilience and competitiveness, in order to ensure full and sustainable integration into the global financial system, and to create the ideal environment for the Iraqi economy to open up to international financial institutions."
A government advisor: An American bank has opened in Baghdad, and Washington's understandings have strengthened the world's confidence in the Iraqi banking sector.
The Prime Minister’s financial advisor, Mazhar Muhammad Saleh, confirmed that the opening of a branch of JP Morgan Bank in Iraq represents an important shift in the course of banking reform, considering that it sends messages of confidence to international markets and financial institutions, and paves the way for a new phase of partnerships with global banks.
Saleh told Al-Mada in an exclusive interview that the presence of a global bank of this size “puts Iraq on the map of international financial institutions and gives clear indications that the Iraqi financial system is moving towards serious reform,” explaining that this step opens the door to advanced financing tools, including arranging sovereign loans, financing major projects, and managing financial risks, tools that were not available by relying on local banks alone.
He added that the entry of international financial institutions coincides with the implementation of a banking sector reform program, which includes qualifying seven Iraqi banks to return to international correspondent banking relationships, reflecting the beginning of a broader structural reform in the financial sector.
He explained that these measures will contribute to reducing reliance on the parallel foreign exchange market, regulating transfers through official channels, as well as enhancing compliance with international standards for combating money laundering and terrorist financing and Know Your Customer (KYC) requirements, thereby enhancing transparency and governance and raising the level of acceptance of Iraqi banks by global correspondent banks.
Saleh pointed out that the success of these reforms requires Iraqi banks to continue updating their digital systems, especially in the areas of electronic transfers and internal control, stressing that the standard of success is not measured by the number of qualified banks, but rather by their ability to build stable and reliable relationships with the global financial system.
He explained that the recent understandings between Iraq and the United States give the banking reform program additional momentum, by enhancing international confidence and encouraging foreign institutions to enter the Iraqi market, thus creating a more favorable environment for investment, project financing, and the transformation of economic agreements into actual projects.
He stressed that completing banking reform should focus on raising the efficiency of local banks, strengthening internal control, and developing the technological infrastructure, particularly in the field of financial technology (FinTech), because it provides solutions that contribute to accelerating financial services, developing electronic payment systems, reducing reliance on cash, as well as supporting financial inclusion, enhancing the fight against money laundering and attracting investments.
Saleh stressed that banking reform is the cornerstone of any economic transformation, as it provides the necessary financial environment for financing projects, managing risks, and attracting investors. He pointed out that the most important achievement in Washington was moving from the stage of talking about reform to the stage of building practical partnerships with international financial institutions and opening new channels for the integration of Iraqi banks into the global financial system.
Al-Zaidi and representatives of JPMorgan agree to open a branch of the bank in Iraq to finance projects implemented by American companies.
Prime Minister Ali Faleh al-Zaidi received representatives of JPMorgan Chase in Washington.
His office stated in a statement received by Al-Rasheed that “Prime Minister Ali Faleh Al-Zaidi received representatives of JPMorgan Chase Bank in Washington, and an agreement was reached to open a branch of the bank in Iraq to finance projects implemented by American companies.”
The Central Bank of Iraq announces the reintegration of 7 banks into the global financial system.
held a series of high- level meetings with officials at the US Treasury , resulting in a " common understanding" to "reinstate restricted Iraqi banks to non- US dollar correspondent banking channels . "
According to a statement issued by the Central Bank on Saturday , July 18, 2026 , these meetings followed an official visit to the United States and were part of ongoing efforts to strengthen bilateral relations between the two countries. The statement noted that the banks' reinstatement to these channels comes " after they have met the approved standards and requirements in the areas of compliance and governance, and completed the first phase of the banking sector reform and relicensing program implemented by the Central Bank of Iraq." Banks that successfully complete the reform and relicensing requirements will also " regain their eligibility to conduct transactions in US dollars upon completion of all related regulatory procedures and requirements ." The Governor explained that seven banks are " currently eligible " to return and operate within the non- dollar correspondent banking channel ( other currencies ) , and "will subsequently have the right to deal in US dollars after passing further stages . "
Among the requirements for compliance and governance.” The Central Bank of Iraq
reiterated its “commitment to continuing the comprehensive evaluation ” of all Iraqi banks and “strengthening the oversight and supervisory system to ensure sustained compliance with international standards and governance , risk management , and anti -money laundering and counter-terrorism financing requirements .”
other articles from different perspectives
US clears seven Iraqi banks for dollar transactions
Seven Iraqi banks have been cleared to resume correspondent banking relationships in foreign currencies, after meeting compliance and governance requirements, which Prime Minister Ali Al-Zaidi on Saturday hailed as “an important step” in Iraq’s banking reform program.
Al-Zaidi said the agreement between the Central Bank of Iraq and the US Treasury Department would “strengthen confidence” in Iraqi lenders, attract investment, and support economic growth.
his facebook post
CBI-U.S. Treasury Understanding Signals New Phase in Iraq's Financial Modernization
Iraqi PM Ali al-Zaidi says the CBI-U.S. Treasury understanding advances banking reform, strengthens investor confidence and supports Iraq's global financial integration.
Iraqi Prime Minister Ali al-Zaidi has described the latest understanding between the Central Bank of Iraq (CBI) and the U.S. Department of the Treasury as a pivotal development in the country's financial reform agenda, presenting it as evidence that years of efforts to modernize Iraq's banking system are beginning to produce tangible international recognition.
In a statement posted on X on Saturday, al-Zaidi said the decision to restore seven Iraqi banks' access to external correspondent banking channels in currencies other than the U.S. dollar demonstrates the effectiveness of the government's reform strategy.
He noted that eligibility to resume U.S. dollar transactions will depend on each institution meeting required standards for compliance, governance and regulatory oversight.
The announcement represents more than a technical adjustment within Iraq's banking sector.
It reflects Baghdad's broader ambition to establish financial institutions capable of supporting international commerce, facilitating cross-border investment and strengthening confidence among global partners.
As Iraq seeks to diversify its economy and attract long-term capital, officials increasingly view a modern and transparent banking system as an essential foundation for sustained economic growth.
Al-Zaidi argued that reconnecting Iraqi banks with international correspondent banking networks will expand opportunities for the national economy while improving the country's appeal to foreign investors.
According to the prime minister, stronger financial institutions are central to Iraq's effort to deepen its integration into the global financial system after years of reform aimed at improving oversight and institutional credibility.
The prime minister also reaffirmed his government's commitment to continuing banking and financial reforms built around transparency, governance and regulatory compliance.
He presented those principles not simply as administrative objectives but as key components of a wider strategy intended to strengthen Iraq's economic standing both regionally and internationally.
For Iraqi policymakers, restoring confidence in the banking sector has become an important prerequisite for broader economic transformation.
International investors often assess the reliability of domestic financial institutions alongside infrastructure, legal protections and market opportunities when evaluating investment destinations.
Expanding correspondent banking relationships is therefore viewed as a practical step toward facilitating international transactions and supporting greater participation in global markets.
The latest financial development comes as al-Zaidi concludes a high-profile visit to Washington focused largely on expanding economic cooperation between Iraq and the United States.
Earlier on Saturday, the Prime Minister's Office announced the signing of 48 agreements and memoranda of understanding between Iraqi and American public and private institutions.
According to official government statements, the package establishes a broad framework for cooperation extending well beyond traditional security ties into investment, finance, technology, energy, education, agriculture, telecommunications and industrial development.
Taken together, the agreements illustrate Baghdad's effort to redefine its relationship with Washington through long-term economic partnerships designed to support modernization and private-sector growth.
While individual agreements span a wide range of sectors, they collectively reinforce the government's objective of creating conditions that encourage sustained international investment.
Within that broader strategy, financial reform serves as a connecting element linking multiple development priorities.
Expanding infrastructure projects, attracting multinational companies and supporting industrial diversification all depend on banking institutions capable of conducting secure international transactions and operating under globally recognized compliance standards.
Government officials have repeatedly argued that Iraq's next phase of economic development requires more than increased investment commitments.
It also demands institutions that inspire confidence among international partners and provide businesses with efficient access to global financial markets.
During his Washington visit, al-Zaidi emphasized Iraq's intention to pursue long-term partnerships that bring advanced expertise, technology and capital across multiple sectors rather than relying solely on short-term commercial arrangements.
The banking reforms highlighted this week complement that broader vision by addressing one of the institutional foundations necessary for sustainable economic expansion.
The government's wider modernization agenda includes strengthening infrastructure, expanding energy production, supporting digital connectivity and encouraging greater private-sector participation throughout the economy.
Officials view improvements in financial governance as reinforcing each of those objectives by reducing barriers to investment and enhancing Iraq's credibility within international financial networks.
The latest understanding between the CBI and the U.S. Treasury therefore carries significance beyond the banking sector itself.
By linking regulatory reform with broader economic policy, Iraqi officials are presenting financial modernization as an essential component of the country's long-term development strategy.
As Baghdad continues to pursue deeper economic partnerships with international stakeholders, the government maintains that stronger governance, greater transparency and internationally connected financial institutions will remain central to its efforts to position Iraq as a more competitive destination for global investment while supporting sustainable economic growth.
Summary Iraqi Prime Minister Ali al-Zaidi says the latest understanding between the Central Bank of Iraq and the U.S. Treasury marks a major step in banking reform, helping reconnect Iraqi banks with global financial networks while supporting investment, transparency and broader economic modernization. |
Al-Zaidi Welcomes Central Bank Pact with US Treasury to Rehabilitate Seven Iraqi Banks
In a statement addressing national economic policy, Al-Zaidi endorsed a newly brokered financial accord between the Central Bank of Iraq and the U.S. Department of the Treasury.
The agreement outlines a phased rehabilitation process aimed at modernizing Iraq's domestic banking sector and synchronizing its regulatory frameworks with international anti-money laundering standards.
Integration with Global Banking Networks
The bilateral understanding focuses primarily on the rehabilitation of seven prominent Iraqi banks, allowing them to resume international correspondent banking operations in alternative foreign currencies. This phase serves as a transitional mechanism designed to precede the full restoration of their eligibility to conduct transactions in United States dollars. The reinstatement remains contingent upon the targeted institutions successfully completing comprehensive compliance overhauls and aligning their operations with rigorous international financial governance standards.
Validation of National Fiscal Policy
According to the statement, the diplomatic and financial breakthrough serves as concrete validation of the financial reform agenda currently pursued by the Iraqi government. The implementation of enhanced compliance measures is projected to rebuild international confidence in the domestic banking sector, stabilize the local regulatory environment, and expand direct investment opportunities within the national economy. Al-Zaidi emphasized that stabilizing these institutions is critical to unlocking broader commercial horizons for Iraq's public and private sectors.
Commitments to Transparency and Governance
Moving forward, political and regulatory bodies have pledged continuous legislative and oversight support to sustain the current momentum of banking sector modernization. Future policy initiatives will prioritize institutionalizing transparency and enforcing international anti-money laundering and governance frameworks. Analysts note that these ongoing financial structural adjustments are vital to securing Iraq's long-term economic sovereignty and enhancing its competitive position within both regional and global markets.
and finally we hear from the CBi
Central Bank: Agreement reached with the US Treasury to reinstate eligible Iraqi banks to foreign correspondent banking channels
The Central Bank of Iraq announced on Saturday that it had reached a mutual understanding with the US Treasury Department to reinstate restricted Iraqi banks to external correspondent banking channels not linked to the US dollar.
A statement from the Prime Minister's Media Office, received by the Iraqi News Agency (INA), stated that " Following the official visit of Prime Minister Ali Faleh al-Zaidi and his meeting with the President of the United States of America, and within the framework of ongoing efforts to strengthen bilateral relations between the two countries, the Governor of the Central Bank of Iraq held a series of high-level meetings with officials at the US Treasury."
He added that "these meetings resulted in reaching a common understanding to return restricted Iraqi banks to foreign correspondent banking channels not linked to the US dollar, after they have met the approved standards and requirements in the areas of compliance and governance, and completed the first phase of the banking sector reform and relicensing program implemented by the Central Bank of Iraq. Banks that are able to complete the reform and relicensing requirements will regain their eligibility to conduct transactions in the US dollar, upon completion of all related regulatory procedures and requirements."
He pointed out that "this understanding comes within the framework of the comprehensive strategy of the Central Bank of Iraq, which aims to modernize the banking sector, enhance its resilience, and improve its efficiency, ability to withstand challenges and competitiveness, in order to contribute to achieving its full integration into the global financial system, enhancing confidence in the Iraqi banking sector and creating the necessary environment for its openness to international financial institutions."
The Central Bank of Iraq, according to the statement, renewed its “commitment to continue the comprehensive evaluation of all Iraqi banks and to strengthen the system of control and supervision, to ensure sustainable compliance with international standards and the requirements of governance, risk management, and combating money laundering and terrorist financing,” indicating that it “will continue to take appropriate supervisory and regulatory measures against any institution that does not meet these standards, including restricting or suspending its access to international financial channels or canceling its license, whenever necessary, and in accordance with the applicable legal and regulatory frameworks.”
The Governor of the Central Bank of Iraq explained, according to the statement, that “there are (7) banks currently qualified to return and operate within the external banking correspondent channel not linked to the dollar (other currencies), and to have the right later to deal in the US dollar after passing other stages of compliance and governance requirements.”
press release
link
Following the official visit to the United States of America, and as part of ongoing efforts to strengthen bilateral relations between the two countries, the Governor of the Central Bank of Iraq held a series of high-level meetings with the US Treasury Department.
These meetings resulted in a shared understanding to reinstate restricted Iraqi banks to non-US dollar correspondent banking channels, provided they meet the established standards and requirements in compliance and governance, and complete the first phase of the banking sector reform and relicensing program implemented by the Central Bank of Iraq. Banks that successfully fulfill the reform and relicensing requirements will also regain their eligibility to conduct US dollar transactions upon completion of all relevant regulatory procedures and requirements.
This understanding comes within the framework of the Central Bank of Iraq’s comprehensive strategy aimed at modernizing the banking sector, strengthening its resilience, and improving its efficiency, ability to withstand challenges and competitiveness, thereby contributing to its full integration into the global financial system, enhancing confidence in the Iraqi banking sector and creating the necessary environment for its openness to international financial institutions.
The Central Bank of Iraq reaffirmed its commitment to continuing the comprehensive evaluation of all Iraqi banks and strengthening its oversight and supervisory framework to ensure sustained compliance with international standards and requirements related to governance, risk management, and combating money laundering and terrorist financing. The Central Bank will continue to take appropriate supervisory and regulatory measures against any institution that fails to meet these standards, including restricting or suspending its access to international financial channels or revoking its license, as necessary and in accordance with applicable legal and regulatory frameworks.
As explained by the Governor of the Central Bank of Iraq, Mr. Nizar Nasser Hussein, there are (seven banks) currently qualified to return to work within the external banking correspondent channel not linked to the dollar (other currencies) and to have the right later to deal in the US dollar after passing other stages of compliance and governance requirements.
Media Office
July 18, 2026
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Breaking | From Washington to Doha... President Al-Zaidi will travel to Qatar to offer condolences to its Emir on the death of his father
Iraqi Foreign Minister Fuad Hussein revealed that Prime Minister Ali al-Zaidi will travel from the United States to Qatar to offer condolences to its Emir on the death of his father.
In a press statement, he added that al-Zaidi will later visit Iran and then Turkey.
Iraq Observer had previously quoted a source as saying that Prime Minister Ali Faleh al-Zaidi's upcoming foreign visits, following his official visit to the United States, would include a visit to Iran on July 23 and an official visit to Turkey on July 28. The source
explained that the programs for these visits include summit meetings with the Iranian and Turkish presidents, as well as meetings with other officials, business leaders, and members of the Iraqi diaspora.
Prime Minister al-Zaidi is currently on what has been described as a historic visit to the United States, during which he has met with US President Donald Trump and senior members of his administration.
Prime Minister al-Zaidi will present his vision for opening up investment opportunities and for bilateral economic partnerships to govern relations.
The Iraqi delegation will include officials and experts on regional, Arab, and international affairs.
Finance Minister: The IMF's praise for the reforms implemented by the government reflects growing international confidence in the Iraqi economy.
Finance Minister Faleh Sari affirmed on Saturday that the International Monetary Fund's praise for the reforms implemented by the Iraqi government reflects growing international confidence in the Iraqi economy, while stressing the continuation of reform programs to enhance financial stability and support sustainable development.
The minister said in a statement received by Al-Mirbad that "the meeting that brought together the government delegation headed by Prime Minister Ali Al-Zidi with the head of the International Monetary Fund Kristalina Georgieva in the American capital, Washington, represents an important milestone to strengthen the partnership between Iraq and the International Monetary Fund, and to support the path of economic and financial reforms implemented by the government."
He added that "the IMF chief's praise for the reform measures, particularly in the areas of financial reform, combating corruption, and diversifying income sources, reflects growing international confidence in the Iraqi economy and in the government's steps aimed at building a more diversified and sustainable economy."
Sari noted that "the Ministry of Finance continues to implement its reform programs in coordination with national bodies and international partners, which contributes to enhancing financial stability, raising the efficiency of public financial management, improving the investment environment, and enabling the private sector to play a greater role in achieving sustainable economic development."
A source reveals to Al-Ghad Press the names of Iraqi banks that have had restrictions on using the dollar lifted.
An informed source revealed on Saturday the names of the Iraqi banks whose US Treasury restrictions on dollar use have been lifted.
The source told Al-Ghad Press that the banks whose restrictions were lifted are: Mosul Bank, Iraqi Investment Bank, Arab Islamic Bank, South Bank, International Development Bank, Mashreq Arab Bank, and Kurdistan International Investment Bank.
Earlier that day, the media office of Prime Minister Ali al-Zaidi announced that the Governor of the Central Bank of Iraq, Nizar Nasser Hussein, held a series of high-level meetings with US Treasury officials, resulting in a mutual understanding to reinstate the restricted Iraqi banks to international correspondent banking channels not linked to the US dollar.
A statement issued by al-Zaidi's media office explained that the lifting of restrictions on these banks came "after they met the approved standards and requirements in the areas of compliance and governance, and completed the first phase of the banking sector reform and relicensing program implemented by the Central Bank of Iraq. Banks that successfully complete the reform and relicensing requirements will regain their eligibility to conduct transactions in US dollars upon completion of all related regulatory procedures and requirements."
Prime Minister's Advisor: 48 agreements with Washington are a step towards enhancing economic openness
Prime Minister’s Advisor Mazhar Muhammad Salih confirmed on Saturday that the 48 agreements with Washington are a step towards strengthening economic openness, while indicating that the memoranda of understanding with the United States reflect Iraq’s direction to attract foreign investments.
Saleh said in statements followed by Al-Mirbad that “the signing of 48 agreements, memoranda of understanding and a declaration of partnership between Iraq and the United States represents an important step in the path of economic openness and strengthening investment relations, but the real impact of these agreements will depend on the extent to which they are transformed from documents of understanding into practical projects that can be implemented.”
He added that "these memoranda reflect, from an economic standpoint, Iraq's desire to expand the base of international cooperation and attract foreign capital, which sends positive messages to investors and global markets that the Iraqi investment environment is witnessing a movement towards greater stability and openness."
Saleh explained that “the entry of international companies into the Iraqi market would contribute to the transfer of technology and administrative and technical expertise, raise the efficiency of productive sectors, create job opportunities, as well as support efforts to diversify the economy and reduce dependence on oil revenues through investment in the energy, industry, infrastructure, communications and services sectors,” indicating that “these memoranda represent an indication of growing international confidence in Iraq’s economic potential, but this confidence will not be consolidated unless it is accompanied by real reforms in the investment environment, including simplifying administrative procedures, enhancing transparency, ensuring the protection of investors and providing legislative and security stability.”
Saleh pointed out that “foreign investors do not only look at the size of the signed agreements, but also at the state’s ability to fulfill its obligations and provide a stable business environment capable of achieving rewarding returns. The success of these memoranda will depend on the speed of moving to the implementation phase and removing the obstacles that have long faced investment projects in Iraq.”
He added that “the declaration of partnership with the public and private sectors represents a modern economic approach aimed at utilizing the capabilities of both parties in implementing development projects. The public sector owns the land, infrastructure, and legal and institutional framework, while the private sector possesses administrative expertise, the ability to finance, innovate, and use modern technologies. Through this model, joint projects can be implemented in the fields of energy, electricity, transportation, housing, industry, and services, according to the formulas of partnership between the public and private sectors, which reduces the financial burdens on the state and increases the efficiency of project management and accelerates their completion.”
Saleh pointed out that “these partnerships are expected to open new horizons for economic and financial cooperation, whether through direct investment, joint financing, the establishment of investment funds and the financing of infrastructure projects, as well as strengthening cooperation between banks and financial institutions to provide credit facilities and investment guarantees,” stressing that “in the medium and long term, these partnerships can contribute to raising the contribution of the private sector to the gross domestic product, stimulating economic growth, increasing non-oil revenues, and enhancing the competitiveness of the Iraqi economy.”
He stated that "achieving these results requires the continuation of economic reforms, the development of legal frameworks regulating partnerships, and ensuring transparency and governance in project implementation, so that agreements and memoranda of understanding are transformed into tangible economic achievements that positively impact development and economic stability in Iraq."
Ex-U.S. Amb.: Premature Troop Withdrawal Could Leave Iraq Facing Security Vacuum
The former US ambassador to Iraq told Kurdistan24 that any American troop withdrawal should be guided by security conditions, warning that a premature exit would not serve Iraq, the Kurdistan Region, or the United States.
Former US Ambassador to Iraq Zalmay Khalilzad said any withdrawal of US forces from Iraq should be determined by conditions on the ground, warning that creating a security vacuum amid ongoing threats would serve neither Iraq nor the Kurdistan Region nor the United States.
In an exclusive interview with Kurdistan24, Khalilzad said Iraq currently presents significant opportunities for US investment, driven by the new Iraqi prime minister's emphasis on business, trade, and economic cooperation.
"There’s a lot of hope and expectation of opportunities with the new Prime Minister, who is a businessman in background and he’s emphasizing economic opportunity, economic cooperation, business and trade," Khalilzad said.
He added that attracting international investment will ultimately depend on whether Iraq can provide a favorable business environment.
"The conditions have to be favorable to attract investment," he said. "It has to be profitable, there has to be security, there have to be real opportunities. I think the opportunities are there if the conditions for attracting investment will be there."
Khalilzad said he remains optimistic, noting that the Iraqi prime minister is "doing a great job... in messaging that Iraq is open for business and for investment."
Asked how Baghdad and Washington could overcome security challenges to encourage greater US investment, Khalilzad said security remains central to Iraq's economic future.
"It's a vital question because sometimes people talk about, 'Let's do business, less security,'" he said.
Khalilzad noted that discussions between Iraq and the United States currently focus on both economic cooperation and security arrangements, including the planned withdrawal of US forces by the end of September.
"We will have to see what the impact that will have," he said. "Will the militias disarm? Will the security environment be such that the neighbors do not interfere in Iraqi security affairs and make things difficult? These are important questions."
He stressed that investors will only feel confident operating in Iraq if the country's security environment improves.
"Ideally, the environment will be such from a security point of view that allows for business investment and for businesses to feel comfortable that they don't feel security risks in operating in Iraq."
Responding to a question about whether US forces should leave Iraq while missile and drone attacks continue to target the country, including the Kurdistan Region, Khalilzad said any decision must be based on realities on the ground rather than a fixed timeline.
"I personally think that we have to be condition-driven," he said. "If the conditions are such that it's safe to reduce or adjust or withdraw, one should do it."
However, he warned against a withdrawal that creates new security risks.
"It's not in Iraq's interest or in our interest or Kurdistan's interest for a security vacuum to be established where there are security challenges that remain," Khalilzad said.
He added that maintaining flexibility and preserving a framework for security cooperation would remain essential.
"We need to maintain some flexibility and a framework for security cooperation that exists. That framework needs to be fleshed out, details need to be provided to it that ensures, or at least assists with security."
Khalilzad concluded by describing the current security environment as "very difficult."
Khalilzad said Iraq's economic potential remains strong, but emphasized that long-term investment and any future adjustment of the US military presence must be supported by lasting security and continued cooperation between Baghdad and Washington.
