Source: Banking activity in Iraq has stopped.
An informed source reported that banking activity will be suspended on Tuesday due to the semi-annual inventory procedures.
The video for this My FX Buddies Blog is below here:
The source told Shafaq News Agency, "Banking activity will cease as a result of the implementation of the semi-annual accounts and budgets, and therefore, there will be no customer reception today."
He added, "Banks will open their doors and resume operations tomorrow, Wednesday," expecting that "the disbursement of retirees' salaries scheduled for today will be postponed until tomorrow, Wednesday."
Iran: Withdrawal from the Nuclear Non-Proliferation Treaty is a "trump card" for Tehran
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Iranian parliament member Ahmad Ajam confirmed on Monday (June 30, 2025) that Iran's withdrawal from the Nuclear Non-Proliferation Treaty (NPT) remains an option, describing it as a "trump card" possessed by the Islamic Republic, but one it has not yet resorted to.
In statements reported by the Hamihan newspaper and translated by Baghdad Today, Ajam stressed that "Iran has not seen any significant difference from its membership in the International Atomic Energy Agency," considering that "Tehran's remaining within the current framework has not contributed to protecting its national interests, but may even expose the country to further harm."
The Iranian representative said, "It seems that our presence or absence in the agency makes no difference. When experts feel that the country may be harmed by a certain outlet, it is our duty to close that outlet immediately."
Ajam sharply criticized the IAEA and its Director General, Rafael Grossi, arguing that the agency's "dual-minded and opportunistic" behavior had reinforced Iranian doubts about its integrity.
He continued, "When three different reports are issued from a single visit, this reflects a lack of honesty, if not hypocrisy. If there were no duplicity, the agency should have declared that Iran was not seeking to possess nuclear weapons before the attack on our territory, not after it."
Ajam considered that "the escalating Western pressure and the exploitation of the IAEA as a political tool are pushing Tehran to review its options," noting that "the decision to withdraw from the NPT is not unlikely, but it depends on future developments. If this decision is taken, it will be based on the greater interest, and the time for that has not yet come."
These statements come amid ongoing tensions between Iran and the West following recent attacks targeting nuclear facilities inside Iran, carried out by Israel and the United States, amid escalating controversy over the future of the nuclear agreement and Tehran's stance on international obligations.
Netanyahu to visit Washington on Monday, source tells 'Post'
Israel will wait to hear about Dermer's meetings in Washington before considering additional significant steps in Gaza.
Prime Minister Benjamin Netanyahu will visit Washington next Monday, and Strategic Affairs Minister Ron Dermer will arrive in Washington on Monday, a source told The Jerusalem Post.
The cabinet held a discussion and will wait to hear about Dermer's meetings in Washington before considering additional significant steps in Gaza.
On Sunday, US President Donald Trump called for a deal to be made in Gaza and to "get the hostages back!!!" in a post to Truth Social.
Earlier, Trump said that Prime Minister Benjamin Netanyahu is in the process of negotiating a deal with Hamas to free the remaining hostages.
Trump called to end the Netanyahu trial
Recently, Trump criticized Israel's prosecutors over the ongoing corruption trial against Netanyahu, saying it was interfering with his ability to conduct talks with both Hamas and Iran.
Netanyahu thanked Trump on Sunday morning, saying, "Together, we will make the Middle East Great Again!"
2 rockets hit Kirkuk Airbase, home in Iraq
No group has claimed responsibility for attack
Two rockets struck Iraq’s Kirkuk Airbase and a civilian home late Monday without causing any casualties or material damage, according to an Iraqi security source.
“One rocket fell between the first and second runways of Kirkuk Airbase,” Iraq’s official news agency said, citing the unnamed security source.
“The other struck a home in the Al-Orouba neighborhood in Kirkuk province,” the source added.
Both rockets were identified as Katyusha-type projectiles.
No group has claimed responsibility for the attack so far.
Iran sets new condition for resuming nuclear negotiations with the US
Iranian Foreign Minister Abbas Araqchi ruled out the possibility of a quick resumption of nuclear talks with the United States, but stressed that "the doors of diplomacy will never close," according to CBS News.
In an interview with the network, Araghchi stated, "Uranium enrichment technology and science cannot be eliminated by bombing," referring to the US strikes on Iranian nuclear sites last week.
He added that Iran would be able to quickly repair the damage caused by the strikes and "make up for lost time," as he put it, "if we have the will to make new progress in this industry."
Araghchi continued, "I don't think the negotiations will resume so quickly. Before we decide to re-engage, we must first ensure that the United States does not target us with a military attack during the negotiations."
"I think with all these considerations we still need more time," he said, but "the doors of diplomacy will never close."
When asked whether Iran intended to continue uranium enrichment, Araqchi insisted, "The nuclear program is peaceful and has become a matter of national pride and glory. The people will not easily abandon enrichment."
Separately, the minister commented on the 12-day war with Israel, which ended after US strikes on nuclear sites in Fordow, Natanz, and Isfahan.
"We have proven during this 12-day war that we are capable of defending ourselves," Araqchi said.
He added, "We will continue to do so if we are subjected to any aggression."
Parliamentary Finance Committee: The budget will depend directly on the results of the 2024 census.
Member of the House of Representatives' Finance Committee, MP Hussein Mounes, confirmed that the preparation of the next federal budget bill will directly depend on the results of the general population and housing census conducted at the end of 2024. He explained that this step will contribute to the distribution of financial allocations among governorates based on the actual population of each governorate.
Mounes said, "The upcoming budget will be prepared based on population census data, which means that financial allocations to governorates will be distributed more accurately and fairly, according to officially recorded population ratios." He added, "This approach represents a qualitative shift in the budget preparation mechanism, especially with the availability of accurate data for the first time since 1997, the date of the last official population census conducted in Iraq."
The Finance Committee member pointed out that “the creation of Halabja Governorate within the administrative divisions does not necessarily mean an increase in financial allocations, as these allocations will be determined based on population size, not the number of governorates.” He explained that “census data showed that the population of the Kurdistan Region, particularly in its three governorates (Erbil, Sulaymaniyah, and Dohuk), is less than the estimates that were adopted in previous budgets. Therefore, the region will only receive what it deserves, according to official figures.”
The General Population and Housing Census in Iraq was conducted on November 30, 2024, under the supervision of the Ministry of Planning and the Central Statistical Organization, with technical support from the United Nations Population Fund (UNFPA). The census included the use of modern digital technologies and GIS maps to ensure data accuracy and up-to-dateness.
The population census is a pivotal step in the state's development and financial planning, as it is linked to numerous issues, including: the distribution of financial quotas among governorates, planning for public services (health, education, infrastructure), updating ration card data, and the future redistribution of parliamentary seats.
Over the past few years, there have been disagreements between the federal government and the Kurdistan Regional Government (KRG) regarding the region's population estimates used in calculating budget allocations. Political parties accuse the KRG of exaggerating the figures to increase its share, while the latter denies this and maintains that its share is disproportionate to the scale of the challenges and obligations.
With the release of the new census results, these disputes are expected to be resolved, as the official figures will become the basis for distribution, as previously confirmed by the Ministry of Planning.
A significant decline in the volume of foreign loans, and Iraq is in the green side in international credit standards.
Iraq's external financial policy has improved its global credit rating, with external debt declining to approximately $10 billion. Despite the rise in domestic debt, economists assert that it poses no risk, thanks to the government's ability to set interest rates and schedule repayments.
The Iraqi government's foreign financial policy appears to be improving, as evidenced by a decline in foreign borrowing rates. This decline raises Iraq's global credit rating, which is based on the size of the debt and the country's ability to repay interest.
Economist Abdul Rahman Al-Mashhadani says, "The decline in external debt is a positive indicator, and it is not measured in this year, but rather over the past three years, when it fell to less than $30 billion, putting Iraq in the green."
Meanwhile, figures show an increase in the value of domestic debt, which the government has borrowed from financial institutions to finance projects and cover the financial deficit in the annual budgets. However, economic readings confirm that domestic loans do not pose a risk, given that the government determines the interest rate and carefully sets the repayment schedule. However, they remain within the framework of debt that must be repaid. Based on this, the Parliamentary Finance Committee emphasizes the need to deal with the available financial liquidity.
Finance Committee member Moein Al-Kadhimi said, "Based on what the government has at its disposal, it must act within its limits. This way, there is no budget deficit, there is ongoing funding for projects, and no new projects are initiated, while simultaneously funding the operating budget."
The size of foreign loans amounts to approximately $10 billion, which currently places Iraq at a (B-) rating, given that the size of foreign loans for 2023 exceeded $20 billion. This means that this decline is attributed to the government's good handling of foreign loan repayments, placing Iraq at a better credit rating than before.
Ain al-Assad is off alert. US patrols and aircraft return to full activity - Urgent
After weeks of anticipation and preparedness, Ain al-Assad Air Base in Anbar province has regained its usual rhythm, with US restrictions lifted and air and ground military activity returning to normal. This scene reflects the turning of the page on the tensions that followed the escalation of regional events in mid-June.
An informed source told Baghdad Today, Monday (June 30, 2025), that “US forces have canceled all precautionary measures imposed inside Ain al-Assad Air Base after the events of June 13, including restrictions on movement and air patrols.”
The source added that "the main entrances to the base were opened in the early hours of the morning, and witnessed the entry of American military convoys, coinciding with the resumption of routine patrols around the base," noting that "helicopters have resumed flying and landing normally, reflecting a noticeable stabilization in the security situation."
He stressed that "the heightened alert came after the escalation between Israel and Iran de-escalated, restoring calm to the base, which is one of the most prominent US military sites in Iraq."
While military life resumes its normal course at Ain al-Asad, the regional landscape remains fraught with potential tension, rendering every moment of stability temporary pending new developments in the international conflict.
Erbil-Baghdad Salary Deal Nearing Finalization; Oil Export Mechanism Key to Agreement
KRG and Baghdad near deal to resume oil exports and release delayed salaries. A KRG delegation met with top Iraqi officials, including Oil Minister Abdul-Ghani. Baghdad may release May salaries this week; debt to oil firms and export terms remain key issues.
The Kurdistan Regional Government (KRG) and the federal government in Baghdad are reportedly on the verge of reaching a pivotal agreement that could pave the way for the disbursement of delayed salaries to public sector employees in the Kurdistan Region as early as this week.
According to a well-informed source familiar with the high-level negotiations, a senior KRG delegation has been in Baghdad for three consecutive days holding crucial meetings with Iraqi government officials.
The source, speaking to Kurdistan24’s Dilan Barzan, stated: "A high-level KRG delegation has been in Baghdad for three days and has held a series of top-level meetings with Iraqi government officials. As of 1:00 PM today, Monday, June 30, 2025, the KRG delegation is scheduled to meet with Iraq’s Oil Minister, Hayan Abdul-Ghani, at the Council of Ministers."
One of the central issues under discussion is the mechanism for resuming oil exports from the Kurdistan Region, which were halted following a 2023 ruling by the Paris-based International Court of Arbitration.
The same source told Kurdistan24 that while "Erbil and Baghdad have reached a mechanism for exporting Kurdistan’s oil," several outstanding points of disagreement remain. Nonetheless, expectations are high that a comprehensive agreement will be reached during Monday’s meetings.
Under Iraq’s general budget law, the KRG is required to deliver 400,000 barrels of oil per day to Iraq’s state marketing company, SOMO. However, the current negotiations appear to have adjusted these terms.
The Kurdistan24 source noted: "About 280,000 barrels are to be delivered to SOMO daily, and the remaining 120,000 barrels are to be allocated for internal consumption by both Iraq and the Kurdistan Region."
A major hurdle yet to be resolved is the significant debt owed to oil-producing companies operating in the Kurdistan Region. This debt—estimated to be close to $1 billion—has become a critical issue following the aforementioned court ruling.
"This debt became a sticking point after a 2023 ruling by the Paris International Court. It is hoped that today’s meeting will also resolve this issue, as the companies are unwilling to resume oil exports without first being repaid," the source said.
Meanwhile, optimism remains high that the progress achieved thus far will translate into immediate economic relief for civil servants in the Kurdistan Region.
Sabah Sobhi, a member of the Iraqi Parliament’s Oil and Gas Committee, confirmed to Kurdistan24: "Tomorrow, Tuesday, July 1, 2025, the Iraqi Council of Ministers is scheduled to convene. It is expected that a decision will be made during the meeting to release the salaries of Kurdistan Region employees, with payment for the month of May to be issued by the end of this week."
The potential breakthrough comes after months of tension and repeated negotiations over oil revenue sharing, salary payments, and administrative control, which have strained relations between Erbil and Baghdad. If finalized, the agreement could mark a significant step forward in stabilizing financial relations between the two governments and alleviating public discontent in the Kurdistan Region.
Oil negotiations between Baghdad and Erbil are nearing a final settlement: Resumption of exports is imminent - Urgent
The energy advisor at the Patriotic Union of Kurdistan's media office, Bahjat Ahmed, revealed on Monday (June 30, 2025) significant progress in the ongoing negotiations between the Baghdad and Erbil governments regarding the Kurdistan Region's oil exports, indicating that an agreement is very close.
Details of the expected agreement
Ahmed told Baghdad Today that the federal government's technical delegation had returned to Baghdad, while another delegation from the Kurdistan Regional Government, including the chief of staff of the regional government and the Minister of Natural Resources, headed to the capital for an expanded meeting with Oil Minister Hayan Abdul Ghani.
Ahmed explained that "the results of the negotiations are very positive, and an agreement is imminent. The issue of resuming Kurdistan's oil exports may be resolved within the current week."
He added, "The agreement includes Baghdad assuming the debts of foreign oil companies from October 2022 until the date oil exports cease, amounting to $1.2 billion, in exchange for the regional government delivering 300,000 barrels of oil per day to Baghdad."
OPEC meeting and increasing Iraq's share
Ahmed continued, "The OPEC meeting scheduled for next month will discuss increasing oil quotas, including Iraq's, which will allow the region to benefit from its 300,000 barrels per day share."
It's worth noting that the Kurdistan Region's oil exports via the Turkish-Ceyhan pipeline were halted in March 2023, following a ruling by the International Court of Arbitration of the International Chamber of Commerce in Paris, which upheld the Iraqi federal government's position as the sole authority authorized to manage oil exports.
Since then, Baghdad and Erbil have engaged in a series of negotiations aimed at reaching a new agreement that would guarantee the resumption of exports in a legal and orderly manner, amidst the significant financial losses the region has incurred as a result of the suspension of oil revenues. Political parties hope to capitalize on this opportunity to reach a comprehensive solution, especially with anticipation of the next OPEC meeting, which may approve an increase in production quotas, opening a window to reap the benefits of the region's export capacity.
Urgent: A salary agreement between Baghdad and the region is within reach.
Iraqi parliament member Siban Sherwani announced on Monday that the Council of Ministers will decide tomorrow to send salaries to the Kurdistan Region if Erbil and Baghdad reach an agreement tonight.
"The region and Baghdad are expected to reach an agreement tonight or tomorrow, and the Council of Ministers will decide in its meeting tomorrow to send the salaries of Kurdistan employees," Sherwani said in a statement monitored by Al-Masry. He added that "the agreement stipulates that the region will hand over 300,000 barrels of oil per day to Baghdad."
A loophole: The Iraqi dollar is being drained by inflated import invoices from three countries.
The head of the Iraq Future Foundation, Manar al-Obaidi, revealed on Monday that there is an inflated invoice for importing goods to the Iraqi market from countries such as China, Turkey, and the UAE. This is a drain on the dollar by exploiting the difference between the official exchange rate and the parallel market. He emphasized the need to reform the transfer and import mechanisms.
Al-Obaidi said in a statement received by Shafaq News Agency, "When reviewing the export data of a number of countries to Iraq, such as China, Turkey, and the UAE, it becomes clear that there is a clear discrepancy in the values of some exported goods, as these values do not correspond to the actual prices of the goods, and the quantities exported often far exceed the actual needs of the Iraqi market."
He continued: "For example, the value of Iraq's imports of Chinese shoes during the first five months of this year amounted to approximately $170 million, while clothing imports amounted to approximately $600 million during the same period." He explained that "these figures do not reflect either the true volume of demand in Iraq or the global prices of these goods, which strongly suggests that there are inflated invoices, both in terms of quantity and value."
He pointed out that "some parties exploited the difference in the official exchange rate versus the parallel market to conduct large-scale transfers by inflating import invoices, allowing them to bypass all levels of scrutiny originally put in place to control transfers and ensure they reach the legitimate recipients."
Al-Obaidi explained that, "Despite the stringent measures taken by the Central Bank of Iraq, including expanded auditing, the current mechanism has proven in practice to be unsuccessful. This is evident not only in countries' export data, but also in the decline in customs revenues, which remain very modest compared to the volume of goods declared as imported."
He explained that "it is necessary to adopt a new mechanism aimed at reducing currency leakage by linking bank transfers directly to the customs duty collection process, and not allowing transfers at the official rate until the customs duties due based on the value of the transfer have been paid."
He emphasized that "this approach will achieve two main goals: strengthening oversight of transfers conducted at the official rate, and increasing the state's customs revenues by pricing goods in line with their true value."
He pointed out that "this proposal may raise some reservations, particularly from the perspective of fears of a rise in the exchange rate in the parallel market as a result of tightening transfers, and the view that such measures fall within the purview of fiscal policy, not monetary policy."
He stated that, "Despite the validity of these reservations, the significant foreign currency outflow and declining reserves Iraq is currently experiencing as a result of uncontrolled import expansion require exceptional measures, even if they have side effects."
He pointed out that "economic policies, by their very nature, do not produce purely positive effects, but success lies in achieving balance and outweighing the benefits over the harms. Therefore, reforming the transfer and import mechanism is no longer an option, but rather an urgent necessity to ensure economic stability and protect Iraq's foreign currency reserves."
Uptick in Iraq TIR operations injects fresh momentum into trade flows
Amid threats to transport and trade caused by geopolitical conflicts, IRU’s Secretary General put the spotlight on the continued, and expanding, success of the global TIR transit system at Türkiye’s Global Transport Connectivity Forum 2025.
Polish transport operator the Milton Group recently completed a roundtrip journey from Poland to the Gulf Cooperation Council (GCC) region, via Iraq’s newly operational TIR corridors, in 10 days, compared to 24 days for traditional maritime-based multimodal routes.
TIR operations are also starting from departure points such as Mersin, Türkiye, to the GCC via the Iraqi seaport of Umm Qasr. With TIR, this journey is being completed securely in less than a week, which can take up to 26 days if the ship needs to reroute around Africa.
These are just some examples of what is now possible with TIR via Iraq.
Speaking at the Global Transport Connectivity Forum in Istanbul, IRU Secretary General Umberto de Pretto said, “We have seen a remarkable uptick in TIR transport operations through Iraq, connecting Türkiye with GCC countries, and increasingly, with Iran and beyond.
“The implementation of TIR in Iraq is more than a technical milestone, it is a strategic one. It signals Iraq’s determination to be not just a beneficiary of regional trade, but a key facilitator of it."
At the heart of this ambition is Iraq’s Development Road Project: a transformative initiative that will link the port of Al-Faw in the south to Türkiye and Europe via the north of the country.
“Iraq’s Development Road Project is a statement of intent. A message that Iraq is ready to resume its historical role as a crossroads of civilization, commerce and connectivity. It’s a message that Iraq is now open for business,” said Umberto de Pretto.
“However, the success of this corridor depends not just on highways and other ‘hard’ infrastructure. It also depends on the ‘software’ of international road transport infrastructure, such as harmonised trade systems, smart borders, and efficient customs regimes. This is where TIR brings tremendous value,” he added.
Beyond the Development Road Project, IRU continues to support the Middle East and Central Asia in building more efficient and resilient transit corridors. IRU is actively promoting the digitalisation of TIR, supporting cross-border training and capacity building, and engaging with governments to simplify transport rules and procedures.
“Despite our progress, we must confront the reality that border bottlenecks, long waiting times, and high transit costs continue to burden trade across the region when TIR traffic is not prioritised. To address these issues, IRU strongly promotes the establishment of TIR-EPD Green Lanes at border crossings,” said Umberto de Pretto.
TIR-EPD Green Lanes use IRU’s electronic pre-declaration tool, TIR-EPD, enabling transport operators to submit cargo information electronically to customs prior to arrival. They have already been successfully implemented in Kyrgyzstan, Moldova, Romania, Saudi Arabia, Turkmenistan, the UAE, and Uzbekistan. TIR-EPD Green Lanes accelerate border crossings by up to 92%, reduce the workload for border officials, and provide greater predictability and security in transport planning.
“The TIR system is not a silver bullet; but it is a powerful enabler. When combined with bold initiatives like the Development Road Project and regional leadership from countries like Türkiye, it can unlock the true potential of global connectivity,” concluded Umberto de Pretto. “Let us work together, not just to move goods, but to move forward.”
New truck transport corridor
The forum, which was opened by Turkish President Recep Tayyip Erdoğan, marked the launch of the Türkiye-Kuwait and Germany-Jordan truck transport system.
Türkiye’s Transport and Infrastructure Minister announced that as part of the first leg of the Development Road project, trucks will travel from Türkiye through Iraq and Kuwait before reaching Jordan.
Umberto de Pretto underscored the system’s importance for Iraqis, allowing their goods to reach global markets quickly and securely.
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Balancing acts and breaking points: Iraq’s US-Iran dilemma
Even without the current conflict between Israel and Iran, the prospects for future US-Iraq relations have often appeared dim.
Due in part to the reduced threat from the Islamic State in Iraq and al-Sham (ISIS), and also to public opposition to US military presence under Operation Inherent Resolve (OIR), Washington and Baghdad agreed to reduce the role of US forces in combating ISIS and transition to a new security relationship.
Moreover, Iran-backed militias had renewed attacks against US forces over Washington’s support for Israel’s military operations in Gaza in the aftermath of October 7, 2023. Making matters worse, popular expressions of anti-US sentiment, due to Iraqis’ long-held animosity towards Israel, led to attacks on US-linked businesses, limiting already low interest in expanding economic ties. Thus, with a diminishing security cooperation footprint and little room to expand into other sectors, it is difficult to envision where US-Iraq relations could go, except for termination or a status quo that does not adequately serve the interests of either party.
Appearances, however, can be deceiving. In April 2024, with the war in Gaza in full swing, Iraqi Prime Minister Mohamed Shia al-Sudani visited the United States to encourage improved security and economic cooperation. He even traveled to Houston, Texas, where he signed agreements with major US oil companies promising them preferential treatment, especially over Chinese companies that are looking to exploit Iraq’s oil resources. In addition to affirming his commitment to security cooperation with the United States, he also signed agreements with US defense contractors for training and equipment. Perhaps more importantly, he had already initiated a comprehensive security sector reform program that brings together all of Iraq’s security sector stakeholders, in which US advisors play a prominent role.
As a result of these conditions, US-Iraq relations appear to be at a crossroads. Baghdad could side with Tehran and expel the remaining US advisors, severely limiting, if not effectively ending, its relationship with the United States. It could also maintain its neutrality and perhaps play a role in de-escalating the conflict. However, there may also be an opportunity for the United States to facilitate Iraq’s efforts to reduce its economic and energy dependence on Iran, while building its resilience to Tehran’s disruption of Baghdad’s attempts at establishing full sovereignty.
The “dilemmas” of US-Iraq relations
Both the United States and Iraq have long had to balance their relations, with each other, with their respective relations with Iran. In Washington’s case, that balance entailed building closer relations with Iraq, while maintaining deterrence with Iran. For Iraq, that meant finding a balance between two partners in conflict, which required space for them to engage Baghdad without engaging each other. Not satisfied with separate corners, Iran has continually used its Iraqi proxies to limit the space in which the United States can engage, ultimately seeking to expel US forces and extend its control over the Iraqi government. In doing so, Tehran’s interference has disrupted Iraq’s recovery and stunted political reconciliation and economic growth.
The resulting “three-body problem” has generated dilemmas for both Iraq and the United States, where progress with one relationship undermines the other. Militia attacks on US forces, for example, place the United States in a position where it must choose between responding and generating public opposition to its presence or doing nothing, thus allowing Iran and its proxies to attack US troops with impunity. When the United States chooses to respond, the Iraqi government must then choose between sanctioning Washington in some way, risking valuable security assistance, or dealing with significant public backlash, often mobilized by the militias.
After the 2019 strikes against Iran-backed militias that had attacked US forces, killing one and wounding several others, for example, militias and pro-Iran political parties organized large protests that culminated in the storming of the US embassy. Under such conditions, the United States has only been able to engage Iraq where it has a comparative advantage, namely in the security and energy sectors.
Iran, for its part, may be the only party that does not face a dilemma in its relationship with either the United States or Iraq. Overtly interfering in Iraqi politics might invite protest, as it did in October 2019. That said, when nationalists associated with Iraqi cleric Muqtada al-Sadr won a majority of seats in parliament in 2021, the Iran-aligned Fatah movement was able to prevent government formation, leading al-Sadr to withdraw all his representatives from the legislature. This withdrawal left Fatah, a coalition of Iran-backed political parties, largely in control. This demonstrates the resilience of Iran’s influence in Iraq—and how Baghdad’s interests pose little threat to Tehran’s.
Despite this resilience, Iran’s inability to defend its airspace, its ongoing losses of key military leaders and nuclear scientists, and the threat of popular resistance have undoubtedly made Tehran feel a sense of urgency to disrupt US-Iraq engagement and convince Baghdad to abandon neutrality.
For example, pressure on Iraq from both Tehran and domestic sources could prompt an armed response to Israeli violations of Iraqi airspace. While the response would not likely be effective, it could prompt militias to overcome their current inertia and strike at Israeli and US targets, this time in defense of Iraqi sovereignty, which would garner much more political support than defending Iran. This could either pressure Baghdad into taking an even harder line toward Washington or face collapse, as parliament and the public question its legitimacy. Should Baghdad, for whatever reason, choose the harder line, the United States would have little choice but to abandon most, if not all, of its security cooperation programs, effectively ending the relationship.
Even if Baghdad resists Iranian pressure, renewed attacks by militias on US forces would again place the United States in a tit-for-tat exchange, a losing prospect for Washington. Each incremental strike or counter‑strike risks escalating a spiral of retaliation without gaining any strategic advantage. On the other hand, Iraq’s Iran-backed militias gain a strategic advantage simply by their challenge. Every provocation undermines US credibility, strains its relationship with Baghdad, and reinforces the militias’ narrative of resistance and legitimacy.
Resolving the dilemmas
Given the choices Baghdad faces, it is unlikely that it will choose to abandon its neutrality to support Iran against Israel.
While some Iran-linked militias, like Harakat Hezbollah al-Nujaba, have threatened to attack US persons and interests, they condition it on Washington or its allies “laying a single finger” on Iranian Supreme Leader Ayatollah Ali Khamenei. This is a common feature of militia public communications—allowing them to demonstrate opposition while assuming little risk of acting on it.
Despite the popular momentum around fighting Israel, militias may believe they have too much to lose from expanding the conflict. Not only could counterattacks by Israeli forces kill key leaders, but they could also disrupt lucrative oil smuggling operations that provide significant leverage with the Iraqi government. According to some estimates, Iran and its Iraqi proxies generate over one billion dollars per year in revenue, of which all get a cut. Oil smuggling is also not their only source of funds. In addition to embezzling from the Iraqi government, they have invested in the Iraqi economy, generating billions more in revenue. As a result, they now appear to be more focused on safeguarding these business interests than getting involved in a fight with Israel or the United States.
The Iraqi government’s moves this year to have its militias to lay down their arms underscores this point. Iraq’s Minister of Foreign Affairs, Fuad Hussein, observed that this dialogue could not have happened two or three years ago; however, having militias operate outside the government is much less socially acceptable. He even offered that Iraq would like to mediate US-Iran tensions, similar to the role it played in normalizing relations between Saudi Arabia and Iran.
It is equally unlikely that Baghdad will move demonstrably closer to Washington, at least publicly. But, the discussion over the status of US troops in the region could present a window of opportunity for the relationship to progress.
The US had planned the withdrawal of its regional combat forces, while maintaining an advisory effort. But in the aftermath of the December ousting of Bashar al-Assad’s regime in Syria, Iraqi leaders have suggested that they would support the United States slowing down its military withdrawal.
Still, Iraq’s security interests and domestic politics likely preclude taking a position that supports the United States at the expense of Iran. While al-Sudani would likely invite expanded economic cooperation, as long as Israeli operations in Gaza and Lebanon continue, the security situation may remain prohibitive for significant Western, especially US, investment.
For now, this means that the best the United States can hope for is the pitch made from al-Sudani on his visit to Washington: continued security, and expanded energy cooperation.
To capitalize on this opportunity, Washington should continue its military advisory efforts and expand senior-level engagement in Iraq’s security sector. These efforts are wholly Iraqi-driven; however, as with most reform efforts, effective application requires political will, which US emphasis could bolster through engaging Iraq’s leaders.
Washington should also facilitate Iraq’s ongoing efforts to diversify its energy sources, thereby reducing its dependence on Tehran. Iraq has made deals with Turkmenistan, Qatar, and Oman for natural gas imports. French company TotalEnergies has agreed to invest ten billion dollars over a four-year period to develop natural gas resources and increase electricity generation capacity. Baghdad also signed an agreement permitting integration into the Gulf Cooperation Council’s electric grid, which could provide 3.94 terawatt-hours annually of electricity, or approximately 5 percent of Iraq’s annual consumption.
In fact, in a call with then US National Security Advisor Mike Waltz, al-Sudani reinforced Iraq’s interest in greater involvement by Western energy companies to facilitate energy independence. If Iraq were to become energy independent from Iran, the US would be in a position to remove the sanctions waiver allowing Iranian natural gas imports without posing hardship on the Iraqi people.
A complicated future
The future of US–Iraq relations is neither as dim as it may first appear, nor as promising as one might hope. Given the rapidly changing dynamics, the relationship will continue to be uncertain, contingent, and highly sensitive to regional developments. While Baghdad remains unwilling to openly align with Washington at the expense of Tehran, it has also shown restraint in responding to Iranian pressure and militia provocations, indicating a continued interest in maintaining a relationship with the United States.
Iraqi Prime Minister Mohammed Shia’ Al-Sudani speaks at an Atlantic Council Front Page event on April 15, 2024.
Al-Sudani’s overtures suggest there is a strategic logic in preserving US engagement, particularly in areas where Washington retains a comparative advantage, such as defense cooperation and energy investment.
For its part, the United States must recognize that its influence will increasingly depend not on force posture but on its ability to support Iraq’s sovereignty, economic resilience, and institutional reform. Navigating this terrain requires a kind of constructive opportunism, where the United States has sufficient contact with Iraq to identify opportunities for expanding cooperation and the ability to quickly act on them. In this context, maintaining a quiet but durable partnership—anchored in mutual interests rather than grand ambitions—may be the most viable path forward.
Baghdad and Erbil reach preliminary agreement to resume oil exports but companies demand financial guarantees.
Delegations from the Kurdistan Regional Government (KRG) and the Iraqi federal government in Baghdad reached a preliminary agreement on resuming oil exports and determining the share for domestic consumption. The issue of oil companies' dues remains unresolved, with expectations of a bilateral or tripartite meeting to resolve the issue this week.
The Kurdistan delegation, headed by Minister of Natural Resources Kamal Mohammed, met with relevant federal government officials late Saturday evening. An informed source stated that the two sides agreed to hand over 50% of oil revenues, with a subsequent meeting to be held with the participation of the Ministerial Economic Council.
The agreement stipulates that the region will receive 280,000 barrels of oil per day for export through the State Oil Marketing Organization (SOMO), and another 120,000 barrels for domestic consumption. In return, the oil companies will receive $16 per barrel until a consulting firm determines the production cost for each field. However, the companies' approval of this arrangement has not yet been finalized.
Oil companies' demands:
An official at one of the oil companies operating in the region said they had temporarily agreed to the proposed pricing for two months, but demanded three main guarantees for continuity after this period.
These demands included not amending existing contracts, considering fixed pricing a form of contract modification, and resolving the issue of their debts, which exceed $900 million, and identifying the entity responsible for them, whether Erbil or Baghdad. They also requested a resolution to the issue of future investments in oil fields, which in some areas require financing of up to $17 million per well. The official indicated that the main problem relates to the pricing mechanism, as companies previously received their refunds as a percentage of oil sales, rather than a fixed amount, which is inconsistent with the current contract model.
Disagreement over quantity
According to informed sources in Baghdad and Erbil, negotiations are making significant progress, but a disagreement remains over the quantity of oil to be delivered. While the federal government is demanding the delivery of 400,000 barrels per day, as stipulated in the budget law, the region is offering to deliver only 280,000 barrels, with 120,000 allocated for domestic consumption. This is one of the most prominent outstanding issues.
A SOMO official confirmed that meetings are still ongoing, and that the issue is "sensitive" and affects all of Iraq, not just the marketing company. He emphasized that the Ministry of Oil and SOMO are the implementing bodies.
The preliminary agreement is expected to be presented to the Iraqi Council of Ministers at its weekly meeting next Tuesday, July 1, for final approval, provided that no new obstacles arise.
Salaries and Non-Oil Revenues
The federal government linked the payment of salaries to KRG employees to reaching a final agreement on oil exports. The Iraqi Ministry of Finance also raised an objection, in an official letter dated May 28, 2025, to the continued funding of the region due to its failure to deliver full revenues as stipulated in the budget law.
The federal government sent a technical delegation to Erbil on June 26 to review non-oil revenues. During the meetings, it proposed sending teams to federal revenue sites in the region, such as border crossings and the Nationality and Residency Departments.
Financial Advisor Hafidar Shaaban explained that the two parties agreed on three main points: transferring 50% of non-oil revenues to Baghdad, merging customs with the Iraqi Customs Authority, and implementing the ASYCUDA system, in exchange for the federal government's commitment to disburse salaries.
Miss the last episode of My Fx Buddies? Catch it Below:
Oil vs Salaries: Can Erbil & Baghdad Strike a Deal?
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