Austerity plan in Iraq: Temporary measures or a long-term burden?
The austerity plan is back in the spotlight with government decisions to reduce spending, amid warnings of its direct impact on citizens' lives.
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Energy expert Hussein Ismail Al-Bahadli announced that the implementation of the austerity plan in Iraq should be gradual and limited, especially given the critical financial situation and the political pressures to form a new government.
Al-Bahadli said that, “Shortly reducing expenditures and increasing revenues in the short term could lead to economic and social unrest, especially in a rentier economy that relies heavily on government spending.”
He explained that “temporary decisions should be limited to necessary measures and not to long-term strategic financial policies without full constitutional cover,” noting that “it is better to leave the government with full powers to implement reforms and a clear program that enjoys parliamentary and popular support.”
Al-Bahadli also warned of “the expected impact of any austerity plan on the lives of citizens, especially the middle and low-income classes, as reducing spending may lead to a decrease in the level of public services such as health, education, electricity, and social support, a decline in job opportunities in sectors related to government spending, and an increase in the cost of living in the event of an increase in fees or indirect taxes.”
strict austerity policy
He then added that “implementing a strict austerity policy in a country suffering from significant poverty and unemployment rates and undergoing a phase of reconstruction and economic security may deepen the social gap and weaken the purchasing power of the middle class, which will negatively affect social stability and economic growth.”
From a legal and political standpoint, Al-Bahadli stressed that “taking strategic austerity decisions in a transitional phase may lack the necessary political and social cover.”
He pointed out that “these decisions are supposed to be issued by a stable and elected government, or one that has the confidence of parliament and is capable of bearing the economic and political consequences.”
The expert concluded by saying that “the priority in the current situation should be to reform spending management, combat waste and corruption, improve the efficiency of non-oil revenues, and stimulate the productive economy instead of placing additional burdens on citizens, especially the poor and middle classes, at a stage that requires stability and support for the national economy.”
The Ministerial Council for the Economy issued decisions on Monday regarding reducing spending and maximizing revenues, including enhancing electricity collection, reviewing the current tariff, adopting automation in all government sectors, especially collection, and ensuring that payments are made exclusively electronically for electricity, Baghdad Municipality collections, municipalities, and throughout the country.
The council also decided to reduce the allowances for state employees’ travel by 90%, and to prohibit it except in cases of necessity and subject to the minister’s approval.
Fitch affirms Iraq's credit rating at (B-) and praises "internal stability"
The Iraqi Ministry of Finance announced on Monday that the international credit rating agency Fitch has affirmed Iraq’s sovereign rating at (B-) with a “stable” outlook.
The ministry said in a statement, received by Shafaq News Agency, that this step reflects international confidence in the ability of the Iraqi economy to maintain its financial and credit stability despite the current global and regional challenges.
The ministry explained in its statement that the Fitch report highlighted positively the strength of internal stability in Iraq, noting that the internal situation has remained resilient and stable during the past months, which reflects the success of government policies in keeping the Iraqi arena neutral from regional conflicts and escalating tensions in the region.
The Iraqi Ministry of Finance added that the agency also noted the significant improvement in the security situation, which has strengthened the country’s ability to absorb successive geopolitical shocks, pointing out that oil revenues still constitute a major support for the Iraqi economy, providing a financial base that contributes to the sustainability of service provision and the running of state affairs.
The Ministry of Finance affirmed that maintaining the rating with a stable outlook provides an incentive to move forward with the implementation of the structural reforms adopted by the government, which aim to maximize non-oil revenues, improve the efficiency of public spending, and address the challenges associated with approving future budgets, thereby reducing financial uncertainty and enhancing the path of economic development.
The ministry renewed its commitment to working according to strategies aimed at diversifying sources of income and strengthening the pillars of the national economy, taking advantage of the state of security and political stability to enhance the confidence of international financial institutions in the future of the Iraqi economy.
A credit rating is an indicator of a country's ability to meet its financial obligations and repay its debts. Fitch Ratings' affirmation of Iraq's rating at (B-) means that the country is still able to repay, but it faces potential financial and economic risks, which keeps borrowing costs relatively high and makes investor confidence cautious, without registering a substantial improvement or decline in the financial situation, according to specialists.
Fitch Ratings is one of the world’s largest credit rating agencies, along with Standard & Poor’s and Moody’s. It is based in the United States and specializes in assessing the creditworthiness of countries and companies. Its ratings are based on economic, financial and political indicators and are used globally by governments, investors and financial institutions to estimate investment and borrowing risks.
Iraq begins the countdown... 90 complex days to form the three branches of government
Following the ratification by the Supreme Federal Court, the highest judicial authority in Iraq, of the final results of the parliamentary elections for the sixth session, the Iraqi political scene has entered a new and sensitive phase, representing the official transition from the electoral process to the formation of the three constitutional authorities: the legislative, the executive, and the presidency of the republic.
Observers confirm that the Federal Court’s ratification yesterday, Sunday, is not merely a formal or procedural step, but rather the decisive constitutional condition that makes the election results effective and binding, and practically announces the readiness to launch a new parliamentary session with all its political entitlements, potential conflicts, and hopes for a different administration than the previous sessions, which were marked by delay and deadlock.
Constitutional legitimacy
Legal expert Nawfal Al-Hayani affirms that the Federal Supreme Court’s ratification of the final election results represents the full constitutional legitimacy of those results, based on the text of Article (93/Seventh) of the Constitution of the Republic of Iraq for the year 2005.
Al-Hayani explains in an interview with Shafaq News Agency that the House of Representatives is not considered constitutionally valid and the parliamentary session does not come into effect except from the date of this ratification, stressing that any parliamentary procedure that precedes the ratification is considered to have no constitutional effect by virtue of the constitution, as it is the highest and supreme law in the country.
According to Al-Hayani, the next step immediately after ratification is for the President of the Republic to invite the members of the House of Representatives to convene for their first session, in accordance with the provisions of Article (54) of the Constitution.
If the President of the Republic does not make this invitation, the Council shall automatically convene on the sixteenth day from the date of ratification, and the session shall be chaired by the oldest member.
The first session of the House of Representatives constitutes the cornerstone in building constitutional authorities, as its agenda is constitutionally limited to taking the constitutional oath and electing the Speaker of the House of Representatives and his two deputies.
Al-Hayani points out that completing this step means completing the formation of the legislative authority, and then moving on to the second entitlement, which is the election of the President of the Republic within a period not exceeding thirty days from the date of holding the first session, in accordance with the provisions of Article (70) of the Constitution.
legal deadlines
For his part, legal expert Abbas Al-Aqabi explains that the Iraqi constitution drew a clear timeline for the formation of authorities, starting with Article (54), which obligated the current president of the republic to call the new parliament to convene within 15 days of the date of ratification.
Al-Aqabi confirms to Shafaq News Agency that the first session, which is held at the invitation of the President of the Republic, witnesses the election of the Speaker of Parliament, the First Deputy Speaker and the Second Deputy Speaker, after which the door is opened for nomination to elect the President of the Republic, as the House of Representatives is obligated to elect him within 30 days from the date of the first session, by a two-thirds majority (i.e., 220 deputies) out of a total of 329.
Al-Aqabi adds that the election of the President of the Republic opens the door to the most important stage, which is the appointment of the Prime Minister, as the President of the Republic, within 15 days, appoints the candidate of the largest parliamentary bloc to form the government.
As for the designated candidate, he has a deadline of 30 days to present the ministerial cabinet and the ministerial program to the House of Representatives to obtain confidence by an absolute majority, (half plus one), i.e., 165 deputies or more.
Al-Aqabi concludes that the sum of these periods constitutes a maximum time ceiling of 90 days, which – theoretically – can be reduced but cannot be increased, because the constitutional text explicitly defined them.
Constitution and reality
Despite the clarity of these timelines, the Iraqi political experience since 2003 reveals a significant gap between the constitutional text and practical application. The issue of delaying the formation of governments and the election of presidencies has become a recurring phenomenon, due to political disputes and sectarian and ethnic balances.
After the March 2010 elections, it took about seven months and 18 days to form a government, due to the dispute over the largest bloc and the right to nominate the prime minister.
In 2020, Mohammed Tawfiq Allawi was tasked with forming the government following the resignation of Adel Abdul Mahdi, but he later apologized for the task, in a clear example that obstruction can occur even after the official assignment.
After the October 2021 elections, Iraq entered one of its longest periods of political vacuum, with the formation of the government delayed for more than nine months, and was not resolved until October 2022, with the formation of the government of Mohammed Shia al-Sudani.
The three presidencies
Therefore, Ghazi Faisal, head of the Iraqi Center for Strategic Studies, believes that the Federal Court’s ratification and the parliament’s approval of the sixth session represents a pivotal step, but it does not mean the end of the complications.
Faisal explains to Shafaq News Agency that, according to the constitution, the President of the Republic will call on Parliament to convene within 15 days to elect the oldest member and manage the first session, then elect the Speaker of Parliament and his two deputies, and thus the legislative authority will be formed.
Then the parliament moves to the second stage, which is the election of the president of the republic, a stage that is often the most complicated, especially in light of the disputes within the Kurdish house.
According to Faisal, the presidency, according to previous political norms, goes to the Patriotic Union of Kurdistan, but the Kurdistan Democratic Party believes that it has the right to compete for the position.
If both parties nominate two people, one from the Union and the other from the Democrats, the decision will be made through a vote in the House of Representatives. However, the two-thirds quorum requirement opens the door to what is known as the "blocking third," which may lead to prolonging the sessions to elect the president, as happened in the 2021 session.
Faisal points out that the election of the president will not be completed politically until there is agreement within the coordinating framework (which brings together the ruling Shiite political forces in the country) on the personality of the prime minister, under the system of political and sectarian power-sharing.
After the candidate is appointed, the stage of distributing ministerial portfolios begins according to the points system and the parliamentary weight of the parties, a stage that is no less complex than its predecessors, and often witnesses objections and difficult negotiations before granting confidence.
Sunni choice
On the Sunni component, Nawaf al-Ghurairi, a leader in the Sovereignty Party headed by Khamis al-Khanjar, affirms that the formation of the government is governed by constitutional timelines that cannot be exceeded, calling on all blocs and representatives to adhere to them in order to form the government as quickly as possible.
Al-Ghurairi reveals to Shafaq News Agency that the choice of the Speaker of Parliament "has been decided within the Sunni component to be Muhammad al-Halbousi," but this proposal is not without objections.
Meanwhile, former MP Bassem Khashan continues to raise the possibility of excluding the head of the "Progress" party, Mohammed al-Halbousi, based on a previous decision by the Federal Court to dismiss him from the presidency of Parliament, and accusations related to the forgery of official documents, which he describes as a "crime of dishonor."
In contrast, the Sunni arena is witnessing intense activity within the National Political Council (which includes the Sunni forces that won the elections), which held an expanded meeting in the capital, Baghdad, on Sunday evening, to discuss the names of candidates for the presidency of Parliament.
According to various sources in the council who spoke to Shaq News Agency, the number of candidates for the presidency of parliament has decreased from six to three, with talk of a "near consensus" on Muthanna al-Samarrai, in addition to the continued inclusion of the names of al-Halbousi and Thabit al-Abbasi.
Coordination framework
In parallel, the leaders of the Coordination Framework held their meeting last Monday, which witnessed an important discussion about choosing a candidate for the premiership. According to sources from Shafaq News Agency, specific dates were agreed upon to resolve the entitlements, with three prominent names being discussed, including outgoing Prime Minister Mohammed Shia al-Sudani, former Prime Minister Haider al-Abadi, and a third "surprise" figure.
The Coordination Framework had previously set conditions and criteria that must be met by candidates for the position of head of the new government, most notably that he should not be the leader of a political bloc, then it softened them, which opened the door for most of the forces within the framework to submit their candidates for the position, according to what a political source told Shafaq News Agency earlier.
Imran al-Karkoushi, a member of the State of Law Coalition led by Nouri al-Maliki, confirms that completing the election of the three presidencies according to their constitutional timetable depends mainly on political agreements between the different blocs.
Al-Karkoushi, speaking to Shafaq News Agency, indicated that this session is expected to proceed in an organized manner and without exceeding the specified legal deadlines, unlike what happened in previous sessions, which witnessed long delays due to political disputes.
Kurdish commitment
For his part, Wafaa Muhammad Karim, a leader in the Kurdistan Democratic Party, believes that the constitutional deadlines were not respected in previous sessions, especially in the election of the president and the formation of the government.
Karim, speaking to Shaq News Agency, points out that an agreement between the two Kurdish parties (the Union and the Democratic) on a single candidate for the presidency could speed up the process, while going with two candidates would mean entering into alliances with other forces and prolonging the entitlement.
According to the political balance that emerged after 2003, the distribution of sovereign positions in Iraq became influenced by sectarian and political quotas; where political custom dictates that the position of Prime Minister is allocated to the Shiite component, while the position of President of the Republic is allocated to the Kurdish component, while the Sunni component assumes the presidency of the House of Representatives
The US-China conflict reaches Iraqi tables: Between the dollar and the market... who wins and who pays the price? - Urgent
Adult game
At a time when Baghdad is searching for a realistic way out of the post-oil era, Beijing is hinting at a move that seems small on paper but could tip the balance of the market if it turns into an executive decision: reducing customs duties on non-oil Iraqi products, giving the local producer a wider access to one of the world’s most consumer-driven markets, after years in which Iraq’s name in international trade has been synonymous with crude oil alone.
Reducing fees... what does it mean on the ground in the market?
The practical implication of reducing tariffs is that when Iraqi products reach Chinese importers, they will be less expensive and therefore more competitive against goods from other countries. This opens a window onto what specialists call the “post-oil economy,” not as a political slogan, but as a path that the market is testing day after day.
Economic expert Rashid Al-Saadi commented to Baghdad Today, saying that China’s efforts to reduce tariffs on non-oil Iraqi products are part of a strategic approach to strengthen economic relations with Iraq and diversify import sources, in parallel with supporting supply chains for Chinese industries. He pointed out that the exclusion of oil from this step is due to the fact that it is subject to relatively stable global agreements and prices and does not need additional customs incentives.
A range of potential products... from dates to building materials
Al-Saadi outlines a basket of products that he believes would most benefit from this measure if it were implemented: dates and their derivatives, some agricultural crops and dried fruits, fertilizers and phosphate products, building materials such as cement, gypsum, and ceramics, as well as primary mineral products, leather, and some light manufacturing industries. He goes further, suggesting that reducing tariffs could contribute to boosting Iraqi non-oil exports and opening new avenues for local products to access Asian markets, which would, in turn, create jobs and stimulate the agricultural and industrial sectors within the country.
From advertising to return on investment... the numbers are the test.
But the path from “announcement” to “return” is not measured by intentions, but by figures and the actual ability to export. Foreign trade data indicates that Iraq’s non-oil exports during 2024 remained limited relative to the size of the economy, and their composition strongly leans towards primary or semi-primary goods. This makes talk of expanding agricultural and industrial exports to the highly restrictive Chinese market conditional on Iraq’s ability to achieve stable production, quality, packaging, and adherence to specifications—points that Al-Saadi repeatedly warns against in his remarks. He emphasizes that success hinges on developing local industries, improving quality, and leveraging China’s openness into genuine production partnerships, rather than merely being an exporter of raw materials.
Where do exports go? The problem of “intermediate markets”.
Iraq’s non-oil export destinations also show another sign of the challenge: a large portion of exports are headed to intermediate markets and trading and re-export centers, rather than to a huge final market like China, which explains why “tariff reduction” seems important from the angle that it may open a different path: direct entry into a large final market, instead of goods circulating in intermediate circles that do not guarantee a clear developmental return within Iraq.
Where are the resource returns when the profit is off-chain?
This raises a question commonly asked by the public: Where do the revenues from these resources and products go? The answer begins with distinguishing between oil and other sources. Oil is a sovereign revenue that the state receives directly and manages through the budget. Non-oil exports, on the other hand, are often channeled through companies and traders, and their revenues primarily go to the private sector, while the state receives a portion through taxes, fees, services, and regulations.
Then comes the most sensitive link: even when commercial returns are achieved, their impact on people’s lives depends on whether these exports create added value within Iraq or leave as raw materials, because the greatest profit globally does not reside in the shipment alone, but in the pre-shipment chain: sorting, packing, packaging, cooling, transportation, and standards, and then what follows in terms of marketing, long-term contracts, and manufacturing partnerships.
The US-China race for Iraq: Who will take the lead?
Before drawing any conclusions, China's move cannot be separated from the broader context: a US-China race using Iraq as an open testing ground. Washington's engagement with Baghdad is not solely based on trade, but also on financial, regulatory, banking compliance, and investment climate controls—tools that allow it to restrict or expand economic activity, thus making any significant trade opening subject to political and financial considerations.
In contrast, Beijing is advancing with a different logic: continuous energy purchases, expansion of contracts and projects, and an attempt to add a new layer of the relationship through non-oil commodities, as if to say that its influence does not need to pass through the dollar gate alone, but also through the market gate.
Between the two doors, Iraq is trying to balance: it does not want to lose Washington, where the keys to financial sensitivity lie, nor does it want to miss out on Beijing, where the market, purchasing power, and the ability of contracts to stimulate internal sectors if they are well managed are located.
At this point, the question “Who will lead?” becomes less simple than a title, because leadership may be distributed: America is stronger in the keys to the financial system and regulation, and China is stronger in purchasing, demand, and projects, while Iraq remains the one that pays the price of the imbalance if the competition turns into a tug-of-war rather than a competition that serves the economy.
The door is open, but the path requires a productive state.
Reducing fees alone will not work a miracle, but it could be a rare sign on the road to a post-oil future if it is turned into a clear Iraqi course of action: a basket of exportable products in stable quantities, quality standards, inspections and packaging that match the Chinese market, logistical corridors that prevent damage to goods, especially agricultural ones, and then production partnerships that make Iraq profit within its borders before it profits at the port.
Ultimately, the issue is not whether China opens the door, but rather whether Iraq finds something that adds value to its economy, not just new raw materials, and whether international competition over Baghdad turns pressure on it into an opportunity, where "leading" is in favor of whoever builds an Iraqi economy capable of selling, not just a country that is constantly looking for a new buyer for its raw materials.
An expert told Iraq Observer: $60 billion in imports on paper... but the reality is different.
Iraq’s trade balance figures are no longer mere statistics; they have become alarming indicators revealing a deep flaw in the structure of the national economy and raising serious questions about the trajectory of industrial development and the limits of self-sufficiency that government plans have been discussing for years.
With each new announcement of import figures, it becomes clear that Iraq remains almost entirely dependent on foreign sources to secure its basic needs, in contrast to a single-export economy based on crude oil, without any real ability to convert revenues into sustainable domestic production.
In this context, economist Nasser al-Kinani warned of a serious imbalance in Iraq’s trade balance, emphasizing that the country imports most of its basic needs while exporting almost exclusively crude oil, indicating a structural weakness in the national economy and a real absence of self-sufficiency.
Al-Kinani told Iraq Observer, “Iraq effectively exports only crude oil, while importing food, clothing, medicine, and most consumer goods, which makes any talk of economic sovereignty incomplete.”
Al-Kinani pointed out that Iraq's annual import volume reaches approximately $60 billion, but the actual amount of goods entering the country does not exceed half that figure. He explained that "this significant financial discrepancy raises serious questions regarding border crossings, import mechanisms, and oversight."
He added that "reliance on specific countries for food and energy makes Iraq's economic security fragile and susceptible to being used as a tool for political pressure in any regional tension."
Gold and cars
are among the goods imported by Iraq, and trade data shows that Iraqi imports are concentrated in a limited number of commodities, primarily electronic and electrical equipment, precious metals (especially gold), cars and their components, and mechanical equipment, particularly refrigeration units. These goods alone account for more than two-thirds of the total value of imports.
Meanwhile, a limited number of countries continue to dominate Iraq's export market, most notably the UAE, China, and Turkey, deepening its trade dependency and reducing its room for economic maneuvering.
Experts agree that the continued importation of food, energy, and basic commodities, despite the availability of natural and financial resources, confirms the failure of economic policies to transform oil revenues into productive projects, especially in the industrial, agricultural, and energy sectors.
Trade data indicates that Iraq imports approximately $60 billion worth of goods and commodities annually, while the value of non-oil exports does not exceed marginal percentages that are almost negligible, which makes the trade balance tilted almost entirely in favor of exporting countries. This imbalance also shows that the huge oil revenues have not been translated into internal productive capacities, but have instead been transformed into a permanent fuel for an import economy.
EBRD announces first investment in Iraq
- The EBRD launches its first investment in Iraq
- US$ 100 million trade finance extended to National Bank of Iraq
- Financing to boost trade finance access for MSMEs and strengthen integration with international markets
The European Bank for Reconstruction and Development (EBRD) has launched its first investment in Iraq, providing a US$ 100 million trade finance facility to the National Bank of Iraq (NBI), the country’s largest private bank.
This new trade finance limit will contribute to boosting the country’s import and export activities. It will support the NBI’s trade finance operations by issuing guarantees to confirming banks and offering cash advances for imports, exports and the local distribution of goods under the EBRD’s Trade Facilitation Programme (TFP).
The facility will also promote greater trade integration in Iraq by extending guarantees and credit lines to mitigate political and commercial payment risks associated with international transactions undertaken by partner banks in the economies where the EBRD works.
The investment will improve access to finance for micro, small and medium-sized enterprises (MSMEs) and facilitate intra-regional trade. It will also help the NBI diversify its correspondent banking relationships and strengthen trade finance links with other EBRD countries of operation.
EBRD Head of Iraq, Catarina Bjorlin Hansen, said: “We are proud to sign our first investment in Iraq and to partner with the National Bank of Iraq. This facility represents a major milestone in supporting the country’s economy by expanding access to trade finance, fostering integration with international markets and strengthening the resilience of local businesses. We look forward to playing a key role in building robust financial institutions and promoting sustainable economic growth in Iraq.”
Ayman Abu Dhaim, CEO of the National Bank of Iraq, said: “This partnership with the EBRD marks a pivotal milestone in NBI’s growth journey and in Iraq’s broader financial landscape. Through this facility, we aim to strengthen the flow of trade, empower Iraqi businesses, especially MSMEs, and open new channels that connect Iraq to global markets with greater confidence and stability. It reflects our continued commitment to driving economic development and supporting Iraq’s integration into the regional and international economy.”
The EBRD TFP was launched in 1999 with the aim of promoting international trade between the economies in the Bank’s regions, in the form of guarantees and short-term loans to selected participating banks and factoring companies.
The NBI is the largest private bank in Iraq and a universal bank with activities in retail, SME and corporate banking, trade finance, and treasury services. Established in 1995, it is majority-owned by the Capital Bank of Jordan, an EBRD client since 2015.
The EBRD began operations in Iraq in September 2025, focusing on the private sector to unlock access to finance, promote local businesses and foster sustainable, long-term growth, contributing to the transformation of the country’s economy.
The Sudanese government issues a series of decisions, including those related to "unifying the salary scale" and the ration card.
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The Ministerial Council for the Economy issued decisions on Monday regarding reducing spending, maximizing revenues, decreasing travel allowances, and unifying the salary scale and food ration card system.
A statement from the Prime Minister's office, received by Economy News, indicated that "Prime Minister Mohammed Shia' al-Sudani chaired an extraordinary meeting of the Ministerial Council for the Economy on Monday, dedicated to discussing reducing government spending and maximizing revenues, during which the Council adopted a number of important decisions."
Regarding measures to reduce spending, the Council discussed the allocations and salaries of the three presidencies and directed an urgent review of this matter. It also directed efforts to equalize the salaries and allowances of all employees of the Presidency of the Republic and the Presidency of the Council of Representatives with those of the Prime Minister's Office. Furthermore, the Council instructed the relevant committee in the Ministry of Planning to update the report on unifying the salary scale for all employees and to adopt the recommendations submitted in this regard.
The Council also decided to reduce the allocations for official travel for state employees by 90%, prohibiting it except in cases of necessity and subject to the Minister's approval.
The statement added that it was also decided to reduce the oversight and monitoring of new projects and to develop and implement a national import program that includes only essential goods. It was also decided to submit a recommendation to the Cabinet to reconsider subsidies for wheat production, ensuring that government support amounts to 170% of the global market price.
The meeting also saw the Minister of Trade tasked with reviewing and reforming the ration card system and directing it to those truly in need among the vulnerable segments of society.
Regarding revenue maximization measures, Al-Sudani directed the ministerial committee formed according to Cabinet Resolution No. 550 to review the calculation of non-oil revenues in the Kurdistan Region of Iraq, which are currently deposited into the Ministry of Finance's account as a fixed sum, in coordination with the Kurdistan Regional Government. He also directed support and enhance the implementation of the pre-declaration system at the Customs Authority in coordination with the Central Bank of Iraq, strengthen electricity collection and review the current tariff, and adopt automation in all government sectors, particularly revenue collection, with payments to be exclusively electronic for electricity, Baghdad Municipality collections, and municipalities throughout the country.
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Baghdad and Washington stress the need for de-escalation and reducing regional tensions.
Baghdad/Al-Masalla: Iraqi Foreign Minister Fuad Hussein and the acting US ambassador in Baghdad stressed the need for calm in the region and working to reduce tensions.
The Foreign Ministry said in a statement, “Deputy Prime Minister and Foreign Minister Fuad Hussein received today, Monday, the Chargé d'Affaires of the US Embassy in Baghdad, Joshua Harris.”
According to the statement, the meeting included discussions on “bilateral relations between Iraq and the United States, and ways to strengthen them in a manner that serves the common interests of both countries and enhances cooperation in various political, economic and security fields.”
The Foreign Minister pointed to “the ongoing political movement in Iraq, and the constructive discussions between the political blocs to form the new government,” stressing the importance of consolidating political stability and strengthening national understanding in a way that positively impacts the course of the democratic process.
The two sides also discussed regional and international developments and exchanged views on issues of common interest, stressing the importance of coordination and consultation regarding current challenges. Both sides emphasized the need for calm in the region and working to reduce tensions in order to support regional security and stability, according to the statement.
Talabani stresses the importance of strengthening the economic infrastructure in Kalar.
Qubad Talabani, Deputy Prime Minister of the Kurdistan Region, met in Sulaymaniyah with the supervisor of the Garmian administration and a delegation from the departments and institutions in the region, to discuss finding radical solutions to the problems and ways to develop the economy and reconstruction.
Talabani expressed his concern about the flood disaster that struck the Kalar region last week, and the extensive damage it caused to citizens’ homes, property, and public facilities, expressing his condolences and sympathy to the family of the child who lost his life as a result of this disaster in the city of Kalar.
The Deputy Prime Minister affirmed his readiness to expedite and coordinate the work of all departments and institutions in the Kalar administration, and to find radical solutions to the problems and infrastructure that have caused the recurring floods in the region.
He also discussed ways to develop the economy and reconstruction in Kalar, where Talabani stressed the importance of strengthening the economic infrastructure in the region and providing additional job opportunities for citizens.
He called for giving special priority to industrial investment projects, reiterating his support for the relevant authorities in order to accelerate the implementation of service projects and achieve tangible results on the ground.
Iraq and the United States discuss strengthening political, security, and economic cooperation.
Iraqi Foreign Minister Fuad Hussein discussed on Monday with the US Chargé d'Affaires in Baghdad, Ambassador Joshua Harris, ways to enhance cooperation in various political, economic and security fields.
A statement from the ministry, received by “Dijlah News”, stated that “Deputy Prime Minister and Minister of Foreign Affairs, Fuad Hussein, received on Monday, December 15, 2025, the Chargé d’Affaires of the US Embassy in Baghdad, Ambassador Joshua Harris.”
He added that “the meeting discussed bilateral relations between Iraq and the United States, and ways to strengthen them in a manner that serves the common interests of the two countries and enhances cooperation in various political, economic and security fields.”
According to the statement, the minister pointed to the ongoing political movement in Iraq and the constructive discussions between the political blocs to form the new government, stressing “the importance of consolidating political stability and strengthening national understanding in a way that positively impacts the course of the democratic process.”
He explained that “the two sides discussed regional and international developments, and exchanged views on issues of common interest, stressing the importance of coordination and consultation regarding current challenges.”
He noted that “both sides stressed the need for calm in the region and to work to reduce tensions in a way that contributes to supporting regional security and stability.”
Coordination Framework Scrambles for "Acceptable" Candidate as U.S. Sanctions Threat Loom Over Baghdad
Facing threats of severe US sanctions, including oil revenue freezes, Iraq's Coordination Framework seeks a PM candidate "acceptable" to Washington.
The protracted and politically sensitive search for Iraq's next Prime Minister has entered a critical new phase, with the ruling Coordination Framework facing unprecedented pressure from Washington to select a leader capable of stabilizing relations with the West or risk crippling economic consequences.
According to sources within the Shiite alliance, the coalition’s options have narrowed significantly under the weight of strict American conditions, forcing a recalibration away from candidates with deep ties to Iran-aligned militias toward figures deemed "acceptable" on both the domestic and international stage. This shift comes as fears mount that the United States is preparing a severe sanctions package that could target Iraq’s financial lifelines, including its oil revenue accounts.
The urgency within the Coordination Framework reflects a recognition that the geopolitical landscape has shifted dramatically.
Anwar Musawi, a political observer tracking the negotiations, told Kurdistan24 that the alliance is currently in a "sensitive situation" due to the credible risk of severe U.S. sanctions. Musawi indicated that the potential punitive measures this time could be devastatingly impactful, reaching the level of "closing the account of Iraq's oil revenues and blocking its assets in America."
Such a move would effectively paralyze the Iraqi economy, which relies almost entirely on oil sales processed through the U.S. Federal Reserve system.
Faced with this existential economic threat, the Framework appears to be adjusting its criteria for the premiership.
Sabah Agayli, a figure close to the coalition’s leadership, provided insight into the internal deliberations, stating that while the candidate will still be someone close to the Framework, the priority is to find an individual who is "far from any political problem and is an acceptable person on both the domestic and external levels."
Agayli emphasized that this strategic pivot is driven by a desire to ensure that relations with America remain stable, acknowledging that the survival of the government depends on avoiding Washington's wrath.
"Designating the Prime Minister of Iraq this time will not be an easy task," Agayli noted, adding a stark assessment of the new reality: "The American side will be the foundation of that work in designating the Prime Minister this time, not the Iranian side, which, according to experts, was the case previously."
This recalibration follows a series of forceful warnings from the Trump administration.
As reported previously by Kurdistan24, Gabriel Soma, a member of the advisory board to U.S. President Donald Trump, issued a blunt ultimatum earlier this week, stating that the continued proliferation of armed militias operating outside state control could trigger "severe action," including economic embargoes.
Soma made it clear that the U.S. demand for disarmament is non-negotiable and that Washington is prepared to use its financial leverage to enforce compliance. The potential freezing of Iraq’s oil revenues aligns with Soma’s warning that the U.S. possesses tools to impose "some sort of penalties on Iraq" if the government fails to rein in rogue factions.
The pressure is further compounded by reports that the U.S. Treasury Department is finalizing a new round of sanctions targeting a broad spectrum of Iraqi figures.
Government sources have confirmed to Al-Araby al-Jadeed that Washington is preparing to blacklist politicians, businessmen, and companies involved in funding armed groups linked to Iran. These measures are viewed as a direct response to recent attacks on energy infrastructure, including gas and oil fields, and are part of a wider effort to curb money laundering.
A diplomat from the Iraqi Foreign Ministry confirmed that the list includes senior members of armed factions who also hold seats in parliament, signaling that political cover will no longer shield individuals from U.S. financial interdiction.
Aid Hilali, a political analyst close to the Iraqi Prime Minister, told Kurdistan24 that these impending sanctions are widely expected within political circles and will likely target figures in the energy transport and logistics sectors.
"The United States has signaled through several channels that these sanctions will form part of a new approach aimed at restructuring Washington’s relationship with Baghdad," Hilali said. He warned that the scope of the measures is significantly wider than previous rounds, raising concerns about the potential political and security fallout.
Nizar Haider, head of the Iraqi Media Center in Washington, added that the U.S. may actively oppose the appointment of individuals aligned with external actors to senior positions in the next government.
This stance directly impacts the Coordination Framework's selection process, effectively vetoing hardline candidates who might otherwise have been favored by Tehran. With the U.S. Congress also moving to condition security aid on the reduction of Iranian influence, the message from Washington is unambiguous: the next Prime Minister must be a partner in sovereignty, not a proxy for militias.
The confluence of these factors—the threat of oil revenue freezes, the looming sanctions on political elites, and the explicit U.S. demand for disarmament—has forced the Coordination Framework into a corner. As they search for an "acceptable" candidate, the leaders of the Shiite bloc are navigating a minefield where a misstep could lead not just to political failure, but to the economic collapse of the state they seek to govern.
Who sets the terms?
Baghdad between “number calculations,” Washington’s lines, and Tehran’s
signals: A map of challenges facing government formation
Following the Federal Supreme Court's ratification of the election results on December 14, 2025, the government formation process effectively entered the stage of "calculations of numbers," not "announcement of results." This is because no single bloc possesses the 165 seats required to secure a prime minister and cabinet without broad coalition agreements. In this system, it is not enough to win the most seats; the crucial factor is who commands the "largest bloc" within parliament, and then how the three presidencies and their respective ministerial and agency portfolios are distributed.
Here, political analyst Ahmed Al-Ansari places the picture in its immediate internal context, stressing in his interview with “Baghdad Today” that the birth of the new Iraqi government “will not be easy,” given the intensification of the conflict between political blocs and parties over sovereign and important positions in the state, noting that these disputes are likely to prolong the negotiations and complicate the political scene.
Seating map: More players mean more "veto power"
The 2025 election results showed Prime Minister Mohammed Shia al-Sudani's coalition winning 46 seats, while the remaining seats were distributed among various Shia, Sunni, and Kurdish blocs. This means the next government will be formed through a "complex consensus" rather than a simple victory. This fragmentation raises the price of each seat and transforms negotiations into a series of demands: from the prime ministership to the speakership of parliament to the presidency, then to sovereign and service ministries, and finally to senior positions and independent bodies.
Al-Ansari says that the current competition “is not limited to the selection of the three presidencies only,” but extends to include the distribution of ministerial portfolios and senior positions in independent institutions and important bodies, which reflects the extent of the intertwined interests and the state of distrust between the political forces, despite the constitutional requirement to expedite the formation of the government.
The first internal dilemma: Who will head the government? And will the Sudanese return?
Al-Sudani is gaining ground numerically, but he alone cannot guarantee a second term, because the forces that previously supported him are not a unified bloc, and some are now competing with him or demanding a higher price for renewing the political agreement. Therefore, the question becomes: Will the Shiite partners agree to renew his term, or will they opt for a new compromise candidate, or will they open the door to a scenario of a "complex consensus government" with a prime minister less confrontational both domestically and internationally?
According to Al-Ansari, each bloc seeks to secure the greatest possible political and administrative influence, based on the election results and interim alliances, which makes consensus extremely difficult, especially in the absence of a unified vision for managing the next phase and prioritizing reform and services over partisan gains.
The Kurdish dilemma: oil, budget, and "regional rights"
The Kurdish issue is not typically limited to the presidency; rather, it is linked to a complex set of understandings where politics, finance, and energy intertwine. It begins with the region's salaries and its share of the budget and extends to the management of border crossings and sovereign matters related to oil and gas. In each round of negotiations, the slogan of "the region's rights" transforms into a detailed list of conditions: a mechanism for transferring salaries, settling internal debts, guarantees regarding financial entitlements, and then the most sensitive hurdle: resuming oil exports via Ceyhan. This entails internal Iraqi agreements, regional intersections with Turkey, and internal calculations between Baghdad and Erbil concerning management, pricing, and oversight. Therefore, the Kurdish issue is not presented merely as "participation in the government," but as a "partnership agreement" that will define the relationship between the central government and the region in the coming years. This explains why it becomes even more complex when linked to sensitive issues such as energy, finance, and stability.
The Sunni knot: The parliamentary presidency and the balance of power among the provinces
The Sunni bloc enters government formation negotiations while closely monitoring the distribution of parliamentary seats among multiple players. This makes the speakership of parliament a superficial battleground for a deeper struggle concerning political representation, provincial governance, and the balance of power within the state. Sunni negotiations are not solely about the position itself, but rather about a "package of commitments" related to reconstruction, compensation, the return of displaced persons, and the launch of service projects. These commitments also encompass issues of provincial administrative powers, their share of the budget, and securing their positions within the civil and security apparatus of the state. With the absence of a single Sunni bloc capable of easily imposing its choice, the speakership becomes a point of contention among temporary alliances. Each party is required to offer "guarantees" to others within the Sunni bloc, while simultaneously calculating its position between the two competing Shiite camps. This further complicates negotiations and makes any final agreement vulnerable to collapse at the first sign of disagreement over a ministerial portfolio or position.
The new decisive factor: Washington is publicly raising the stakes.
Here, an additional layer of pressure is added to the situation. The acting US ambassador in Baghdad stated clearly that “forming the new government is an Iraqi decision, but Washington’s response to the government is an American decision,” adding that Iraqi leaders understand that including factions in the government is incompatible with the partnership between Baghdad and Washington. In a related development, reports indicated that US Chargé d’Affaires Joshua Harris called for “urgent Iraqi action” to begin dismantling foreign-backed armed groups, emphasizing that the time has come for this process.
This is not merely a “diplomatic message,” but a redefinition of American red lines: not only who heads the government, but also who enters ministries and institutions, who controls the levers of security and the economy within the state, and whether the next government will be formed through “full partnership” or through “calculated exclusion” to avoid a clash with Washington. But the question remains: Why now?
Washington links its escalation to two intertwined issues: the security of its interests, infrastructure, and energy, and the impact of this on stability, investment, and the flow of money. When the issue of "factions" becomes part of the structure of the next government, it is no longer a separate political matter, but rather a point of contention in negotiations concerning the very nature of the state: a state with a single decision-making authority, or a state with multiple decisions-making authorities.
The Iraqi reaction: The sensitivity of sovereignty and the limits of objection
Conversely, Washington's rhetoric presents Baghdad with a delicate equation: absorbing pressure without appearing to "concede," and calming domestic tensions without appearing to "rebel" against the international partnership. Politically, any future government will be required to project an image of "sovereignty" domestically to avoid accusations of being a product of external dictates, while simultaneously maintaining open lines of communication with Washington. This is because the latter's influence extends beyond politics to encompass the economy, finance, banking compliance, and investment pathways. Therefore, the Iraqi response is often measured: publicly rejecting any form of tutelage while attempting to smooth things over behind the scenes through reassuring measures that neither fracture internal alliances nor close the doors to external partnerships.
Behind-the-scenes factors add to the complexity
In addition to the logic of “ministerial quotas” and the issue of weapons outside the state, which has become a declared condition from Washington, the economy is present as a pressure factor no less than politics: any government will face the test of the dollar, finance, energy and investment, which are files that give Washington tools of influence that are not only political, and push internal forces to think about the “cost of confrontation” before choosing the form of government and its components, especially when it comes to ministries that affect finance, economy, trade and banks.
The regional context is also present: Iraq is caught in a web of competing interests involving Iran, Turkey, the Gulf states, and Syria, with each party interpreting the "form of government" as a key indicator of its direction. In this climate, forming a government becomes not merely a constitutional obligation, but a process of mutual reassurance: reassuring the domestic audience that the state will not be hijacked, and reassuring the international community that Iraq will not become a platform for open conflict.
Al-Ansari warns that the Iraqi public is watching these developments with concern, with growing fears of a repeat of previous disruption scenarios, noting that the continuation of disputes may negatively affect political and economic stability and delay the implementation of the government programs required to address the accumulated crises.
A notable Iranian absence... and a presence through the factions' "signals".
What is striking about this equation is that the Iranians, contrary to their traditional role in government formation processes, seem to be completely absent at the level of public discourse and direct intervention, at least until now, as if they prefer to observe the scene from the shadows or leave the local forces to struggle within the rules of the game without a clear imprint that can be easily picked up.
However, this absence does not mean that Tehran's influence has completely faded. Certain signals emanating from factions ideologically and politically aligned with it may be interpreted by decision-making circles as "indirect pressure." A prime example is Abu Ali al-Askari's recent attack on Trump's envoy, Savaya, and his threat to anyone dealing with him. This message could be understood as an attempt to raise the cost of engaging with the American channel, or as a reminder that Iranian lines of influence still possess the capacity to disrupt or interfere at critical moments, even if Tehran itself does not take center stage.
According to this logic, the new government becomes stuck between declared American pressure that draws “red lines” with clear conditions, and other undeclared pressure that may appear through messages from the factions when they feel that the balance of formation is heading towards a formula that excludes them or reduces their presence, which adds a new layer of complexity to any settlement that tries to pass without internal losses or external clashes.
Are we really on the verge of change?
Yes, but not in the sense of a coup against the regime, rather in the sense that the “rules for forming the government” are changing: for the first time in a while, the participation of factions in the executive authority is becoming an openly declared American issue with such clarity, and with it the calculations of power within the Shiite house itself are changing: who goes to compromise, who raises the ceiling, and who is looking for a way out that guarantees the survival of influence without a direct international cost.
3 realistic scenarios for the next stage
-Renewal of the Sudanese mandate with a conditional settlement: political support in exchange for controlling the representation of some forces in sensitive ministries, and providing political and security pledges that reduce friction with Washington.
-A new compromise candidate: to reduce external friction and calm internal competition, in exchange for a heavier distribution of ministries among partners to ensure the government's passage.
-A long stalemate and an even longer caretaker government: if Washington’s conditions clash with internal red lines, or if a Kurdish or Sunni knot explodes in parallel.
In concluding his remarks, Al-Ansari stressed that the success of the government formation process depends on the ability of political forces to make mutual concessions and prioritize the national interest, moving away from the logic of power-sharing and conflict over positions. He warned that any government that does not start from a genuine consensus will be liable to fail from the outset.
Abdul Mahdi visits Maliki and then Sudani to discuss the latest developments in government formation
He congratulated them on the election results.
Former Prime Minister Adel Abdul Mahdi visited the office of State of Law Coalition leader Nouri al-Maliki on Monday, congratulating him on the advanced results achieved during the elections. He discussed in detail the issue of the three presidencies and the formation of the government. He then followed this with a visit to the office of Prime Minister Mohammed Shia al-Sudani, congratulating him as well on the positive results during the elections and reviewing with him the latest political developments on the national scene.
The head of the State of Law Coalition, Mr. Nouri al-Maliki, received former Prime Minister Mr. Adel Abdul Mahdi at his office today.
At the beginning of the meeting, Mr. Abdul Mahdi congratulated Mr. Nouri al-Maliki on the success of the democratic process represented by holding parliamentary elections, and congratulated the State of Law Coalition on the advanced results it achieved in the elections.
The two sides reviewed the latest political developments and the ongoing dialogues between political forces to form a government, especially after the Federal Court ratified the election results. They also discussed in detail the possible and practical mechanisms for forming the three presidencies in accordance with constitutional entitlements, in a way that contributes to strengthening joint action and is consistent with the requirements of the Iraqi people.
Former Prime Minister, Mr. Adel Abdul Mahdi, visited Prime Minister Mr. Mohammed Shia Al-Sudani, where he offered his congratulations on the success of the electoral process and the positive results it produced.
During the meeting, the latest political developments on the national scene were reviewed.
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