Iraq Leader’s Successful Visit to Washington Shows New Path Forward with U.S.

Iraq’s new prime minister, Ali Al-Zaidi, was first regarded as a political newcomer with no prior experience in government or political office, but he understood enough about Iraq’s interests to insist his first overseas trip be to the United States, unlike his predecessors, whose first official visits were always to Iran. Al-Zaidi recently concluded his visit to Washington, D.C., and a successful meeting with U.S. president Donald Trump.Al-Zaidi appears to have achieved significant gains, although some are still memoranda of understanding (MOU) rather than binding agreements.The most significant results include:Major U.S. investment commitments. U.S. and Western energy companies signed more than $60 billion in agreements and memoranda covering oil, natural gas, pipelines, infrastructure, healthcare, and communications, including introducing Starlink to Iraq. The most significant development of the visit was the agreement to open a branch of JPMorgan Chase in Iraq. This marks the first time since 2003 that a major American bank has established a presence in the country to facilitate financing for U.S. companies operating in Iraq. This will encourage foreign investment, strengthen Iraq's financial sector, and serve as a model for Iraqi banks seeking to expand their partnerships with international financial institutions.A stronger economic relationship with Washington. The leaders emphasized that bilateral relations should become increasingly economic rather than primarily military. Baghdad presented itself as open to American investment, while Washington highlighted trade and commercial cooperation.Expansion of Iraq's energy infrastructure. Agreements with companies such as Chevron and ConocoPhillips include redevelopment of oil fields, pipeline construction, and other infrastructure designed to increase production and improve export capacity.Alternative oil export routes. One strategic outcome is support for pipelines that would reduce Iraq's dependence on the Strait of Hormuz by connecting to Mediterranean and Turkish export routes. Given the recent disruption of Gulf shipping, this is a major long-term strategic objective for Baghdad. During al-Zaidi’s visit, Iraq and Syria signed an MOU to rehabilitate the idled Kirkuk (Iraq) to Baniyas (Syria) oil pipeline that could eventually transport up to 2.5 million barrels per day to the Mediterranean, avoiding the Strait of Hormuz. And Iraq and Türkiye recently agreed to maintain the oil export pipelines to the Turkish port of Ceyhan, though numerous differences between the parties are still unresolved.Improved investment climate. Iraqi officials announced additional steps to reduce regulatory obstacles and improve security for foreign investors, making Iraq more attractive to international companies. Al-Zaidi’s visit was preceded by the arrests of 47 officials and members of parliament on charges of corruption featuring camera-ready pictures of piles of gold bars and stacks of U.S. dollars and Iraqi dinar. Iraq has made middling progress in international corruption indices, and still falls behind its neighbors, a legacy of the Saddam Hussein era that institutionalized corruption, the dismantlement of state institutions after the 2003 U.S. invasion, and reliance on a hydrocarbon-based rentier economy.Maintaining balanced diplomacy. Although Washington pressed Baghdad on Iran-backed militias, al-Zaidi avoided a public confrontation with the U.S. or Iran. His government continues to pursue a policy of maintaining working relations with both powers while emphasizing Iraqi sovereignty, which is supported, rhetorically at least, by Washington and Tehran. As a symbol of the balancing required, immediately before he departed for the U.S., Al-Zaidi attended funeral services in the holy city of Najaf for Ali Khamenei, the former Iranian leader assassinated by Trump. Iraq’s challenge, per Professor John Calabrese, is “becoming a bridge” between the U.S. and Iran, and leveraging its geography after the fall of the Islamic State and the Assad regime, and U.S./Iran – Iran war.Al-Zaidi pledged the armed groups would be demobilized when U.S. forces, the justification for the militias, depart by 30 September. (Many of the militias are part of the Popular Mobilization Forces and are recognized as government entities.) Demobilization assumes the Americans depart on time, despite the war between the U.S./Israel and Iran. If Al-Zaidi is late fulfilling his commitment, unnamed administration sources will start sniping while Trump, the “good cop,” will tout the “tremendous chemistry” between him and the prime minister.The U.S. can help the demobilization process along by providing timely intelligence to Baghdad when a militia is readying an action and discreetly pressing the government to take action. Instead, in late July, American and Saudi forces attacked Iraqi militias after militia attacks on Saudi oil facilities. Prime Minister Al-Zaidi was in Turkey at the time, and an American attack on Iraq when he was out of the country was, as the diplomats say, “not helpful.” Iran then claimed the U.S./Saudi attack targeted facilities used by Arbeen pilgrims, millions of whom will flock to Karbala, Iraq in early August.There were also political gains:The visit demonstrated that Iraq's new government has direct access to the White House, which will strengthen the prime minister’s hand against militia leaders and the powerful Coordination Framework.It reassured international investors that Iraq intends to remain open for business despite regional instability. Iraq will be more attractive to foreign direct investment (FDI) that is needed to refresh infrastructure damaged by decades of conflict and sanctions and to support ambitious projects such as the 1,200-kilometer Development Road that will connect the Persian Gulf to Türkiye.It reinforced Iraq's image as a country seeking reconstruction and economic development rather than becoming a battlefield for regional rivalries. Much depends on Washington, Tel Aviv, and Tehran, who see Iraq as a lever to use against their opponents or an arena of conflict.Several challenges remain. Many of the announced agreements – 48 in total - are non-binding MOUs, and their success will depend on execution. U.S. officials continue to expect progress on limiting the influence of Iran-backed militias, while Iraq must balance those expectations against its domestic political realities. Despite all the deals, Iraq should minimize its reliance on FDI when possible as FDI brings foreign inference in its wake, an acute possibility given America’s proprietary attitude given the resources it poured into ousting the Saddam Hussein regime. And as long as Trump is president, he will expect Iraq to publicly demonstrate gratitude for the 2003 invasion. Overall, the visit was a success: it secured substantial prospective investment, strengthened ties with Washington without openly breaking with Tehran, and advanced Iraq's long-term goal of transforming its relationship with the United States from one centered on security to one centered on economic development.For the first time since 2003, Iraq appears to be moving toward a policy of positive neutrality. In doing so, it may be following a path similar to Pakistan's by maintaining strategic relations with the United States while preserving pragmatic, tactical relations with Iran.By James Durso for Oilprice.comMore Top Reads From Oilprice.comIran Rejects Oman’s Proposal to Evenly Divide Hormuz ControlUK Regulator Targets Data Center Land Grab on the Power GridRefined Fuels, Not Crude, Are Driving the Oil Market Crunch