Prime Minister Mohammed al-Sudani’s Reconstruction and Development Coalition emerged from the elections with the largest number of seats, a result widely interpreted as an endorsement of his pragmatic governing style, tangible success in reconstruction, and relative success in balancing competing domestic and external pressures. Yet electoral victory alone does not translate into political continuity in Iraq’s post-2003 system. Iraqis do not elect the top leaders directly; they elect the legislators, whose voting on consequential political and legislative business is subject to the will of their respective political leaders. Parliamentary arithmetic, constitutional rules, and factional bargaining matter more than popular mandates.

Despite Sudani’s electoral victory, the Coordination Framework, an assortment of Shia political coalitions, consolidated itself as the largest bloc in the newly elected Council of Representatives. Under the Iraqi Constitution, that status grants the Coordination Framework the right to nominate the next prime minister. Exercising this prerogative, the Coordination Framework denied the incumbent prime minister, Sudani, a second term, underscoring once again that Iraq’s premiership is determined less by voter preference than by elite consensus within Shia politics – a consensus that is carefully formed after extensive consultation with Iraqi ethnosectarian leaders and prominent regional and international actors whose national interests intersect with Iraq’s domestic and foreign policies.

What followed, however, was unexpected. Rather than resist or withdraw quietly, Sudani executed a bold political maneuver: He withdrew his candidacy and endorsed former Prime Minister Nuri al-Maliki as the Coordination Framework’s candidate. In doing so, Sudani effectively turned the tables on the very bloc that had sidelined him. His endorsement placed the Coordination Framework in an awkward position: Rejecting Maliki would risk fracturing the alliance, while accepting him would revive a deeply polarizing figure whose legacy remains controversial inside and outside Iraq. Sudani further pledged full cooperation with Maliki should the latter lead the government, a move that effectively consolidated Maliki’s position and raised the political costs of resistance to his candidacy. The voices of dissent, a minority within the Coordination Framework, must choose to join the majority or lose the chance to play a significant executive role in the coming four years.

Maliki’s potential return immediately triggered regional and international reactions. Iran was quick to endorse his candidacy, a move that carried symbolic weight far beyond diplomatic signaling. For Maliki’s critics – both Iraqi and international – Iran’s support reinforced the long-standing perception that he represents Tehran’s preferred strongman in Baghdad. Even for Iraqis who do not oppose Iranian influence outright, the optics were damaging: The narrative of Maliki as an “Iranian choice” resurfaced with force, complicating efforts to frame his candidacy as a purely Iraqi decision.

Internal opposition soon followed. Two prominent Shia leaders within the Coordination Framework – Qais Khazali and Ammar al-Hakim – voiced objections to Maliki’s nomination. Their resistance reflected both ideological concerns and, perhaps, political calculations, as Maliki’s dominance threatens to marginalize rival Shia leaders within any future government. Opposition also emerged from outside the Shia camp. Former Council of Representatives Speaker Mohammed Halbousi, leader of the largest Sunni bloc whose candidate for speaker was already elected, openly rejected the prospect of Maliki’s return, signaling that Sunni cooperation with a Maliki-led government would be far from guaranteed.

The Kurdish response, by contrast, was favorable. With their candidate for the Iraqi presidency yet to be identified and elected, no major Kurdish faction publicly objected to Maliki’s candidacy. In fact, the prominent Kurdish leader Masoud Barzani welcomed his nomination, viewing the situation through a strategic lens. Barzani likely calculated that accommodating Maliki could strengthen the Kurdistan Democratic Party’s bid to secure the Iraqi presidency – a post traditionally held by its rival, the Patriotic Union of Kurdistan. In this sense, Kurdish pragmatism – and calculation –once again prevailed, as Erbil focused on maximizing institutional gains rather than shaping Baghdad’s leadership.

The most dramatic intervention came from Washington – and it came late. Throughout most of the government-formation process, the administration of President Donald J. Trump refrained from taking a public position, seemingly respecting Iraq’s claim that forming a government is a sovereign, internal matter. That restraint ended abruptly when Trump issued a public warning on social media, stating that, if Maliki were appointed prime minister, “the United States of America will no longer help Iraq and, if we are not there to help, Iraq has ZERO chance of Success, Prosperity, or Freedom.”

The timing of the message proved as consequential as its content. By the time the warning was issued, the Coordination Framework had already announced Maliki as its official candidate. What might have been leverage early in the process instead became a blunt veto delivered at the eleventh hour, throwing Iraq’s political class into an impossible dilemma. The Coordination Framework now faces a lose-lose choice. Proceeding with Maliki risks severe repercussions from the United States, potentially affecting economic assistance, security cooperation, and Iraq’s broader international standing. Backing down, however, would undermine the Coordination Framework’s claim to sovereignty and reinforce the perception that Iraq’s governments are shaped by external pressure – whether from Washington or Tehran. Either path damages the Coordination Framework’s credibility and deepens public cynicism about the Iraqi political process.

More broadly, Iraq itself stands to lose regardless of the outcome. A government formed in defiance of the United States risks isolation and instability. A government reshaped under direct, public U.S. pressure risks being dismissed as a puppet regime, trapped in the zero-sum rivalry between Washington and Tehran. In both scenarios, Iraqi agency is diminished.

At present, the Coordination Framework has little room to maneuver. The only viable strategy that preserves a semblance of dignity is delay. Constitutionally, this can be achieved by postponing the election of a president, a process that requires a two-thirds quorum in parliament. Without a president, the formal process of appointing a prime minister and forming a cabinet cannot move forward. The last government formation took an entire year from the general election to the confirmation of Sudani’s government. Such delay would not resolve the crisis, but it would buy time; and time, in this context, is political currency. A prolonged government-formation process could open space for quiet negotiations between Baghdad and Washington, potentially producing a compromise blueprint that avoids a direct confrontation. It might also allow internal dynamics within the Coordination Framework to pivot from its current position, presenting an alternative consensus candidate or a recalibrated political arrangement.

Yet delay carries its own risks. Iraq has lived through prolonged political paralysis in the past, and the costs are well known: stalled reforms, eroding public trust, growing social frustration, and strong potential for security risks. Furthermore, each additional month without the formation of a government risks reinforcing the perception that Iraq’s political leadership is struggling to provide effective governance and sustained direction. Iraqi society has demonstrated notable patience over the past two decades, accepting persistent shortcomings in governance while continuing to engage constructively in the democratic process. Citizens have participated consistently in elections and made significant sacrifices, including mobilizing to defend the political system against the threat posed by the Islamic State group. In return, public expectations remain modest, centered on achieving a dignified standard of living and the consistent provision of essential services.

Ultimately, the current crisis is about more than Maliki’s return. It is a test of whether Iraq can assert genuine sovereignty in a system still shaped by foreign influence, factional vetoes, and constitutional loopholes. For the Coordination Framework, Iraq’s political elite, and Iraq itself, the choices made in the coming weeks will carry consequences far beyond the formation of the next government.

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Recent political, security, and economic shifts have kindled new Kurdish aspirations, from symbolic demilitarization gestures to major energy deals. Yet the region’s long history of external interference, internal division, and unresolved disputes tempers optimism.

A New Political Landscape: Hope for Security, Stability, and Prosperity

For the first time since the deep political rupture that followed Iraq’s October 2021 early elections, there is renewed optimism among Iraq’s Kurds that this moment may offer the KRG new leverage, a regional role, and opportunity for international engagement.

A decisive development has been the public declaration by the Kurdistan Workers’ Party, or PKK, that its fighters will lay down arms. This symbolic disarmament has lifted the spirits of Kurds in Iraq but also those Kurds from Turkey displaced in Makhmour refugee camp, southwest of Erbil, and elsewhere.

Yet even as gestures of reconciliation unfold, Baghdad’s formal ban on the PKK – imposed under Turkish pressure – reveals the persistent constraints on Kurdish aspirations within Iraq’s political framework. Baghdad’s crackdown satisfies a crucial Turkish demand, clears ground for improved Iraq-Turkey relations, and may open doors for KRG engagement with international actors – particularly those wary of being ensnared in Ankara’s counterterror concerns. At the same time, it forces the KRG to navigate the delicate process of accommodating former PKK fighters, ensuring their protection and reintegration without reigniting tensions with either Baghdad or Ankara.

Economically, the KRG’s fortunes have been buoyed by a series of breakthroughs. The signing of two landmark energy deals with HKN Energy and Western Zagros, collectively valued at $110 billion over their lifespans, represents more than an influx of foreign direct investment; the deals serve as high-profile endorsements of Erbil as a sustainable energy hub and a key pillar in Western strategies for regional energy independence from Iran. And Washington’s public support illustrates Erbil’s continued centrality to regional energy diplomacy.

This momentum was reinforced in late September, when crude began flowing again through the Iraq-Turkey pipeline after a 2½-year hiatus under an interim agreement – a step toward boosting Iraq’s revenue and stabilizing relations between Baghdad and the Kurdish region. The agreement – involving the transfer of most Kurdish oil output via Iraq’s State Organization for Marketing of Oil and the remittance of substantial non-oil revenue – signaled a tentative maturity in Baghdad-Erbil relations. Complementing these breakthroughs, a July arrangement between the KRG and Baghdad’s Council of Ministers restored public salary payments after months of deadlock. For Kurdish workers, the resumption of salaries provides hope for a stable future.

The KRG is confronting a historic opening, with improved security prospects, deeper integration into the regional and global energy economy, and increased international visibility. These trends, if sustained, would support the aspirations of a generation of Kurdish citizens and create space for greater institutional resilience.

Underlying Risks, Uncertainties, and Challenges

Yet the prospects for Kurdish transformation are tempered by enduring and emergent vulnerabilities.

First, the PKK’s move toward disarmament may be historic, but it is not unprecedented – nor is it guaranteed to last. Previous rounds of Turkish-PKK detente (notably in 2015) collapsed amid mistrust and violence. The PKK itself has made clear that complete disbandment is contingent on specific assurances: legal recognition, freedom for its imprisoned leader, Abdullah Ocalan, and a secure environment for its cadres. The Turkish state, meanwhile, continues to stage incursions and airstrikes into northern Iraq and shows no eagerness to remove its 100-plus military outposts in KRG territory.

For Iraqi Kurdish authorities, this means unresolved questions over the shelter, status, and integration of former PKK fighters as well as the lingering Turkish military presence that could, at any time, revive local grievances or draw the region into new rounds of conflict. Iraq’s national security advisor, Qasim al-Araji, has publicly stated that the desired outcome is the full withdrawal of both Turkish and PKK forces, but it is doubtful this can be accomplished quickly, if at all.

Confounding these security uncertainties are the overlapping theaters of proxy war. The Kurdistan region’s oil fields, the mainstay of its economy, came under direct drone attack repeatedly in July, temporarily halting operations and forcing international companies to suspend production. These attacks are widely suspected to be the work of Iranian-backed Iraqi militias – particularly the Popular Mobilization Forces – seeking to escalate costs for the U.S.-aligned KRG and Western commercial interests.

Drone incidents, including at Erbil’s airport where U.S. troops are based, underscore the inescapable specter of proxy warfare. Yet the challenge is not only external. Persistent divisions between the Kurdistan Democratic Party, aligned with Ankara, and the Patriotic Union of Kurdistan, closer to Iran and the PKK, weaken the region’s response. A recent power struggle within the PUK, marked by purges and arrests, highlights how intra-Kurdish rivalries can destabilize politics on the eve of elections and complicate Erbil’s ability to present a united front with Baghdad, Ankara, or Washington.

Nor are Baghdad-Erbil relations guaranteed to remain on their current cooperative trajectory. The July energy and salary agreements came after weeks of fiscal crisis and mutual recrimination: Baghdad had accused the KRG of failing to remit oil and non-oil revenue, prompting the unilateral suspension of payments, while KRG leaders threatened to withdraw from the central government. The underlying legal ambiguity – stemming from conflicting interpretations of Iraq’s constitutional provisions on resource ownership – remains unresolved, although recent judicial rulings have tended to favor Baghdad. Every step toward precision in revenue-sharing locations or pipeline oversight generates new disputes, each threatening to unravel fragile accords. Compounding the uncertainty, the agreement’s 30-day rolling renewal structure and other provisional terms leave its long-term durability in question.

Layered atop these economic and security dilemmas is the question of international strategy. The $110 billion in energy contracts with U.S. firms highlights both the promise and risk of external engagement: Washington’s support provides resources and stature but also fuels Baghdad’s suspicions and resentment that Erbil is skirting federal authority. The July deal for a phased withdrawal of U.S. forces from Iraq adds to this complexity. While combat forces exit central and western Iraq, training and counterterrorism operations will continue from the Kurdistan region, enhancing its leverage and visibility. Yet the accelerated drawdown in late August underscored the fragility of this arrangement and the dangers of overdependence on Washington.

Finally, even as displacement and violence might be reduced, the Kurdish refugee question remains deeply challenging. Generations of refugees raised in camps – whose parents’ homes were razed decades ago – may never return to Turkey or elsewhere. As such, the normalization of regional relations, while symbolically significant, may do only so much to address Kurdish social and economic grievances, absent robust, durable solutions for citizenship, reintegration, and economic opportunity.

The November 11 Elections: Sunrise, False Dawn, or Reckoning?

The upcoming parliamentary elections will test whether the recent series of agreements, peace initiatives, and economic breakthroughs are the product of genuine structural change or merely the latest cycle in Iraq’s perennial crisis. A peaceful, credible vote – one in which Kurdish parties are not marginalized or manipulated, and where subsequent government formation reflects genuine representation – would mark a break from the patterns of political interference that have marred previous election cycles. With political consensus, both at the Iraqi and Kurdish regional level, the energy agreements and security pacts could become durable cornerstones for a new order.

Yet all the newly woven threads of progress could just as easily unravel. Should Kurdish parties – divided by factional rivalry – arrive in Baghdad lacking unity, or should Shia power maneuvering within the central government once again take precedence, the fragile understandings on budget, oil, and security could swiftly come apart. Yet all the newly woven threads of progress could just as easily unravel. Already the KRG’s own postelection crisis has left the regional Parliament paralyzed, unable to choose a speaker or form a Cabinet, and some voices are even calling for its dissolution – a radical move that would weaken institutional capacity and disrupt any claim to genuine autonomy.

Moreover, should external actors – Turkey, Iran, or the United States – revise their policies, invest less in Kurdish stabilization, or press for new “red lines” on security, the KRG’s space for maneuver could quickly shrink. For example, Turkey’s plans to allow the Iraq-Turkey pipeline treaty to expire in 2026 could leave the region’s vital oil flows disrupted once again, especially if Baghdad and Erbil cannot coordinate.

Above all, for many Kurdish citizens, the stakes are not abstract but concern pressing issues of salaries, service delivery, personal security, and legal recognition. The latest drone attacks, salary crises, or government infighting do not just mark political failures; they weaken public trust, encourage outmigration, and challenge the centuries-old Kurdish dream of self-rule.

How the elections unfold, and what coalitions and bargains they produce, will either embed the fragile gains of the past several months or see them reverse in another round of crisis. The durability of recent peace gestures, energy deals, and revenue-sharing agreements will hinge on political consensus and restraint, both within Kurdistan and across Iraq’s fractured national landscape.

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Flows from the pipeline were cut off in March 2023 after the International Chamber of Commerce in Paris ruled in favor of the Iraqi federal government that Turkey violated a 1973 treaty by allowing the KRG to market oil independently via this pipeline. As the final or transit destination country for all oil the KRG exported via the pipeline, Turkey was forced by the Paris decision to refuse any oil flowing in the pipeline from the KRG. Ankara halted these KRG exports, cutting off Erbil’s revenue stream and deepening its budget crisis. Although Turkey said it was ready to allow the KRG to ship oil via the pipeline in October 2023, disputes between the KRG and Baghdad over sovereignty and export rights, compounded by disagreements over contracts and payments to international oil companies based in the Kurdistan region, blocked progress.

The resumption of crude exports to the international market via Turkey is a win for all sides. For Erbil, the deal could stabilize its economy, assuming Baghdad implements its part of the agreement. The agreement should temporarily calm tensions between the KRG and Baghdad, improve Iraq’s political and investment image internationally, and eliminate a point of friction in Iraqi-Turkish as well as Iraqi-U.S. relations.

Persistent U.S. diplomacy helped Erbil and Baghdad to resolve their standoff. Through commercial diplomacy, President Donald J. Trump’s administration pressed Kurdish and Iraqi leaders to accept a compromise deal that protected Erbil’s basic financial and energy rights while honoring Baghdad’s long-standing quest for sovereignty over oil sales. Under the agreement, Iraq’s State Organization for Marketing of Oil will set the price and load Kurdistan’s oil in Turkey’s Ceyhan port for sale. International oil companies will be paid in crude oil, which will eventually turn into cash that will be deposited into an escrow account at Citibank in the United Arab Emirates.

The KRG and Iraqi government eventually understood that this dispute had mushroomed beyond each side’s parochial concerns and prompted a stronger and more assertive U.S. intervention to resolve the conflict and assure energy stability in northern Iraq. However, the same forces that created this opening could cause it to quickly unravel. Baghdad may push to centralize revenue if power dynamics change following Iraq’s November parliamentary elections. Compounding this risk, in 2026 a new national budget law needs to be legislated in which issues related to the Kurdistan region’s share of the national budget and how much oil the KRG will be required to transfer to the federal government for exportation will likely be subject to heightened debate.

In addition, Ankara may overreach for commercial gain as it seeks to renegotiate the Iraq-Tukey Pipeline treaty of 1973, which is set to expire in the summer of 2026. Turkey’s demands in its proposal for a new pipeline deal with Iraq could complicate a new agreement in the months to come. Erbil may view the September 23 deal as a springboard for more autonomous powers if the KRG leadership does not treat the agreement with caution. And Washington may try to use the pipeline agreement and overall energy politics in Iraq as geopolitical leverage against Moscow and Tehran, especially if a new deal between Iraq and Turkey includes gas and potential utilization of the pipeline to increase oil exportation to Turkey and Europe. Maximalist demands from any side would imperil the fragile balance just achieved.

The resumption of flows from the Iraq-Turkey pipeline may have far-reaching geopolitical consequences, coming at a time when the Trump administration’s sanction regimes are increasingly reshaping the global energy supply landscape. Washington has tightened sanctions on Moscow and Tehran, reshaping energy supply lines, as Europe is steadily reducing its reliance on Russian hydrocarbons while accelerating its green transition. Once eager to buy discounted crude, India now faces scrutiny for cushioning sanctioned regimes. Under pressure from the United States to curb dependence on Russian and Iranian oil and gas, Turkey must make steep cuts to purchases of oil sourced to Moscow and Tehran, which also requires a stable alternative. Kurdistan, geographically close and already tied to Ankara by a long-term energy agreement, offers one.

The deal could be a steppingstone toward Erbil’s goal of becoming an energy hub for Iraq, Turkey, and Europe, if given the opportunity and necessary protection. At the same time, unlocking the Kurdistan region’s energy reserve potential (billions of barrels of oil and trillions of cubic feet of natural gas) could be more than just a source of commodities for the United States and its NATO allies. If harnessed, Kurdistan’s energy supplies could bolster Turkey’s and Europe’s energy security while anchoring allies in a Western-oriented energy framework. They could also contribute to buffering global market volatility while reinforcing Washington’s broader strategy of reducing allied dependence on Russian and Iranian supplies.

Kurdish leaders, however, should take heed. Bypassing Baghdad or banking on unconditional Western support is likely to backfire again. Resources can create meaningful leverage only when wielded with restraint and balance. Recent Kurdish history has the hallmarks of overreach. In 2017, when the KRG sought to convert energy wealth into political power, it overstepped; adversaries and friends united, and the Kurdish bid for statehood, via the 2017 regional referendum for independence, led to a reduction of autonomous powers. Allies, however sympathetic, balance Kurdish interests against strategic relationships with sovereign countries in the region, starting with Iraq.

If Erbil is to transform this fragile opportunity into sustainable economic leverage and the political influence that usually accompanies it, the KRG must treat energy as an economic foundation, not a cure-all. Future hydrocarbon revenue should continue to finance diversification into agriculture, tourism, technology, and logistics, reducing exposure to price shocks and weak bargaining position. Transparency around revenue flows is equally vital to establish public trust in the sector, reassure investors, and head off renewed disputes with Baghdad.

For Baghdad, credibility rests on consistently disbursing the Kurdish share of the budget, as the necessary response for the KRG’s concession recognizing the Iraqi national government’s right to maintain a degree of control over the flow of the oil. Stability in the north should not be viewed as a concession but a necessity for Iraq’s unity and a stable investment climate. For Ankara, the challenge is to keep commercial pragmatism from being undercut by inflated financial demands or entangling the negotiations to renew the pipeline deal with other broader demands that could be unacceptable to Baghdad. For Washington, the task is to build on this success by helping the entire country to utilize its energy sector for both economic development and global price stability without treating oil solely as a tool against adversaries. Balance, not maximalist ambition, is the key to sustaining progress.

The persistence of U.S. diplomacy led to a breakthrough but sustaining it will require discipline on all sides. If pragmatism holds, the pipeline’s reopening can secure Kurdish financial stability, pave the way for rebuilding and vitalizing the Kurdish energy sector, usher in new areas of cooperation among all stakeholders, strengthen allies, and reinforce the U.S. global energy strategy.

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It was not federalism that destabilized Syria and Iraq. It was the very opposite. For the better part of the last century, both countries were ruled by highly centralized regimes that prioritized ethnic nationalism, militarization, and authoritarianism over pluralism, accountability, and power sharing. In Iraq, the minority Sunni regime led by Saddam Hussein launched genocidal campaigns against the Kurds and violently repressed the majority Shia community. In Syria, the minority Shia Alawite regime of Bashar al-Assad and his father, Hafez, built a political system on the exclusion of the Sunni majority and denied Kurds even the most basic civil rights, including citizenship.

Centralized states in the Middle East did not bring unity or stability. They sowed division, created power vacuums, and ignited violence with repercussions far beyond their borders with profound challenges for Western countries, serving as persistent sources of instability, authoritarian repression, and systemic human rights violations. These regimes, by consolidating power among a narrow group of elites, created push factors that drove waves of emigration toward the West, straining social and political systems. At the same time, authoritarian structures and lack of inclusive governance fostered environments ripe for radicalization and terrorism, directly threatening Western security through both regional and transnational violence.

The cumulative effects of these dynamics – unrest, refugee crises, and security threats – demonstrate the deeply entrenched risks tied to such political systems. To assume that the revival or continuation of the same centralized, authoritarian model would somehow produce different results overlooks decades of evidence to the contrary.

Federalism and decentralization, though imperfect, have proved effective frameworks for governing diverse societies. The United States has sustained a federal system for over 250 years, balancing unity with regional autonomy while managing profound political and cultural divides. In the Middle East, the United Arab Emirates demonstrates how a federal structure can preserve local authority while enabling national cohesion and economic growth.

For Syria, the solution should not be called federalism or autonomy, as these politically charged terms have been used to deny the rights of minorities and are often mistakenly equated with separatism. Instead, a new term can be coined to address the concerns of the center and fulfil the local demand for self-governance as has been done in the European Union with “subsidiarity,” “devolution of power,” “regional empowerment,” and “shared governance.”

The experiences of the Democratic Autonomous Administration of North and East Syria and the Kurdistan region of Iraq illustrate that even in fragmented and volatile contexts autonomous governance structures can function as stabilizing mechanisms. While these models are imperfect, they have nonetheless demonstrated resilience, pragmatism, and a tangible capacity to mitigate broader conflict risks. In fragile settings where central authority remains contested, these autonomous arrangements stand as working models that reduce instability, preserve pluralism, and offer viable alternatives to state collapse.

In northeastern Syria, the SDF and its political wing, the Autonomous Administration of North and East Syria, have implemented an effective, locally based model of governance that emphasizes ethnic coexistence, gender equality, and grassroots participation. This system has offered a rare example of bottom-up stability in a region otherwise ravaged by war and authoritarianism. Women have become an active and integral part of the political, security, military, and economic systems. And infrastructure has been developed to the extent that speed limits are enforced through traffic cameras, an indicator of both improved rule of law and administrative capacity. The system is not without flaws: Critics of the system in northeast Syria note that actual governance inside the northeast, despite the emphasis on decentralization in discourse and wire-diagram organization, tends to be top-down, centralized, and deficient in transparency.

Despite numerous political and economic challenges, the Kurdistan region of Iraq has maintained relative stability, contributed to regional security, and provided a level of governance and public service often absent in the rest of Iraq. The Kurdistan region has shown that decentralized governance can coexist with broader national frameworks and even thrive, given the opportunity and international support.

Conversely, centralized governance has a catastrophic history in Iraq and Syria. The Assad and Saddam Hussein regimes were not only unable to build inclusive states, they contributed to state fragmentation. Both Iraq and Syria became breeding grounds for extremist ideologies precisely because they denied meaningful space for political and cultural pluralism.

The region requires a new political architecture that acknowledges its ethnic, linguistic, and religious diversity rather than the rigid state models inherited from the colonial mapmakers of the early 20th century. Federalism or any other sort of power decentralization, shaped by the realities on the ground, may be a path toward peace, representation, and accountability.

While decentralization offers a viable framework for rebuilding multiethnic states in postconflict settings by expanding participation, reinforcing local resilience, and diluting authoritarian structures to set the foundation for more inclusive governance, these gains are not guaranteed. Without safeguards, central authorities, external powers, armed actors, and entrenched elites can swiftly undermine local progress and recentralize power. In addition, there are risks of fragmentation and internal division, as well as well as inequality, where richer, more centrally located areas do better while remote, poorer, or more marginalized regions lag. While such flaws and vulnerabilities are real, when stacked against the catastrophic weaknesses the region has witnessed in highly centralized, authoritarian rule, there is a persuasive case to be made for giving decentralization more of a role.

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The reaction from Baghdad was swift and punitive. The Iraqi Oil Ministry immediately declared the KRG energy deals “invalid and void.” On May 28, Iraq’s finance minister, Taif Sami, alleged that the Kurdistan Regional Government had exceeded its 12.67% constitutional share of the federal budget over the past three years. This allegation served as the pretext for a critical announcement: Future disbursements would be contingent on Kurdistan’s compliance with the federal “Tawtin” electronic payment system and the transfer of Kurdistan’s oil and non-oil revenue from the past two years. Iran-backed militia figures, including Qais Khazali of Asaib Ahl al-Haq, publicly accused the KRG of “separatism” and illegal oil smuggling. Simultaneously, Baghdad deepened its economic ties with Beijing, signing major infrastructure and energy contracts with Chinese firms. This move could be seen as a diplomatic rebuke to Washington and a calculated effort to shift Iraq’s economic orbit eastward.

Since 2014, the autonomous Kurdistan region of Iraq has faced a systematic campaign of economic strangulation by Baghdad. Baghdad has weaponized the federal budget, systematically withholding funds earmarked for the Kurdistan region. This financial coercion, cloaked in legal and bureaucratic justifications, has taken various forms, including budget cuts, blockades on oil exports, punitive trade restrictions, and judicial interventions designed to cripple the KRG and diminish its autonomy. These actions are not administrative disagreements but rather mechanisms of coercion aimed at a constitutionally recognized federal entity that has consistently served as one of the United States’ most stable partners in the region.

The consequences of Baghdad’s economic pressure have been profoundly detrimental for the Kurdish population. Unemployment in the Kurdistan region has soared, with youth joblessness on the rise, contributing to increased public protests. In trade-dependent cities, such as Zakho, new customs restrictions have paralyzed commerce, leading to the unemployment of over 10,000 logistics workers. Hundreds of manufacturing companies in Sulaymaniyah have been forced to shut down because their goods have been denied access to the wider Iraqi market. Kurdish farmers are seeing their produce spoil at federal checkpoints awaiting clearance, while those in disputed territories, such as Kirkuk, are being denied access to their own lands under flimsy security justifications.

This economic pressure has also fueled significant migration of young Kurds. Thousands of unemployed and politically alienated young people have undertaken the perilous journey to Europe. Educated professionals and entrepreneurs who once viewed the KRG as a rare island of opportunity within Iraq are now abandoning it in search of stability abroad. Their departure is a profound strategic loss, eroding the social and professional class vital for the region’s future reconstruction and development.

Beyond the immediate human impact, Baghdad’s assault on Kurdistan is dismantling the federal compact that underpins the post-2005 Iraqi Constitution. A series of rulings by the federal Supreme Court, widely perceived as aligned with central government interests in Baghdad, have systematically nullified core elements of Kurdish autonomy. The Kurdish oil and gas law was invalidated, the KRG Parliament was dissolved, minority quotas in Parliament were annulled and subsequently restored to half, and even electoral authority within the KRG was stripped away when a Supreme Court ruling tasked the Iraqi Independent High Electoral Commission to run the October 2024 Kurdistan region’s legislative elections. Since 1992, the Kurds had run their own polls. Compounding these issues, the 2024 Supreme Court’s decision gave the Iraqi Finance Ministry authority over the disbursement of KRG civil servants’ salaries. The ministry has still not released payments to civil servants owed since May. By stripping the KRG of its financial power, the Iraqi central government has been able to diminish the legitimacy of the Kurdish government in the public eye. In response to the salary crisis, out of desperation and frustration, Kurdish citizens are increasingly calling for reassertion of central power over the Kurdistan region, which appears to be the goal of the Shia ruling political elite in Baghdad.

While the KRG faces economic pressure for pursuing Western investment and strategic economic autonomy, the Iraqi federal budget continues to channel unchecked billions into the coffers of the Popular Mobilization Forces, a sprawling network of militias many of which are aligned with Tehran rather than Baghdad. In fiscal year 2022, the PMF’s official budget stood at $2.16 billion. By 2024, this figure had exploded to nearly $3.5 billion, representing a 62% increase in just two years. During this same period, the PMF’s ranks nearly doubled, reaching almost 250,000 members, significantly more than Iraq’s regular military.

The funding process for these militias is opaque, their expenditures unaudited, and their political activities largely unrestrained. These groups frequently interfere in elections, intimidate local populations, and maintain parallel economies, all while benefiting from substantial federal largesse. In contrast, Kurdish civil servants have frequently gone without salaries for months. This targeted allocation of state resources is a deliberate weaponization of public finances to reward political loyalty, punish dissent, empower PMF forces, and systematically weaken institutions that embrace Western partnerships. This financial control is part of an emerging model of centralized autocracy in Iraq, masked by procedural legitimacy and enforced through economic and legal weaponization.

These coercive moves are also a direct challenge to U.S. interests and influence in the region. Kurdistan was pivotal in the fight against the Islamic State group, has consistently hosted tens of thousands of people who have been internally displaced, and has modeled a more pluralistic and pro-Western form of governance than much of the rest of Iraq. U.S. companies continue to view the KRG as a promising environment for investment. Washington’s current silence amid Baghdad’s campaign of economic coercion risks not only alienating a loyal ally but also undermining its own “commercial diplomacy” and strategic interests.

The United States possesses leverage to address this crisis. One of the most potent, yet underutilized, instruments at Washington’s disposal is its influence over Iraq’s access to U.S. dollars. Iraq’s economy is heavily dollarized due to its oil exports, and the U.S. Treasury Department continues to safeguard Iraq’s foreign currency reserves and oil revenue, primarily held at the Federal Reserve Bank of New York. Every week, Baghdad receives substantial dollar shipments via the Central Bank of Iraq’s auction system, a process designed to stabilize the Iraqi dinar and regulate trade. However, these dollars are not politically neutral. They not only sustain Iraq’s broader financial system but also fund the budgets of militia groups hostile to U.S. interests and enable the very institutions being used to repress Kurdistan. For instance, the Central Bank of Iraq has denied Kurdish companies access to dollars and refused to regulate KRG-based currency exchanges, while approving more than 2,000 currency exchanges in federal Iraq, many of which directly benefit militia groups hostile to the United States and the KRG and sympathetic to Iran.

Continued U.S. protection of Iraq’s financial flows should not be unconditional. Access to the global dollar system should be contingent on adherence to basic norms of constitutional governance and the equitable treatment of all Iraqi citizens, irrespective of ethnicity. The misuse of these funds to reward militias and punish federal regions should trigger financial scrutiny by the United States and, if necessary, restrictions. The same U.S. Treasury mechanisms that have been deployed to sanction terrorist financing and corruption elsewhere should be applied to ensure constitutional compliance in Iraq. Iraq’s covert accommodation of anti-U.S. regimes through undisclosed energy deals and financial channels undercut U.S. sanctions policy and offer adversarial actors a critical economic lifeline. Should Baghdad persist in enabling these networks while sidelining U.S. and U.S. allies’ interests, a response from the U.S. Treasury, including the potential suspension of access to Iraq’s protected assets in the United States, must be considered. Washington has both the legal grounds and strategic imperative to act when its interests are consistently undermined, and its partners are being forced into alignment with its adversaries. Failing to do so enables the very dynamics that threaten Iraq’s unity and undermine long-term U.S. influence.

For over two decades, the Kurdish population has suffered from the protracted political standoff between Erbil and Baghdad. While the Kurdish leadership shares responsibility for aspects of the current financial crisis, the federal government is using the broader Kurdish population as leverage in its negotiations with the KRG. Punitive measures aimed at extracting political concessions often backfire by deepening instability and alienating the population that has long been a key partner in Iraq’s post-2003 recovery.

Therefore, Washington should exert diplomatic pressure to condemn the political weaponization of salaries, trade policy, and judicial rulings. It should make its substantial assistance, both bilateral and multilateral, conditional on the equitable distribution of resources and the restoration of revenue-sharing agreements enshrined in the Iraqi Constitution. Simultaneously, it should resume its crucial role as a mediator between Erbil and Baghdad, leveraging its diplomatic weight to reestablish a fair, transparent, and constitutionally grounded fiscal relationship.

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Iraq’s past experiences hosting the Arab League Summit set low expectations. During the 1979 summit in Baghdad, which followed the Camp David Accords, Iraq spearheaded the Arab League’s efforts to suspend Egypt’s membership, a decisive moment demonstrating Baghdad’s capacity to drive regional division. The 2012 summit, held after years of instability, yielded more diplomatic fanfare than concrete, lasting progress.

In stark contrast, the 2025 summits came at a moment when Iraq had pushed back the existential threat of the Islamic State group and invested significantly in rebuilding the sinews of its state. Prime Minister Mohammed al-Sudani’s government sought to project an image of Iraq not just as a stable entity but as an indispensable facilitator of regional dialogue, capable of shaping, rather than merely reacting to, regional agendas.

However, Iraq’s bold ambition to reclaim its historical mantle as a central regional broker has faced domestic and regional challenges. Domestically, deep and vocal divisions have emerged regarding Sudani’s handling of the summits. He faced accusations of attempting to leverage the event for personal political gains, potentially at the expense of broader political consensus as well as Iraq’s sovereignty and interests. Regionally, Baghdad’s historical political and military prowess has been increasingly overshadowed by the Gulf Arab states’ expanding geopolitical and economic influence. And even the new rulers in post-2003 Iraq have failed to reassure their neighbors that Iraq is not a source of threat for them but a source of peace and prosperity.

A Bid for Participation

Sudani, the driving force behind this diplomatic offensive, cast the summits as a critical opportunity to forge a unified Arab front on issues including the urgent humanitarian crisis in Gaza, the reintegration of Syria into the Arab fold, and initiatives toward deeper regional economic integration, in which Iraq is a vital node to a more interconnected Middle East.

After months of planning, the summit’s organizers, including the prime minister’s office, actively reached out to heads of state throughout the Arab League. This effort to incentivize participation involved significant expenditure, with Iraqi media reporting estimates ranging from $180 million to $600 million, as well as a wheat donation sent to Tunisia to encourage the participation of its president.

These efforts were met with controversy and fueled domestic skepticism in Tunisia. Particularly, the issue of the wheat donation to Tunisia, estimated at a substantial 50,000 tons by Sudani’s government, ignited debate in traditional and social media in Iraq and Tunisia just days before the summit. Sudani’s gesture was widely viewed by Tunisian opposition circles as a thinly veiled bribe intended to persuade the Tunisian president to attend the summit in person. Abdelwahab Hani, leader of the Tunisian Al-Majd Party, sharply criticized the move, writing: “Regardless of the motives behind the commendable Iraqi donation, it is unfortunate that Tunisia has transformed from a country that attracts book donations to a stricken country that attracts wheat donations.” The criticism extended to the very framing of the gesture. Maher al-Abbasi, a former leader of the Tahya Tounes Party, directly addressed the Tunisian president declaring: “If you want to go to Iraq and attend the summit, that’s your business. But don’t accept this gift, which is equivalent to only five days of our daily grain consumption, or $15 million, while Tunisia’s 2025 budget is $20 billion.”

In Iraq, economic expert Mazin Al-Eshaiker sparked debate on X by labeling the May 17 summit in Baghdad the “Shia Summit.” He raised concerns about resource allocation, questioning, “If the leaders of Syria, Lebanon, and Tunisia decide not to attend the Shia summit in Baghdad on May 17, will they be asked to return the free wheat gifts?” Critics asserted that Sudani lacks the authority to give away national assets, which they stressed belong to the people.

However, despite this extensive preparation and considerable investment, the summit was conspicuously marked by the absence of 16 out of the 22 Arab League heads of state. Notably, none of Iraq’s immediate Arab neighbors attended at the highest level. Out of all the Gulf Cooperation Council countries, only Qatar’s emir attended, but he left without addressing the summit.

Exposing Internal Fractures

The limited participation of high-level representatives at the Baghdad summit, a disappointing return on invested efforts and money, can likely be attributed in part to persistent intra-Shia factionalism and the security concerns it presents. The prime minister’s unannounced trip to Doha in April, where he met Syrian interim President Ahmed al-Sharaa under Qatari mediation, reportedly blindsided his chief patron, former Prime Minister Nuri al-Maliki, and other heavyweights within the governing Coordination Framework. To add insult to injury, Sudani extended an invitation to Sharaa to attend the Baghdad summit, which brought a wave of anger against the prime minister.

Militias aligned with Iran, including Asaib Ahl al-Haq and Kataib Hezbollah, alongside Maliki’s own Dawa Party, brandished outstanding Iraqi arrest warrants dating from Sharaa’s previous identity as Abu Mohammad al-Jolani (a nom de guerre), an al-Qaeda commander accused of orchestrating devastating bombings in Shia districts from 2005-11. Their demand that he be detained upon arrival framed the invitation as a profound affront to the victims of terrorism and a violation of Iraq’s judicial sovereignty.

Maliki publicly lambasted Sudani for bypassing essential coalition consultation processes and avoiding taking responsibility for the invitation when he framed it as a “League decision.”
Maliki said that Sudani’s decision to invite Sharaa and his trip to Doha were part of a calculated effort to bolster his reelection campaign and secure the attendance of Gulf leaders at the summit.

By extending an olive branch to a leader who has already been welcomed by Gulf monarchs and even met President Donald J. Trump, Sudani probably wanted to signal that Iraq was ready to open a new chapter and surf the same geopolitical wave currently drawing Syria back into Arab orbit and, to some extent, Western circles. A successful appearance by Sharaa at the summits would have been a powerful validation of Iraq’s audacious claim that it is a regional consensus builder. Furthermore, it could have sent a message that Baghdad could convene adversaries under one roof and mediate hard issues.

However, the intense domestic backlash proved insurmountable. In response to vociferous protests by extremist Shia factions in Baghdad and elsewhere, the Syrian president’s office ultimately announced that Sharaa would not participate in the summit and would instead send the foreign minister. The decision, while averting a potentially volatile confrontation in Baghdad, underscores the limits of any Iraqi prime minister’s autonomy – especially one who was appointed by powerful Shia factions – and the power of internal political forces to shape foreign policy.

Moreover, the path to securing attendance for the summit, even before Sharaa’s withdrawal, revealed Baghdad’s limited bargaining power. Gulf leaders reportedly tied their personal attendance at the Baghdad summits to two specific conditions: Iraq’s acceptance of the Khor Abdullah maritime security pact with Kuwait and the inclusion of Sharaa. Agreeing to these terms would expose Baghdad’s weakness vis-a-vis its wealthier, more strategically aligned neighbors. The subsequent withdrawal of Sharaa further highlights how Baghdad’s past mistakes as well as hard-line actions by certain factions continue to undermine trust between Iraq and its neighbors.

By contrast, several Sunni political blocs voiced support for the invitation, viewing it as tangible proof that Baghdad can engage with a Sunni-led Damascus and potentially attenuate Iranian sway in both capitals. It had offered Sudani a rare, albeit now thwarted, chance to broaden his political capital beyond the confines of the traditional Shia establishment. But it inadvertently deepened an old communal fault line within Iraq. And Sudani’s patrons are likely viewing him increasingly as a liability jeopardizing his bid for a second term in the November parliamentary elections.

Moreover, in a bold challenge to the Iraqi state, some Shia factions replaced national flags with sectarian banners along the Baghdad airport road. For potential attendees, the act starkly exposed the central government’s fragile authority and reinforced the perception of performative stability. This tangible lack of state control likely contributed to regional leaders’ decisions to abstain, driven by both security concerns and the desire to avoid the personal humiliation of traveling beneath sectarian symbols.

Overshadowed by Trump’s Gulf Tour

Compounding these significant internal and external challenges was the potent dynamic introduced by Trump’s high-profile tour of three GCC countries. With sweeping multibillion “mega deals” spanning economic, technological, and defense sectors, and even including a meeting with the Syrian president, the tour overshadowed the more nuanced multilateral efforts underway in Baghdad. Trump’s brand of swift, often transactional, bilateral diplomacy, focused on high-impact agreements and personal rapport with Gulf leaders, is designed to capture global headlines and project U.S. influence. Regional actors, long accustomed to this style, may view the slower, more deliberate pace of multilateral consensus building in Baghdad with skepticism. This stark juxtaposition of diplomatic styles also presented a formidable hurdle for Baghdad in capturing and holding regional and international attention despite inviting more than 500 journalists.

The Baghdad summits, which were intended to strategically position Iraq’s reentry into central Arab regional politics, fell short. Despite considerable preparations, internal divisions, regional mistrust, and shifting geopolitics undercut the gathering’s aspirations. The absence of key leaders, controversy over Syria’s invitation, backlash from aligned militias, and perception of performative security all contributed to undermining the narrative of a revitalized, sovereign Iraq. Ultimately, rather than demonstrating leadership and consensus-building capacity, the summits exposed the fragility of the Iraqi state, riddled by deep structural dysfunction and competing loyalties, hindering Baghdad’s ability to chart a new regional path amid a broader regional geopolitical realignment.

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The final technical and commercial details of the BP deal have yet to be disclosed, though reports suggest that it may be a $25 billion investment, making it the second-biggest energy investment after TotalEnergies’s $27 billion megadeal signed in 2023. The agreement includes the development of Kirkuk’s Baba and Avana Domes as well as three adjacent fields: Bai Hassan, Jambur, and Khabbaz. The rehabilitation of existing facilities, alongside the construction of new infrastructure, such as gas expansion projects and drilling to stabilize production and reverse decline in the Kirkuk fields, is also part of the deal.

Although the 2018 letter of intent between the Iraqi Oil Ministry and BP included expanding production at the Khurmala Dome, controlled by the Kurdistan Regional Government and operated by the KAR Group since 2007, the status of the oil field in the deal remains unclear. Located about 22 miles southwest of Erbil, the Khurmala Dome produces about 150,000 barrels per day making it a vital revenue source for the KRG’s struggling economy amid budget cuts from Baghdad. If BP’s new deal with Baghdad includes Khurmala, the company risks becoming embroiled in Iraq’s volatile dispute over resource control. Such a move could exacerbate tensions between the KRG and the federal government.

The BP project aims to stabilize and boost production at these strategically important oil fields. It will increase oil production from the current 300,000 b/d to 750,000 b/d, with a longer-term target of reaching 1 million b/d from Kirkuk fields. Such a boost in revenue streams will be important to support Iraq’s bloated public sector and fund key development initiatives. Additionally, the deal outlines plans to construct power plants that will generate electricity by utilizing associated gas from the oil fields to meet local energy needs. This electricity could lessen dependence on gas imports from Iran in the future and help Iraq to reach a key environmental goal: the elimination of gas flaring by 2028.

On the surface, this agreement appears to be a major victory for Iraq, offering necessary cash for its struggling economy. However, the deal also risks exacerbating the long-standing conflict between the Kurdistan Regional Government in Erbil and the central Iraqi government in Baghdad, especially if the deal is implemented without consultation with Erbil. Kirkuk has always been a flashpoint for ethnic and political conflict, with both the Kurds and Iraq’s central government asserting claims to its sovereignty and resources.

Prior to Iraqi Prime Minister Mohammed al-Sudani’s trip to London, his office had notified the KRG about the impending signing of the Kirkuk deal with BP. However, at the same time, Baghdad advised BP to engage in talks with the KRG only after the deal has been finalized.

Given Kirkuk’s legal status and the Kurdish majority in the province, the KRG asserted its right to have a significant say in any major long-term energy agreements concerning the province. The KRG’s demand is clear: a seat at the table with BP and the Iraqi Ministry of Oil.

The Kurdish population is apprehensive about energy deals in Kirkuk, particularly with BP, because of the experience of the discovery of oil by BP’s forebearer in newly British-founded Iraq. The extraction and commercialization of oil from Kirkuk in 1934 did not just stifle the hope of Kurdish autonomy, it laid the foundation for a century of oppression. The revenue generated by this oil wealth empowered successive Iraqi governments to systematically suppress the Kurdish population, using the resources to fuel a war on the Kurds. What began as a geopolitical and economic calculation by the British and the Anglo-Persian Petroleum Company reverberated through generations, trapping the Kurds in a cycle of marginalization and conflict.

The new BP deal also repeats a dangerous precedent: a major foreign company entering the heart of a disputed province and aligning with one side engaged in a long-standing political and legal conflict. The interests of foreign corporations, particularly in resource-rich regions, have often had long-term ramifications that far exceeded the immediate economic benefits as has been the case in Aceh in Indonesia and the Biafra region in Nigeria, for example. BP’s decision to sign the deal without securing the consent of the KRG could deepen the divide between the central government and the Kurds, igniting tensions that could contribute to a fresh wave of conflict.

In the past, the fate of major energy projects in Kirkuk was determined primarily by the exercise of power rather than through legal or political frameworks. BP’s path to the new deal in Kirkuk has been a long endeavor, with negotiations dating back to 2009. Progress has been consistently hampered by a multitude of factors, primarily the deeply strained political relationship between the KRG and Baghdad. Tensions were exacerbated by several other key factors: Kurdish political and military control of Kirkuk until October 2017, instability and security challenges in Kirkuk province, and the overall volatile environment for any major development projects on the national level.

Kurdish dominance in the region hindered past efforts to reach a deal with BP. Now, Baghdad is asserting its power to finalize a deal. However, if this deal – concerning Iraq’s most contested province – is not handled carefully, it could have substantial detrimental consequences for political stability and economic development.

A BP spokesperson said the agreement is not yet finalized, giving Baghdad the opportunity to meaningfully include the KRG, even if not as a direct partner. Including all relevant stakeholders will help to ensure the success of this mega-development project, protect it from future political or security upheavals, and contribute to the stability of Iraq as a whole.

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This program was convened by invitation only and held under the Chatham House Rule. If you are interested in being included in AGSIW’s exclusive events, please contact Raymond Karam, chief program and development officer: raymond.karam@agsiw.org.

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Chinese energy companies emerged as dominant players in the Iraqi Oil Ministry’s May licensing rounds to auction 29 oil and gas blocks, securing 10 out of 13 oil and gas blocks. Shell was the only Western international oil company to participate, and it did not win any bids. Other Western and U.S. international oil companies showed no interest in bidding, despite improved fiscal terms of the contracts. The resounding success of Chinese firms underscores a significant shift, solidifying Beijing’s already strong position in Iraq’s energy landscape and presenting a substantial challenge to Washington’s strategic position in the region.

The increasing Chinese dominance comes amid a seemingly contradictory development: In April, Iraqi Prime Minister Mohammed al-Sudani signed numerous memorandums of understanding with U.S. energy companies, particularly focusing on gas development and power generation. This focus aligns with Washington’s strategic goals of diminishing Iran’s political influence in Iraq and, by extension, blunting China’s push to dominate Iraq’s hydrocarbon sector. The stark contrast between the memorandums of understanding signed by U.S. companies and the contracts awarded to China demonstrates a significant mismatch between the aspirations of Washington and the realities of the investment environment in Iraq.

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