Will US and GCC Interests Converge in Iraq?
August 18, 2023
By Irina Tsukerman
Several recent developments highlight Iraq’s growing and paradoxical role in the Middle Eastern security framework. Will these contradiction and tensions draw Washington closer to some of its key Middle Eastern allies or exacerbate existing diplomatic challenges and push them further apart? Overcoming the obstacles to securitizing the region and optimizing the emerging opportunities, however, first requires addressing US priorities in the region and where its current strategy fits with external and independent developments.
US Priorities in the Middle East
Preventing Iran from acquiring nuclear weapons
When it comes to addressing Iran’s nuclear ambition, US foreign policy has been ambivalent and fraught with partisan and cross-branch strain. The Biden administration has focused the bulk of its Iran-related efforts on some form of a return to the JCPOA, most recently in the form of a “nuclear understanding”, in essence, an executive policy rather than a formal agreement or treaty requiring Congressional review, which would have Tehran slow down its uranium enrichment in exchange for the lifting of some sanctions. Given that Washington has not imposed any new sanctions on Tehran and has not been enforcing many of the existing ones since at least March 2023, the effectiveness of this understanding is sure to attract scrutiny and objections.
It also comes hand in hand with a US prisoner release deal, which includes the release of $6 billion in frozen funding to Iran. Iraq plays a pivotal role in this move, as these developments were precipitated by a US government sanctions waiver allowing to pay about $2.76 billion in gas and electricity debt to Iran. These waivers treat oil and gas renumeration as cash payments, thus potentially creating a precent for additional Iran sanctions evasion. There is a couple of reasons why US would want to grant such a waiver. First, US wants to keep Iraq in its field as much a possible. Giving it the means to repay its debt could in theory mean less dependence on Iran and more goodwill towards Washington.
There are some problems with that argument, given that immediately after the repayment, Iran cut off electricity to Iraq anyway, showing that in terms of infrastructure and much else, Baghdad is far more dependent on its neighbor than the US cares to admit. Another problem is that easy access to such a payment enables and further entrenches Iran with new financial means, undermining the quest to make Iraq less dependent. A financially strengthened neighbor next door is far more tempting than even a much stronger country far away. This reasoning undercuts the claim that US prioritizes moving Iraq away from Tehran or that it prioritizes stopping Iran’s political and economic expansion in the region. Instead, the natural conclusion is that US is much more invested in the second reasoning for allowing that waiver, which is that it is actually more of an indirect goodwill gesture to Iran rather than the Iraq government. The purpose of such a gesture is to lubricate the path toward more tangible nuclear discussions. Quite simply, Iran may have demanded this waiver as a condition of further negotiations over the prisoners and the JCPOA-lite.
Iraq, in this context, is being used as a front for a US-Iran transaction. This argument is strengthened by the release of $10 billion in frozen Iranian funding to be used for purchasing non-sanctioned US goods. This step comes after the commitment to release overdue energy payments, and this Iraqi debt would allegedly be used for “Iranian pilgrims” in Iraq and for purchase of basic commodities. However, the innocuous language likely indicates far less innocuous activity. Iranian pilgrims in Iraq could just as well be Iranian experts, business people, officials, and oil smugglers all of whom will need the infusion of cash for far more serious operations, which could include paying off the local militias. That leads to the second US interest which is
Countering terrorism and extremism
Despite contemplating complete withdrawal from Iraq due to persistent attack on the US troops by local Iran-backed militias, US is now making a big comeback. There are several reasons for that return. First, ISIS has not only not been vanquished but still commands thousands of fighters in Iraq and Syria, despite the counterterrorism operations, according to recent UN reports. CENTCOM joint operations with local allies squared way thirty ISIS members in Iraq and Syria in July of this year alone. Second, US is hoping that greater security investment into joint activity will bring Iraq closer to US camp. In the course of the recent US-Iraq Joint Security Cooperation Dialogue held in Pentagon, the two countries have committed to establish and develop a long-term strategic elevation, essentially restarting the defense ties from scratch.
The relationship would go beyond eliminating ISIS, and the strategic partnership, which has resulted in this year’s reduction in ISIS attacks by 64%, would also include economic cooperation such as the build up of Iraq’s economy and business opportunities for US companies. One aspect would be energy development and helping Iraq achieve self-sufficiency – with an eye towards an independence from Iran’s electricity crisis imposition. Even before the conclusion of the Dialogue, US businesses were already being encouraged to invest in Iraq. US was also supportive of Iraq’s recent oil, gas, and renewables deal with France’s TotalEnergies worth approximately $27 billion. Many challenges remain – ranging from an unclear regulatory framework, to corruption, Iran sanctions risk, and security risk, despite some improvements and huge financial investments. US may be missing out on opportunities in untapped markets as a result of these obstacles, which various bodies such a the US-Iraq Business Council are working to overcome.
Washington sees Iraq as a pinnacle of potential success in the Middle East bridging the two sides of its regional policy: the efforts to come to some sort of a resolution with Iran on the one hand, and an effort to integrate regional security and economies, on the other. Investments in the local economy, US, believes would help with overcoming terrorism related challenges. US seems to have come to an understanding that would keep the Iran-backed militias from targeting Western business. But in return these PMC are likely to get a significant pay off that enables their local entrenchment.
A portion of the profits from all these benefit deals is likely siphoned not only into the pockets of the local politicians and organized crime figures but directly to Iran. And non-American non-European targets are still fair game – the abductions of the Kurdish-German human rights activist and Abraham Accords promoter Bakhtiar Ibrahim and the strange circumstances in the kidnapping of the Russian-Israeli dual national Elizabeth Tsurkov, which drew Israel into direct negotiations with Iran, are just two examples of how Iran and its proxies continue to view Iraq as their sphere of influence despite a growing US economic footprint. Moreover, Iran’s influence over Iraq is visible on a broader policy level, which includes a crackdown on the Kurdish energy autonomy, and the passage of a tough law criminalizing Iraqi contacts with Israelis with a possible life sentence or capital punishment as penalties. These measures not only disrupt hopes for the expansion of the Abraham Accords but undermine the US vision of an integrated regional economic and security framework. Nevertheless, US remains relatively passive in response these issues, and seems focused on optimizing the transactional relationship with Baghdad for the time being. US appears to take no specific issues to put an end to the Iran-backed PMC as such, accepting a sort of coexistence so long as it own interests are protected. Moreover, there is also no longer counterextremism strategy to avoid to the spread of radicalizing ideologies that contribute to ISIS recruitment as well as the expansion of the Iran-backed factions. For that reason, US goals in countering terrorism may not be fully met. Even if effective enforcement can prevent ISIS attacks, complete elimination and the stopping of the continuing recruitment process is unlikely without specific intervention into the ideological factors. Ignoring Iran-backed terrorism while hoping for a more peaceful, prosperous, secure, and independent Iraq is also not going to work. The unhelpful role of other competitive actors, such as Russia’s involvement, should also be examined.
US Interest In Stopping Russia’s and China’s Middle East Meddling
While in theory it would be behoove US to curtain Russia’s and China’s involvement in regional issues, in practice the Biden administration has tried to reconcile contradictory geopolitical goals. China has not been a major factor in Iraq in particular, but overall it is playing a very significant, and possibly leading, political, diplomatic, economic, and intelligence role in the Middle Eat – with a possible view towards a military function, as well. US has taken no steps to deter China from encroaching upon its GCC allies and Israel; most of the pressure has been exerted on those allies with respect to limiting particular defense sales. Otherwise, the approach of the Biden administration has been to appreciate China’s diplomacy, in bringing a number of countries towards open normalization with Iran.
These developments have contradicted US interests in moving the region away from Iran’s influence, which raises the questions about its security and defense strategy in general and in Iraq in particular. IF the goal is not really to counter Iran’s political and military hold over the country, is it then consists of just enough deterrence to support an uneasy coexistence? If so, this approach has been tried before and is doomed to an eventual failure. Regardless, Russia has exploited the loopholes in the US strategic engagement in Iraq to push for its own interests. In particular, Russia has made significant investments into Iraq’s energy sector. Oilprice.com analyst Simon Watkins gives four reasons for this decision: the significant oil reserves in the Kurdish region, the potential for playing a mediator between the Kurds and Baghdad, which would enhance Russia’s regional clout overall, the possibility of using this clout to reach into other parts of Iraq with additional and bigger oil and gas reserves, and finally countering US and its allies efforts to rebuild influence inside Iraq. So now with US signing billions worth of deals and extending business contracts into 2036, Russia can be counted upon to meddle and disrupt this nascent partnership. Disinformation, bribery, sabotage, and various forms of subverting local relationships are just some of the tools in its arsenal.
Most importantly, however, Russia can play on its closeness with Iran and its growing relations with KSA and UAE to inflict potential damage. US, thus far, has paid little heed to Russia’s presence in Iraq and has made real effort to enforce Russia related sanctions. Enhanced relationship with Iran could include assisted smuggling of assorted contraband, including oil, to enforcement actions against critics of the local militias, to information warfare operation – expansion of hearts and minds campaign and educational propaganda, cyberattacks against US businesses and military structures, and media and other propaganda used to incite hate and violence. In terms of KSA and UAE, Russia could use the newfound enthusiasm by the formerly staunch US allies to block US from involvement in reconstruction and energy contracts and to enhance its own regional positioning. Still, even with Russia’s unwelcome presence, US has a potential opportunity to rebuild its fractured ties with Riyadh and Abu Dhabi through Iraq.
KSA and UAE refocus on Iraq
Despite the hyberbolized rumors of a political fallout over strategic differences, KSA and UAE have joined forces investing $6 billion to boost Iraq’s trade and commerce sector. The obvious question here is whether this dedicated effort is in spite of Iran’s dominant presence, or inspired by the recent rapprochement with Tehran. If KSA and UAE are uneasy with their old-new regional frienemy despite all appearances, they may want to retain a foothold in the country and to exploit any opportunity to protect their allies and counter Iran’s aggressive grasp over the country. Qassem Soleimani’s liquidation arguably makes this task easier; US investment in the economic sector could bolster this effort. On the other hand, there appears to be no clear and obvious coordination between US and its Gulf allies; moreover, while US has indeed envisioned that the rapprochement with Iran could bring about mutually beneficial financial relations and move the regional rivals from destabilizing confrontations, this development could welcome at expense to its own interests.
One of these projects is a gigantic $1 billion mall planned by the Saudis near the Baghdad airport. However, if past such efforts are any indication, this at best would be a vanity project that will expend more money that it will ever make or very likely end up being a sinecure to benefit local authorities and their families. It will not do much to strengthen the country’s economy or to prevent the spread of Iran-backed radicalization. To prevent, additional Middle Eastern investments into Iraq from going to waste or further enabling corruption, US should move to propose clearly defined multilateral projects that could meet its strategic goals. These include educational efforts, such as the building of schools, universities, or hospitals, or youth entrepreneurship and empowerment investment. Meaningful and thoughtful long term projects of that sort could help break through the ice between the allies, and also address some of the ideological concerns in Iraq brought about by the proliferation of authoritarian actors.
The Biden administration has focused the overwhelming majority of its public efforts in the Middle East on pushing top level diplomatic relationships, such as promoting the unlikely Saudi-Israel normalization, but the region would be far better off from more practical applications and sharing of economic, business, humanitarian, and development knowhow that would strengthen relations with local populations and build visible and long-term good will.