Although U.S. influence in Iraq is growing through renewed energy investment and political leverage, Baghdad’s continued alignment with Tehran continues to complicate Washington’s strategic objectives. Photo courtesy of Iran international.

The U.S. position in Iraq is improving. But Baghdad’s alignment with Tehran continues to complicate the relationship. Commercially, the picture is genuinely positive: ExxonMobil, Chevron, and BP have returned to Iraq on contract terms far more favorable than the agreements that drove Western firms out a decade ago. Baghdad has actively courted this investment as a hedge against regional instability.

Politically, the picture has not shifted nearly as far. The Coordination Framework, the Iran-aligned Shia coalition, still controls both the Oil and Finance Ministries. A deputy oil minister has been alleged to serve as Tehran’s interlocutor inside the ministry itself. The Popular Mobilization Forces, a predominantly Shia paramilitary umbrella formally part of Iraq’s armed forces but largely loyal to Iran’s Supreme Leader, remain armed, state-funded, and outside Baghdad’s real control.

This split means American energy companies are gaining ground inside an institutional structure that Iran-aligned factions still substantially govern. The durability of that commercial progress depends on a political alignment Washington has so far been unable to dislodge.

Iraq’s government is not formally Shia or Sunni by constitution. Instead, it operates under an informal post-2003 power-sharing convention: the premiership goes to a Shia Arab, the presidency to a Kurd, and the speaker of parliament to a Sunni Arab. In practice, Shia Arab parties have held the dominant position since the system’s creation. Current Prime Minister Ali al-Zaidi, who took office on May 16, 2026, is Shia and emerged as a consensus candidate after the Coordination Framework controlled the selection process.

Within this system, Sunni and Kurdish parties retain meaningful but lesser representation: the Al-Azm Alliance holds cabinet and parliamentary seats, and in April 2026 the Council of Representatives elected Nizar Amedi, of the Patriotic Union of Kurdistan, as president. The decisive levers of power, including the premiership and the Oil and Finance Ministries, remain with Shia Arab parties aligned with the Coordination Framework.

This arrangement reflects Iraq’s underlying demographics, though no official current breakdown exists; the country’s first nationwide census since 1987, conducted in November 2024, excluded sectarian and ethnic data. International estimates place Iraq’s population at 46-48 million, with Arabs at 75-80 percent and Kurds at about 17 percent. Muslims make up roughly 95-98 percent of the population, and U.S. State Department data puts Shia Muslims at 60-65 percent and Sunni Muslims at 32-37 percent.

Nearly all Iraqi Kurds are Sunni, however, so a large share of that Sunni figure is ethnically Kurdish and aligns politically with Kurdish nationalist parties rather than Sunni Arab blocs. Iraq’s Christian population has collapsed since 2003, to current estimates as low as 150,000-500,000.

The bottom line is that Shia Arabs form Iraq’s largest demographic and political bloc, which is why the premiership goes to a Shia Arab by convention, and why Iran-aligned Shia parties hold a structural advantage even when individual governments try to assert independence from Tehran.

Kurdish politics itself splits between two rival parties with different postures toward Baghdad and Tehran. The Kurdistan Democratic Party controls the Erbil and Duhok region and holds the separate presidency of the Kurdistan Region, currently Nechirvan Barzani. The PUK is based around Sulaymaniyah, which borders Iran directly, and has historically held the federal presidency in Baghdad, now occupied by Nizar Amedi.

The PUK has been accused of functioning as Iran’s arm in the region, while the KDP has positioned itself more independently, at times adversarially, toward both Baghdad and Tehran-aligned militias. The KDP boycotted the April 2026 vote that elected Amedi and does not recognize him as representing the Kurdish majority.

The clearest evidence of Iranian influence inside the Iraqi state runs through the Popular Mobilization Forces, known in Arabic as al-Hashd al-Shaabi. The PMF formed in June 2014, when Grand Ayatollah Ali al-Sistani, Iraq’s top Shia religious authority and a counterweight to Tehran’s own clerical rule, issued a fatwa calling Iraqis to arms against the Islamic State’s seizure of Mosul.

This united existing Shia militias, most backed directly by Iran, with a small number of Sunni tribesmen. Iraqi President Fuad Masum formally incorporated the PMF into the armed forces by law in December 2016. Today it comprises roughly 60 to 70 brigades and more than 230,000 personnel, with an annual budget near $3.6 billion. Though legally part of the military, PMF leadership and operational capacity remain concentrated among Iran-aligned factions; in 2024 its Chief of Staff openly declared that the organization took orders from Khamenei.

Its rank and file are overwhelmingly Iraqi citizens, mainly Shia Arabs with smaller numbers of Shia Turkmen, Sunni Arabs, and Iraqi Christians. Iran’s role lies mainly in funding, training, weapons, and command influence, including facilities inside Iran such as the Pazooki Barracks in Tehran, where some fighters train under IRGC supervision.

Several PMF factions are the armed wings of parties sitting inside the Coordination Framework. Kata’ib Hezbollah traces its roots to the Badr Corps and maintains close IRGC ties. Asa’ib Ahl al-Haq’s political wing, Sadiqoun, performed strongly in the November 2025 elections but received no cabinet ministry, pending militia disarmament. The Badr Organization, not U.S.-designated as a terrorist entity, received the Transportation and Water Resources ministries. Harakat al-Nujaba and Kata’ib Sayyid al-Shuhada operate under the Islamic Resistance in Iraq, an Iran-aligned coalition focused on removing U.S. influence from the country.

PMF-linked militias have directly attacked Kurdish targets, including a March 2026 drone strike on the Dohuk home of KRG President Nechirvan Barzani, part of a longer pattern dating to a 2015 objection by then-KRG President Masoud Barzani over PMF recruitment in Kurdish areas. Baghdad’s relationship to the PMF is tolerance bordering on de facto support, not genuine control. Foreign Minister Fuad Hussein acknowledged the limits directly, saying he did not believe Baghdad could rein in the PMF without risking confrontation, and that he did not know which side held the real balance of military power.

That dynamic played out during the 2026 war on Iran, when the Islamic Resistance in Iraq, overlapping heavily with PMF factions, launched more than 500 attacks from Iraqi territory, including strikes on the U.S. embassy in Baghdad, Harir Air Base, and the U.S. consulate in Erbil. After a U.S. strike killed PMF personnel, Iraq’s national security cabinet, chaired by then-Prime Minister al-Sudani and staffed by PMF-affiliated officials, authorized the militias to defend themselves against further strikes, underscoring deference over restraint. Baghdad sought throughout to avoid being drawn into the broader war, neither backing the U.S.-Israeli campaign nor curbing the militias operating from its soil.

The same tension between formal neutrality and the Coordination Framework’s grip on Iraq’s institutions extends to the oil sector, which underpins Washington’s commercial reengagement. Members of the Coordination Framework run both the Oil and Finance Ministries, and unnamed sources have alleged Deputy Oil Minister Khudair has served as Iran’s key interlocutor inside the ministry.

The pattern is documented elsewhere: the U.S. Treasury sanctioned Deputy Oil Minister Ali Maarij al-Bahadly for allegedly diverting Iraqi oil to an Iran-affiliated smuggler who relabeled it as Iraqi to help Tehran evade sanctions. Iran-backed factions have sought influence beyond oil. The new Minister of Communications is reportedly linked to both Kata’ib Hezbollah and Qais al-Khazali.

Iranian influence, however, has clear limits. Al-Zaidi is a political newcomer and businessman, not a Tehran-aligned figure, and he became prime minister with explicit U.S. backing.

Washington also drew a formal red line barring affiliates of the six U.S.-designated militia organizations from cabinet posts. That line largely held. No ministry is led by an individual formally affiliated with those six groups, and Sadiqoun, the political wing of Asa’ib Ahl al-Haq, was kept out of the cabinet despite its strong electoral showing.

An earlier episode underscores how close Tehran-aligned factions came to a more decisive victory. In January 2026, Iraq’s Shia leaders nominated the more Tehran-aligned Nouri al-Maliki to return as prime minister. Tehran reportedly favored Maliki because his government could have denied Washington the use of Iraqi bases for strikes on Iran.

That nomination ultimately gave way to al-Zaidi. Nevertheless, it demonstrated how much influence Tehran-aligned factions continue to wield within Iraq’s Shia political bloc.

The most accurate characterization, then, is one of substantial but contested Iranian influence rather than full alignment. Washington retains significant leverage, including control over Iraqi oil export revenues routed through the Federal Reserve Bank of New York, sanctions authority, and a residual military presence. It has used that leverage to block militia affiliates from cabinet posts and to pressure Baghdad to strengthen sanctions enforcement.

At the same time, the Coordination Framework’s dominance in parliament, its control of the Oil and Finance Ministries, and documented sanctions-evasion activity by Iraqi oil officials demonstrate that Iran continues to wield significant influence within the institutions that oversee Iraq’s oil revenues and contract awards. Those are the same institutions where American companies are now re-establishing a commercial presence.

The long-term success of ExxonMobil, Chevron, and BP in Iraq will depend less on the terms of their contracts than on whether Washington can further weaken the political networks through which Tehran continues to operate in Baghdad. The outcome of the broader U.S.-Iran war remains a wildcard in that equation.

Depending on how the conflict unfolds, it could weaken Iran’s ability to fund and direct its allied factions inside Iraq, easing the obstacles facing American firms. Alternatively, it could harden the resolve of Iran-aligned officials and militias entrenched in Baghdad, making those obstacles even more difficult to overcome.

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