Save for later Print Download Share LinkedIn Twitter The trip to the US last month led by Iraqi Prime Minister Mustafa al-Kadhimi has been hailed by some commentators and officials in Washington as the start of a constructive new era. For much of the past 18 months, Iraq’s ties with the US have been badly strained by the escalating conflict between Washington and Tehran, sometimes played out dramatically on Iraqi soil. Appointed in May, Iraq’s former intelligence chief is known and respected in the US. The five energy deals signed with US firms -- worth up to $8 billion, according to the US department of energy -- and the pledge he secured from US Secretary of State Mike Pompeo to help Iraq address its economic crisis, were reasons enough to think that al-Kadhimi has opened a new chapter in this troubled history. Inevitably, the reality is more complicated. Three days before he left for Washington, well-informed sources say the prime minister was visited in Baghdad by Esmail Ghaani, the successor to Iran’s top general, Qassem Soleimani, whose assassination by the US in January was seen as a stunning blow to Iran’s regional reach (EC May8'20). Ghaani’s call was a stark reminder of Tehran’s inescapable influence in Iraq, extending from parliament, key ministries and institutions to powerful paramilitary groups. “There are forces inside Iraq, even among those MPs who voted for al-Kadhimi, that do not want a normalization in relations with the US,” UK-based Iraq expert Hamdi Malik tells Energy Intelligence. “For the US to develop a more advanced economic relationship, the Iraqi government needs to bring more Americans to the country. These Iran-backed groups are not going to let that happen easily.” Iraq’s new government has clearly signaled that it is not afraid to try -- or to court the cooperation of Iran’s enemies in the region, notably Saudi Arabia and Egypt, in rebuilding the country and deepening its regional integration. Finance Minister Ali Allawi says greater US involvement in itself won’t solve the grave economic problems Iraq faces. Instead he is calling for reforms that open up the private sector and facilitate foreign investment. “It is not so much a question of how much funds the US can give us. Frankly I think it will be very little,” Allawi said, speaking to US think tank the Atlantic Council during his visit to Washington. “However, as a backer of a consistent and well-constituted reform program [the US] is really vital to that reform being successful.” Energy Networking In the energy sector, serious plans are afoot to bring in US companies. Where those plans lead, at a time of acute funding shortages in Iraq, the political difficulty of sweetening Iraq’s tough contractual terms and spending restraint by international oil companies across the board, is another matter. Security fears had fueled speculation that Exxon Mobil’s future presence in Iraq was untenable (EC Jan.10'20). Chevron has nonetheless agreed, under a nonbinding memorandum of understanding, to carry out extensive exploration work that could result in a major oil-field development. Separately, Honeywell, could sign a contract by November to develop the Ratawi gas gathering project, designed to hike gas supplies in southern Iraq -- and reduce Baghdad’s reliance on energy imports from Iran. Allawi says Iraq is in talks with the US Export-Import Bank about funding the project, which Saudi Aramco and Saudi power developer Acwa could also get involved with. At a trilateral summit in Amman last week, al-Kadhimi emphasized his government’s desire to see energy and transport infrastructure built that links Iraq with Jordan and Egypt, under what he has called his hopes for a “new Levant.” Another long-held plan is to build a highway linking Basrah to Turkey. But besides requiring huge investment, these are plans that Iran-backed groups in Iraq oppose, and have the means to stop, says Malik. Indeed, from Washington’s perspective, the most pressing strategic problem in Iraq are those factions within the Popular Mobilization Forces, the mainly Shiite militias notionally under the government’s control, that answer to Iran. The prime minister has won praise for efforts so far, including when counterterrorism forces in June arrested 14 members of Kataib Hezbollah, reportedly as they were preparing rocket attacks on Baghdad airport and the US embassy (EC Jul.3'20). More recently, al-Kadhimi sacked the local police and intelligence chiefs after the killings of civil society activists in Basrah, which he has vowed to investigate. But despite being “almost recklessly brave,” in the words of Mike Knights at the Washington Institute, it is far from clear that al-Kadhimi’s government can make the militias submit to a stronger state. After its members were arrested in June, Kataib Hezbollah, a group that has openly accused al-Kadhimi of betraying his country, sent an armed column to surround the prime minister’s house. Within a week all but one of those arrested had been released. Foreign Minister Fuad Hussein articulated the dilemma Iraq faces at the Atlantic Council discussion last month. “We don’t want to be a part of this conflict. But we need both [countries]. One of them is our neighbor and a big power in the region, the other is our ally and a big power in the world ... But they must not make decisions for us. And in this case, the Iranians are intervening more ... [as] they have got different positions inside our political system.” Simon Martelli, London Compass Points • SIGNIFICANCE: Al-Kadhimi has vowed to strengthen Iraq’s sovereignty and tackle corruption. The economic crisis he inherited has stacked the odds against him. But Iran may prove the greater threat as he turns to the US for support. • CONNECTION: US troops in Iraq -- ostensibly there to fight Islamic State remnants -- have withdrawn from several bases this year and focused increasingly on defending themselves from attacks by Iran-backed groups. Plans to cut their numbers to around 3,500, as reported by the Wall Street Journal, may reflect their evolution into a more advisory role. • NEXT: During al-Kadhimi’s upcoming visit to Saudi Arabia, Iraq will be hoping to see energy agreements signed that turn talk of closer cooperation into action.