To save Iraq from economic collapse and fight ISIS, contain Iran’s proxies

Shi'ite fighters gather to fight against Islamic State militants in al-Fatha, northeast of Baiji, October 18, 2015. Iraqi forces backed by Shi'ite militia fighters say they have retaken a mountain palace complex of former President Saddam Hussein from Islamic State fighters, as government forces push ahead on a major offensive against the insurgents.   REUTERS/Thaier Al-Sudani

Content from the Brookings Doha Center is now archived. In September 2021, after 14 years of impactful partnership, Brookings and the Brookings Doha Center announced that they were ending their affiliation. The Brookings Doha Center is now the Middle East Council on Global Affairs, a separate public policy institution based in Qatar.

The day after President Biden was inaugurated, Baghdad was hit by two suicide bombers who, in macabre fashion, killed at least 32 people and wounded at least 100. The attack was a stark reminder that the Iraq theater is still a critical one for combatting ISIS and preventing it from mounting a resurgence. With this in mind, U.S.-Iraq ties are worth salvaging after their deterioration over the past four years. ISIS is strongly positioned to carry out more routine mass-casualty attacks. While the January bombing was its first major terrorist attack in Baghdad in over three years, ISIS carries out near-daily attacks in the rest of the country and could develop a momentum similar to that which preceded its declaration of a caliphate in 2014.

There are two underlying challenges that makes ISIS capable of carnage and launching a resurgence: Iraq’s desperate need for an economic revival and the threat from Shiite militia groups. Addressing both requires that Washington adopt a set of guiding principles for its engagement with Iraq — an approach premised on the fact that Iraq’s economic crisis and the threat from Iran-aligned Shiite militia groups are two sides of the same coin.

ISIS, Iran-aligned militias, and the economic crisis

Iraq’s economic crisis will produce untold poverty levels if it is not addressed. The COVID-19 pandemic, together with the decline in oil prices, has added to the urgency of stabilizing the precarious security environment and reviving the economy. According to the World Bank, 12 million Iraqis could soon become vulnerable to poverty. Iraq has a budget shortfall of around $4.5 billion monthly and debt in excess of $80 billion. At least 700,000 Iraqis enter the job market every year but struggle to find jobs.

In this environment of destitution and lawlessness, the influence of Iran-aligned militias will increase; their reach and strength within Iraqi society is underscored by a complex web of inter-personal and inter-organizational links that make their elimination difficult, if not impossible. Central to their predominance is their capacity to exploit socio-economic conditions to swell their ranks with the impoverished and reinforce their patronage networks. When combined with their ongoing and systemic violence against political rivals and the civilian population, this allows them to impose a stranglehold over Iraq’s institutions.

On the surface, the Baghdad government has effectively outsourced security to some of these groups in the territories that were previously occupied by ISIS, but in reality the government is too weak to confront them and impose its authority in strategically important territories. The militias are disdained by the local population as a result of their human rights abuses and ongoing sectarian crimes. This allows ISIS to exploit the resulting grievances and cracks in the security environment, and potentially mount a resurgence.

These militia groups also lack the professionalism and discipline to contain ISIS — their primary focus is not to secure ISIS’ defeat, but to secure broader political and territorial objectives, in direct coordination with Iran. Monday’s rocket attack on Erbil by Iran-aligned groups shows that they will continue undermining the coalition’s efforts to secure the enduring defeat of ISIS. In addition to consolidating their control over illicit economies, the militia groups are augmenting their bastions in Iraq’s north. From places like Sinjar, the militias and Iran can pursue cross-border objectives in Syria.

Under President Trump, U.S.-Iraq relations were volatile. While the Biden team in charge of the Iraq portfolio should not emulate the Trump administration’s stance regarding Iran and its proxies, it should not assume either that long-term security-sector reform efforts will actually rein in these actors. Biden should focus on empowering Iraqi actors who can hold Iran-aligned groups to account, and who can constrain their ability to shape Iraq’s political, economic, and security environment. In the process, Washington can enable economic reforms that will reduce those groups’ stranglehold over the state.

While there was some hope that security sector reform would result in the integration of Iran-aligned militias into the armed forces, as well as their demobilization and disarmament, this has proven to be a costly miscalculation for which the average Iraqi is paying the price. Through their control of the Popular Mobilization Force (the 100,000-strong umbrella militia organization led and dominated by Iran’s proxies, which was integrated into the state in 2016), the interior ministry, and an array of other militias, Iran-aligned groups exert undue influence over the Iraqi state. They coerce or kill champions of reform and good governance such as Hisham al-Hashimi and Riham Yaqoob.

These groups have also assassinated government officials and are responsible for killing at least 700 protesters and wounding thousands. Yes, Iraq has an array of armed groups as a consequence of its recent history and its pre-war legacies — but it is this particular group of militias that negotiates with its rivals through systemic violence, including assassinations, rocket attacks, and improvised explosive device attacks on coalition personnel. And it is this group of militias that, at Iran’s bidding, attacks prospective and much-needed investors from the Gulf to prevent Iraq from developing its relations with the Arab world and saving its economy in the process.

Addressing the militia problem

The Biden administration has an opportunity to establish new guiding principles for its relations with Iraq. It should focus on possible near- and medium-term wins.

Washington should view two issues as interconnected: its economic support for Iraq and the threat that the Baghdad government faces from Iran-backed militia groups. The resources and energy it spends on Iraq’s institutions must no longer indirectly empower the actors that use violence to shape the direction of the political environment. That also means U.S. military support — which is designed to strengthen the Baghdad government so that it can undertake the economic regeneration of the country free from the threat of violence — must not become an enabler of militia violence. For example, U.S. Abrams tanks and other equipment supplied to Baghdad in the past are now in the hands of Iran’s deadliest and most powerful partners. Iraq’s protesters, civil society, and wider population pay the price.

Washington’s counterterrorism strategy, in coordination with Baghdad, should seek to address Iran-backed militia atrocities in addition to the threat of ISIS. The former ultimately enables the latter. As part of this, Washington should pressure Baghdad to stop expanding the purse that allows militia groups to grow. Iraq’s federal budget proposal for 2021 has been criticized. As my Brookings colleague Marsin Alshamary’s analysis shows, it proposes to increase the budget allocation for the Ministry of Defense by 9.9%, the Ministry of Interior by 9.7%, the Counter Terrorism Force by 10.1%, and the Popular Mobilization Forces by a staggering 45.7% from the previous budget of 2019.

Iran’s allies and enablers in Baghdad have sowed confusion and distorted their own complicity in human rights atrocities by adding more militia groups to their growing network of partners. They blame these so-called “rogue groups” for human rights violations, rocket attacks, attacks on protesters, and assassinations. The Biden administration should not fall for this sophisticated effort to create a degree of plausible deniability that allows them to escape culpability.

Washington should also help the Iraqi security forces insulate reformists from the threat of intimidation and assassination, to include politicians and activists. As a start, the U.S. should work with Iraqi civil society to improve its capacity to expose the nexus between Iran’s proxies and their front groups, a key part of the accountability process. This could empower (and pressure) Kadhimi to take more action on Iran’s proxy network in Iraq, and pressure the judiciary to act.

The reason it’s so important to promote broad reform in Iraq is because, as I wrote last year, economic revival will diminish the resources and manpower that Iran-aligned groups depend on. Iraq must work to erode the patronage networks that allow them to exploit the impoverished, and improve accountability and transparency to constrain their ability to carry out atrocities with impunity. The U.S. should support the pillars of economic regeneration — including the prime minister’s office, the finance ministry, and the Trade Bank of Iraq, among others — to enhance Iraqi efforts vis-à-vis strategic partnerships with the Gulf, financial assistance from the International Monetary Fund and World Bank, and the establishment of a modern banking infrastructure in the country.

Iran-aligned militias are a major political force as much as they are a military one. Prime Minister Kadhimi should avoid making rivals out of political actors that also want to contain these groups. U.S. engagement with Iraq should consequently focus on mediation between actors that have strong ties to Washington. Efforts to ensure these groups are unified on critical policy issues — like revenue-sharing agreements, budget allocations, and the disputed territories — should be central to U.S. engagement with Iraq. Moreover, Washington should not be averse to the idea of making support to the Kadhimi government conditional on its ability to reconcile at least some of its differences with U.S. aligned groups. Otherwise, short-term support for Iraq risks becoming either sunk costs, or long-term gains for Iran-aligned groups.

Iraq’s struggle with its Iran-aligned militia groups is very multifaceted, and no one policy solution out of Baghdad or Washington will be enough on its own. But given the way these groups exploit Iraq’s dire economic situation, in particular, economic reform from within and support from without should be considered a key part of the overall response to these nefarious armed actors.