The U.S. Has More Leverage in Iraq Than It Thinks

With a potential U.S. troop withdrawal by 30 September 2026, policymakers should see the event as a chance to redefine bilateral ties rather than to abandon influence in Iraq. The presence of U.S. forces provided two decades of direct leverage; their departure will reduce that direct control but not remove all American instruments of power. Washington retains access to levers such as the international dollar system, sanctions, defense sales, intelligence cooperation, diplomatic access, and commercial and technological ties to Western markets. A key strategic shift proposed is moving from a securitized relationship to one more focused on broader strategic and economic engagement. Even after troops leave, defense assistance and counterterrorism cooperation—especially against a potential Islamic State resurgence—will remain relevant. But commercial relationships and investment in sectors like energy, electricity, infrastructure, banking, and transportation could become the principal channels for sustaining U.S. influence in Iraq. The U.S. dollar and related financial controls are singled out as a potent post-withdrawal tool. Iraq’s oil revenues and banking system are integrated into the dollar-based international financial system, and in 2026 Washington limited physical dollar shipments over militia and illicit finance concerns, easing them only after Baghdad implemented financial controls and banking reforms. Conditional access to international finance—requiring transparency, anti-money-laundering measures, and sanctions compliance—could be used to protect the financial system’s integrity without coercively dictating Iraqi political outcomes. Addressing Iran-aligned militias will be the most complex challenge. Many militias are embedded in Iraq’s political, economic, and security structures, and immediate, externally imposed disarmament risks sparking civil conflict, political fragmentation, and economic decline. The recommended approach emphasizes insisting on genuine, irreversible progress toward state control while allowing Baghdad to manage the pace and mechanics, recognizing that successful transitions historically require a strong state, incentives, and voluntary disarmament. Ongoing negotiations include militia proposals to store heavy weapons under their control for a pause in operations—an option Baghdad rejected as talks continue. Finally, the piece cautions against forcing Iraq to choose outright between the United States and Iran, noting Iraq’s geographic, historical, religious, and economic ties that make such a binary choice unrealistic. A post-withdrawal U.S. policy that balances security cooperation with economic and diplomatic engagement, and that uses financial and commercial levers conditionally, is presented as more likely to preserve American influence without prompting Baghdad to pursue alternatives to dollar-based finance or closer alignment elsewhere.