Washington and Baghdad’s New Government: A Test of Economics

Image Credit: PM Designate Office

It is no secret that Mustafa al-Kadhimi’s government is backed by the United States. After almost two years of struggling to deal with Prime Minister Adel Abdul-Mahdi, Washington is back in the driver’s seat in the Iraqi swamp. Many would say this is a blow to Tehran, but others may differ. At a time of intense economic difficulties, a domestic health crisis, and biting sanctions — and with no means to consolidate the Shi’a political house after losing its two key whips — Iran is watching from afar. Facing the most critical economic crisis in its history, Iraq is too hot to even toss around between the two actors.

So for now, Washington has been left with the task of saving Iraq economically — and with it the last chance at a pro-Western Baghdad. It is an immense task, but it is still doable, as recent history suggests. Under the government of Prime Minister Haider al-Abadi, the U.S. provided crucial assistance. On the world stage, Baghdad was aided in its fight against ISIS, while the IMF and World Bank were incentivized to help the country’s ill-managed public financial system. Credit lines, U.S. government-guaranteed dollar bonds, and assistance with fiscal consolidation of Iraq’s finances will definitely aid Mr. al-Kadhimi. However, Mr. al-Abadi dealt with Obama’s administration and Mr. al-Kadhimi is dealing with Trump’s — apples and oranges.

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Managing Director | + posts

Yesar Al-Maleki is an energy economist and a Middle East observer with extensive knowledge of the intertwining subjects of energy, geopolitics, and economics in the region.
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