On February 4, 2025, US President Donald Trump issued a memorandum reinstating the maximum pressure policy against the Islamic Republic of Iran. The policy seeks to deprive Iran of the financial resources needed to develop nuclear weapons and to counter what the White House has described as the Iranian regime’s “malign influence.” Though primarily aimed at Iran, the memorandum’s repercussions will significantly shape Iraq’s political landscape. It confronts Iraq’s political elite—particularly those aligned with Iran—with a stark dilemma: face US sanctions that could spark widespread popular protests if they persist in supporting Tehran, or dismantle their strategic alliance with the Iran-led resistance axis.

The memorandum mandates a review and revocation of all US waivers related to trade with Iran—waivers Iraq heavily relies on to import natural gas for electricity generation, a trade that generates approximately $2.6 billion annually for Iran. It also imposes sanctions on entities facilitating the smuggling of Iranian oil, a practice in which official Iraqi institutions are suspected of being complicit. 

Furthermore, it explicitly prohibits Iran from exploiting Iraq’s banking system to circumvent sanctions. Should the Iraqi government fail to address these issues effectively, it risks sanctions that could paralyze its energy and financial sectors.

Patronage networks at risk

Iraqi political parties depend on sprawling patronage networks—systems of political loyalty sustained by distributing public sector jobs—to manage and expand their influence. By controlling appointments to the public sector and key executive positions, they secure popular allegiance and maintain electoral support. Following the 2019 protests, the tactic of hiring more public sector employees—regardless of their qualifications or the necessity of their roles—emerged not only as a means to bolster these clientelist networks but also as a shield for the political system against future unrest. 

This has fueled a massive, ongoing effort to pacify society through salaries, pensions, and social welfare programs in exchange for political compliance. The system effectively absorbed the 2019 protests by employing many of the supporting segments and defusing their discontent through payroll inclusion. Consequently, Iraq’s budgetary operational costs have ballooned to roughly $47 billion.

Yet, this reliance on public sector employment, while offering temporary relief, could become the system’s Achilles’ heel if the state cannot sustain salary payments. In November 2024, the Council of Ministers approved a one percent deduction from employee and retiree salaries, designating it as donations for Gaza and Lebanon. Despite the modest amount and its association with causes popular among Iraqis, the fierce backlash forced the government to retract the decision and reimburse the deductions retroactively to avert further public outrage.

If US sanctions on Iran extend to Iraq’s ability to export oil or access hard currency like the US dollar, the state’s capacity to pay salaries would be gravely undermined. This could ignite protests larger and more intense than those of 2019. The expansion of patronage networks has reshaped public perception, with Iraqis increasingly viewing the state not as a guardian of rights or a catalyst for development, but solely as a guarantor of income. Failure to meet this expectation could trigger the system’s collapse. The reaction to the one percent deduction offers a window into how Iraqis now perceive the state, and sustained US sanctions could pit the political establishment against millions of frustrated public sector workers.

The relationship with the Resistance Axis

For political factions adhering to the doctrine of Wilayat al-Faqih (Guardianship of the Jurist), their deep ties with Iran—often at odds with Iraq’s national interests—are vital to retaining power. Just as Iran has safeguarded Bashar al-Assad in Syria, the Houthis in Yemen, and Hezbollah’s dominance in Lebanon, it employs a similar strategy with Iraqi politicians. 

During the 2019 protests, Iran supplied the religious edicts (fatwas) and ideological justification needed to suppress demonstrators. Supreme Leader Ali Khamenei framed the protests as “an attempt to drive a wedge between Iraq and Iran,” later urging those concerned for Iraq and Lebanon to “address the riots and insecurity caused by the United States, the Zionist entity, and certain Western states, funded by reactionary regimes.” 

Then-President Ebrahim Raisi added that “unrest in Iraq aimed to disrupt the revered Arbaeen pilgrimage… seeking to ignite an American-Saudi fitna (sedition).” Tehran’s Friday prayer leader, Imami Kashani, noted that “the enemy is focused on the Arbaeen procession and Iraq, creating troubles.”

These statements translated into tangible action, with Iran dispatching senior Islamic Revolutionary Guard Corps (IRGC) officers experienced in quelling civil unrest to advise the Iraqi government, according to Reuters. Iran’s role in suppressing the 2019 protests was aimed at preserving Iraq’s political system—a role it has played repeatedly since 2003. This influence has fostered a persistent dependence among Iraq’s political elite on Tehran for protection during crises. To ordinary Iraqis, it represents a brutal instrument of repression; to the ruling class, Iran remains the only regional ally willing to defend them.

Necessary steps

Iraq’s political system stands at a crossroads: it must either sacrifice its current relationship with Iran to evade US sanctions or risk a popular uprising that could destabilize it. Strengthening ties with neighboring states and forging new partnerships may be the only way to reduce reliance on Iran and shield Iraq from sanctions without triggering internal collapse. Countries like Qatar and Turkey could replace Iran’s natural gas and electricity supplies, while trade agreements with Jordan, Saudi Arabia, and the UAE could offset goods currently sourced from Iran.

For Iraq, diversifying regional partnerships transcends merely dodging sanctions; it is critical for ensuring long-term stability and autonomy, preventing overreliance on any single foreign power. This approach should have been pursued in the early post-2003 era, but Iran’s growing influence gradually enabled its allies to dominate Iraqi political decision-making. Political parties must also recalibrate their relationship with Iraqi society, taking decisive steps to rebuild trust in the democratic system—a trust that has eroded with each election, as evidenced by declining voter turnout.

The United States should frame any potential sanctions on Iraq within this context. Future measures should encourage Iraq’s political elite to pursue robust, long-term partnerships with regional allies aligned with the US. Such measures should also aim to repair the bond between political factions and the Iraqi public while weakening militias likely to resist Iraq’s openness to its neighbors. A rushed, ill-conceived, or punitive sanctions strategy could deepen Iraq’s political dependence on Iran and deprive ordinary Iraqis of resources, ultimately amplifying the ability of wealthy parties and militias to exploit public needs and secure greater loyalty.