Transcript: Webinar – New Leadership in Baghdad: Implications for U.S. Interests and the Broader Middle East
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PANELISTS
Michael Knights
Chief Product Officer, Horizon Engage; Author, Back to Basics: U.S.-Iraq Security Cooperation in the Post-Combat Era (2023)
Joel Rayburn
Senior Fellow, Hudson Institute; Former Senior Director for Iraq Policy, U.S. National Security Council
The discussion was moderated by JINSA Vice President for Policy Blaise Misztal.
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TRANSCRIPT
Transcript has been lightly edited for flow and clarity.
Blaise Misztal:
Good afternoon, everyone, and welcome to another JINSA webinar. We are here to discuss what seems to be a rare moment of U.S. and Iranian agreement, which is the support for the current recently created new Iraqi government.
Here to discuss whether in fact that is a good thing or a bad thing, or something that Washington and Tehran should be in agreement on, I am delighted to be joined by the two foremost experts on everything Iraq in Washington, Michael Knights who is the Chief Product Officer at Horizon Engage, and Joel Rayburn, a Senior Fellow at the Hudson Institute and previously the Senior Director for Iraq at the National Security Council, and the author of a two-volume history of the Iraq war.
Welcome, thank you for being with us.
Joel, maybe I could start with you. Iraq held parliamentary elections at the beginning of November of last year, and yet the prime minister was selected, and the government was formed just two weeks ago. What was the process and why did it take six months to go from the election to government formation?
Joel Rayburn:
Well, good to be with you, Blaise, and also good to be with Mike.
One of the reasons that it took so long is that it always takes so long. The Iraqi system is pretty clunky and even as written in the constitution, all the constitutional timelines get thrown out the window. Procedurally, what the Iraqis would do, [is that] they would elect a parliament, the parliament would be seated, the parliament would then elect a president of Iraq in a slate of vice presidents, and then the president would task the largest bloc in the parliament with nominating a prime minister. Then there would be a certain amount of time for the prime minister-designate to be able to form a cabinet, which then comes back to the parliament for ratification.
Actually, I skipped the very first step, which is that the parliament, once it meets, has to elect a speaker. In Arabic parlance, there’s a president of the parliament, a president of the republic, [a] president of the country, and then a president of the government. So, Iraq has to go through three elections. They have the elections of parliament, and then three elections after that for the leadership.
The way things have emerged is politically, that’s what’s written. What’s unwritten is that each of those three presidents is allocated to a different communal bloc within Iraq. So that the speaker of parliament has come to be designated for the Sunnis of Iraq, the Sunni political blocs. The president of Iraq has come to be allocated, de facto, for the Kurdish blocs, and the president of the Republic, or the prime minister, has come to be allocated for the Shia political blocs.
Now, there’s a fight, then there’s a competition within each of those communal blocs for who is going to get those positions. There’s a protracted political battle for that, because each of those communal blocs are subdivided in different political groupings that are competing with one another and they’re shifting alliances.
In reality, just as is the case in Lebanon, this is exactly the kind of consociational arrangement that’s in Lebanon. In Lebanon [it] is written into the constitution and the governing law. In Iraq, it’s just de facto the practice, but it may as well be written in law. I mean, it’s as firm a constitutional element as any. In the same way that the British constitution is not really written down, but there is a very clear set of constitutional guidelines, that is what is happening in Iraq. It’s a consociational arrangement. It would be very difficult for anybody to change that, and what it also means is just as in Lebanon, none of the positions is agreed until they’re all agreed, because all of the blocs are jockeying for their influence over each of the three positions.
So, the Shia political blocs will line up on one side or the other of who will be the president of the parliament among the Sunnis, and so on. So, the Shia and the Kurds will weigh in and have an impact on who will be the Sunni, which Sunni bloc gets the speakership of the parliament. The Sunnis and the Shia will weigh in on which Kurdish bloc and nominee get to be the president of the parliament. Then everyone weighs in on who gets to be the prime minister, which comes from the Shia bloc. That is the arrangement, and that’s why it would take very long, even if it were perfect wartime, prosperous conditions, and the whole region were in a state of stability.
If you layer in that the Iraqi election took place at a time of regional conflict, and then there were outside powers also competing to influence the shape of the formation of the Iraqi government. Then it slowed down even further. I mean it’s a miracle that the Iraqis ever see any government at all, so it certainly wasn’t unusual that this one took as long as it did. Let me stop there, because Mike probably has some thoughts as well, but that’s the general backdrop.
Blaise Misztal:
Yeah, thanks, Joel.
So, Mike, let me turn to you. Maybe tell us a little bit about the outcome of the elections, and who the major players were in this process of jockeying for government formation.
Michael Knights:
Thanks so much. It’s great to be here with you both.
To add on to some of the things Joel said, and he literally wrote the book on Iraq, ‘Iraq after America’, which is still a great read, I’d say this. First of all, it’s a miracle they form a government, but it’s a miracle that happens every time, right? So, it’s kind of something that they’ve got very used to doing. Even though they do stretch a lot of their constitution, definitely the spirit of it is stretched. Often, they are very focused on having elections roughly on time, and in this case forming the government roughly on time.
They took about the maximum time they could to do some of the stages of it, but you could see they were keen to keep it on track. One of the reasons for that, I think, is that the Shia religious parties and militias who run the country gain enormous benefit from running it. They don’t want it to collapse into complete chaos, e.g., for instance, constitutional time frames don’t mean anything anymore, when the prime minister can just stay in position as long as he likes. No. There’s reasons why they try and keep things roughly on the train tracks, even if the train tracks are heading somewhere pretty bad.
I don’t tend to talk a lot about the Kurdish or the Sunni political groupings in Iraq, because they’re not the ones who are running Iraq. They’re not the ones who are picking the prime minister, which is traditionally, as Joel said, a Shiite role. They’re not the ones who are ultimately running the most powerful posts in the country, such as finance, interior, the prime ministership itself, the intelligence agencies, the central bank, and things like that.
So, the key parties within what we call ‘the coordination framework’, which is the pan-Shiite bloc in parliament that agrees who the prime minister is going to be, and they have a majority of the seats in parliament, so if they want to, they can pass pretty much anything if they work together. Those guys have split into a number of factions. Even the Shiite part, which is about 60% of parliament, is split at least 10 ways. So, you can imagine this is a pizza. The Iraqi parliament is a pizza that has about 32 slices in it, and nobody’s going to get much of a mouthful with 32 slices. It takes an awful lot of pulling people together into coalitions. They’re very fragile.
In this particular case, the reason why we’ve got Ali al-Zaidi as the new prime minister of Iraq, a banker, a money changer, a businessman, from a major southern tribe who everybody in the system has made money with at some point or the other. It’s because none of these coordination framework players could agree who would be prime minister. They all said, “We want a say in who will be the prime minister designate”, but nobody wanted to accept everybody else’s compromised candidates that they were putting up, who were in fact the candidates they themselves had in their pockets.
So, in the end, out of pure inability to break the deadlock, they reached somewhat outside of themselves to a candidate. Not to former Prime Minister Nouri al-Maliki, who Donald Trump said cannot be the next prime minister of Iraq, he was no good last time, he can’t do it again. Not to designated terrorists like Asa’ib Ahl al-Haqq (AAH), who have 26 seats in parliament out of 329, one of the largest Shiite blocs. Not to Badr, that was formed by the Iranians, that has about 20 seats in parliament. [They are] not yet sanctioned, but very close to the Revolutionary Guard, not close to former prime minister Mohammad Shia’ al-Sudani, who had 46 seats, but his bloc has already split into two pieces, and so they’re both smaller factions now.
None of them could push their compromise candidate forward. Instead, the Supreme Court judge of Iraq and a number of other factions said “Let’s see if this businessman can be somebody that we can all work with”. At the moment, that’s what they went with. The Gulf states embraced him, mostly. The Jordanians embraced him. Ultimately, the US embraced him, and after that the Iranians embraced him, and the Turks, and the Pakistanis, and others.
So, the creation of this prime minister is a very important thing to understand. How a person comes to the throne in Iraq is the most important thing about them. Who put them there? What did they offer those parties? In this case, it would appear that [the] prime minister has not necessarily offered any of the key Shiite parties anything in particular yet. He might have made certain assurances that some very negative outcomes from their perspective wouldn’t happen, like complete removal of all the militias. He might have made some of those assurances to the Iranians too. I think the Gulf states and the U.S. probably had more of a role in shaping the introduction of this prime minister-designate than has been the case in the past. So, in the past, the Iranians went first, and we said, okay. This time I think we went first, and they said okay. I don’t know if Joel would agree with that at this stage.
Joel Rayburn:
Yeah, I think that’s right. I mean, there’s been a pattern of all but really one. I think every prime minister that’s come out of the Shia bloc consensus since 2005 has gotten the mandate because they were viewed as non-threatening to the interests of the major Shia political blocs and to the Iranians. So, every prime minister that’s gone in since 2005, the other blocs have assumed that [the] prime minister would essentially be under their either control or heavy influence. [They] wouldn’t have a mind of their own, wouldn’t have an independent power base, wouldn’t be able to make decisions without consensus support.
That’s been largely true for all but one, and that was Nouri al-Maliki, who was able to get into office and develop his own power base, organize in a very Stalin-esque way, and seize control of the government apparatus in an unprecedented way. Also, since Maliki’s prime ministership ended, all the other parties have said, “Well, we don’t want another Maliki. We can’t have that. We need to make sure that whoever we choose can’t do what Maliki did and consolidate power.
So, the blocs that wind up agreeing to the prime minister then will take all the steps possible to prevent the prime minister from consolidating enough control and power to be able to actually execute policies over their heads. I think that is what they’re banking on with Ali al-Zaidi in this case. He’s a bit of an unknown quantity, he’s not a politician, so we haven’t seen him in leadership. Whether he will be able to consolidate the kind of power basing and control that he would need in order to strike an independent policy line from the rest of the Shia parties.
It’s somewhat unpredictable for those political blocs, because he comes from the business community. [He is the] first person to come in from that community. Everyone else that’s been prime minister of Iraq has come from the Shia Islamist political world, maybe with the possible exception of Mustafa al-Kadhimi, but he was in that milieu in the opposition in the pre-2003 opposition galaxy of Shia blocs. So, he was very well known to them.
So, [it’s] a bit of a gamble by these other political blocs. Also, the fact that he is perceived as having, as Mike said, a very close relationship with the Supreme Court judge Faiq Zidan. [He is a] very powerful figure in Iraqi politics, probably the most powerful figure in Shia politics, for sure. So that’s what I would say to extend Mike’s points.
Blaise Misztal:
Joel, maybe just sticking with you and staying with Maliki for a second. It did seem like in January there was talk that Maliki was going to be the prime minister candidate. Then, as Mike said, I guess President Trump shot that down or threatened to not waive sanctions on Iraq if they went through with the Maliki nomination. Was that actually a serious attempt to put Maliki back in power after that experience that you just described?
Joel Rayburn:
Yeah, that was a serious attempt by Maliki to put himself back in power. So, I think what’s happened [is that] since Maliki left office, he remains a very powerful leader [of a] very powerful bloc. Essentially with the state of law, which is kind of like his ‘Dawa Party +’ within the Iraqi parliament. This is a big bloc, and he is the head of it, and so he has banked on being a kingmaker. Since he couldn’t return after 2014 as prime minister, for the last 12 years, his influence has come from being one of the kingmakers.
He’s one of the people that had to agree to who would be the Shia premier, who would get the mandate from elsewhere in the Shia bloc, is essentially how Mohammad Shia al-Sudani became prime minister.
He was fully backed by Maliki, came from that state of law kind of coalition. Sudani, as soon as he got into office, then began trying to do what Maliki had done, which was to consolidate his own control and be independent. It wasn’t very long before Maliki and some of the other Shia political grandes who had put Sudani there said, “Well, when it comes to the next government, that guy for sure will not be returning over our dead bodies”. So that was the immediate.
Then Sudani won the largest electoral bloc and attempted to get the mandate for himself, but these other blocs, having already said “over our dead bodies,” then were in a stiff-arm wrestling match with him to deny him the mandate. The United States was de facto supporting Sudani for continuity’s sake, and because Sudani had made commitments to the U.S. on curbing militia power and doing things to expand the U.S.-Iraq relationship. Not just the security relationship, but the economic relationship in particular.
But when it became clear that the other blocs were going to essentially block Sudani from returning, and the question went to, “Well, who then comes forward?” At first, Maliki then thought of nominating someone else from within his bloc, and so there were some names floated on who that would be. But, when things started aligning, I think Maliki then began saying, “Well, maybe this time I don’t have to just be a kingmaker, I don’t have to just send a proxy in to nominate a prime minister. Maybe I can just do it myself.”
He seemed to have Iranian support for that, and he seemed to have the support of some of the militias. That got very far down the road, with the U.S. having a quiet opposition to it, but Maliki not really getting the message, or not believing the messages that he was getting, which tended to be diplomatic and nuanced and not very straightforward. Until it had to go all the way basically to the Oval Office for President Trump to clarify the U.S. position and say, “Over our dead bodies will that guy return as prime minister,” and then that ended his candidacy.
At that point, Prime Minister Sudani then first tried to come back in to get himself the mandate again, and then, as that was still essentially checkmated by the other Shia blocs, then it became a competition of proxies. Maliki then put forward a candidate from his block. Prime Minister Sudani then countered with his chief of staff. So that essentially, each of them vying to be kingmakers, the Shia parties deadlocked between those two, and then that threw the way open for an outside candidate going off the board. Faiq Zaidan came in, and some others came in and supported Ali al-Zaidi.
That was the Shia political bargaining and positioning that went on. Now, during this entire process, the United States was weighing in, and Iran was weighing in. But just among the Shia parties, that’s essentially what happened.
Maliki and Sudani canceled each other out, and then that left the way open for the outside candidate, which was Ali al-Zaidi, almost by default. I think the rest of the parties, though, what they will be hoping for, is to have the same kind of arrangement with Ali al-Zaidi as they’ve had with previous prime ministers. Which is to say “All right, we will agree to your mandate. as long as you agree to the following laundry list of things that will render you not a threat to our bloc’s interests,” and the Iranians will have done the same thing.
Blaise Misztal
So, Mike, how should we think of Zaidi? I mean you said that there’s not much known about him. He doesn’t have a political background. Does that mean he’s a political blank slate? Do we think he has an agenda or an ideology?
How much is he likely to be controlled by the various factions that put him in power versus be independent. What should we expect from him?
Michael Knights:
Anyone who has owned a bank in Iraq and in the world is not a blank slate, the US Treasury knows him very well. So do, for instance, U.S. grain importers, because he is the biggest aggregator of foreign grain coming into Iraq, and a lot of that is American. So, whether it’s our business community, whether it’s our banking regulators, whether it’s our intelligence community, we know Ali al-Zaidi a bit better than it might appear.
I think he’s somebody whose own bank was, for instance, banned on U.S. instructions from the Iraqi dollar auction, their way of getting dollars into the hands of Iraqis, in theory, who need them to cover import costs. But in actuality, [it is] the way that the militias divert a lot of dollars to Iran.
So, he’s had to have those negotiations with the U.S. government about how to fix his bank, how to work with U.S. law firms, regulators, lobbyists to fix that. So, in some ways there’s more track record there for the U.S. than some people might think.
He’s a relatively gentle person. In other words, he’s quite well mannered. He’s not a political fighter; he’s a businessman who always tries to come to some arrangement with people. He has worked with pretty much every key faction in Iraq in the kind of banking money exchange – to put it in a polite way. As a result, he’s somebody that they’ve all found to be workable, and the U.S. has as well. So, in many ways, he’s a guy with no overwhelming black marks on him, which is difficult to find in Iraq.
Whether he’s a guy who, as Joel pointed out, has any experience running large bureaucracies. No. Does he have any experience having to look someone in the eye and tell them, “Do what I say, you’re going to prison?” No, he doesn’t really.
Iraq is a place where business is tough, it’s hard-edged. But at the same time, he’s not one of the more hard-edged businessmen. So, he’s entering a world now–and you can see it sometimes on his face in the photos–where he knows he’s in, I won’t say over his head, but right up to his nose, and you know he can just, he’s just about staying above water now.
Now, the good thing is, I don’t think Zaidi is a standalone individual. He has no team of his own. He’s going to get the team that’s given to him by political factions, and also by the judiciary, and by the military and intelligence services. The strength of that team, and where they help him to lean, or pull him to, will be what really tells us what kind of government we’re going to get with Zaidi.
We’ve had good men run Iraq, I think like Mustafa al-Kadhimi, prime minister from a few years ago. But they were not necessarily hard enough to do the things required to break the power of militias and corruption networks. We’ve had bad men run Iraq, like Nouri al-Maliki, and a couple of others, Shia’ al-Sudani, and not everything they did was wrong.
So, it’s really about how he came to the throne, and that’s encouraging. This time, he was not picked by Iran, which is rare in Iraq, and then it’s what kind of team you build around you. That’s up in the air still, but it’s getting slightly encouraging. We’re seeing, particularly in the intelligence and security realm, individuals getting rotated out who are very bad news and are very tight with the Iranians or with the militias or both, and we’re seeing other people rolled in who might not be quite that way.
So I might be hopeful. When you say, “How should we view Zaidi, the prime minister?” I think we should very much view him as an opportunity. I’m happy to discuss in a little bit more depth why the moment right now is so potentially transformative for Iraq if the U.S. leans into supporting this prime minister. But also disciplines him and the broader system if they fail to do the things they need to do to get Iraq back on the right track,
Blaise Misztal:
That is definitely something I want to dig into, but let me get Joel’s take on Zaidi, and how we should understand him.
Joel Rayburn:
My take largely accords with Mike’s. Coming from the business community, he’s had to maintain business relationships with all of these political blocs and not make enemies. So, I don’t think he has enemies right now, which sets him apart from probably all the other candidates that were out there. He’ll have a bit of a honeymoon period with the United States.
But each one of these blocs in the United States and the Iranians have set very firm expectations for him to deliver on, and he’s going to have to make some choices because some of the expectations are mutually exclusive to one another.
He’s not going to be able to satisfy everybody, and as Mike pointed out, he’s going to have to be administering a state, and a vast one. The Iraqi state is enormous. Its military security apparatuses are vast; the ministries of Iraq are gargantuan. He’s going to have to be running them. There’s a budget, I mean, my goodness, to come into the seat at a time when the Iraqi government budget is so bloated. It’s so large, and the state provides so many services, and has so many Iraqis on the payroll. The break-even point for oil has to be very high, and that’s if you’re exporting it.
The Iraqis aren’t exporting oil very well right now, because of the closure of the Strait of Hormuz. It hurts them just about more than anybody else, because their alternatives are quite meager. So he’s going to be coming into office at a time when they’re going to be at a big cash flow deficit, so he’s immediately going to have a budgetary crisis that he’s going to have to negotiate with.
And guess what, if you’re cutting down different parts that you’re having to cut back on the budgetary expenditures. The political economy is so thick in Iraq that he’s immediately going to have to be negotiating, strong arming, cajoling different political blocs, which say, “Well, wait, not my share of the budget, not our share. That ministry, that’s ours, that budget comes to us, or that governorate,” and so on. So, it’s going to be tough.
He’s in an even more difficult, I think, probably the most challenging environment confronting any new prime minister, probably since Haider al-Abadi walked into office at a time when ISIS owned a third of Iraq. I mean, can you imagine? So, it’s certainly the toughest task of any new premier since then.
Blaise Misztal:
Joel, I could just ask you to expand on that a little bit, because you said he’s going to be pulled in multiple directions by competing interest groups or factions. So, I wanted to ask you to tell us a little more about the sort of issues facing Iraq that he’s going to have to confront or be pulled on. You talked about the economic challenge with the closure of the strait. What are the other areas in which there’s going to be pressure on him to move one way or the other.
Joel Rayburn:
I think the biggest one is that the government revenues for a decade and more, because it’s vast oil production and export and revenues, along with in gas. For quite some time an increasing portion of the government’s oil revenues have been diverted or been siphoned off by political block in Iraq. So it’s reduced the share that the government writ large is able to use to finance itself. So if he’s going to balance the budget, [if] he’s going to keep the state functioning, he’s going to have to claw some of that back.
Which of the political blocs does he claw it back from? How, which actors, and so on. That’s going to be that’s the first minefield in which he has to walk. The other part of the budget, the functioning of the state, is the payroll. It is vast and hyperinflated and full of non-actually working people. So, ghost employees, ghost soldiers, ghost policemen, and so on.
All the political blocs get a share of the budget of this ministry or that security service or this government, and so on, by having a certain share of people on the payroll. He’s going to have to reduce and rationalize that. Every prime minister that has come into office in the last 10 years has tried to grapple with that and reduce the payroll, or reduce it in one area and expand it in another, based on the politics.
But every prime minister’s come in and said, “My God, we cannot support this payroll, we can’t keep millions of people on the government payroll. It’s got to be reduced.” That’s huge. That’s a huge share of the political largess, and he’s certainly in a time of constrained resources, which is going to be for quite a while in Iraq. Then he’s going to have to fight that. But I’d say those are the two biggest ones, are the revenues from the energy sector, and then what do you do with the budget, what do you do with the government money.
The Iraqi state contracts for everything under the sun all across Iraq, and so there’s a huge political competition to get the contracts. So, it’s the revenues from the energy sector, it’s the payroll, and then it’s which of the political blocs gets this or that contract. If he really wants the functioning state, and a state that has viable finances, he’s got to get those under wraps, and those are very, very difficult. They’re also all interconnected.
Blaise Misztal:
Alright, Mike. I’m eager to hear why you think this is a potentially hopeful moment, and how the United States can make the most of it.
Michael Knights:
In the past, when new Iraqi prime ministers have come in, I’ve traditionally had a moment of hope with them. Sudani was a bit of an exception. I didn’t like how that started. I understood better what kind of audition process he went through to get the job with the Iranians. Likewise, with one of the ones before him, Adil Abdul Mahdi.
I feel more hopeful in this case for a couple of reasons. The big breakthrough moment for me in understanding Iraq and its governance, is this idea that it’s how a person, it’s how a man comes to the prime ministership, that matters. It really sets the tone for what follows. It’s hard to break out of a very subordinate relationship with the Iranians and with Iraqi Shia militias, who are in many cases U.S. designated terrorists, if that’s the position you started from.
I think this guy starts from a slightly different position, which is that other forces, except the Shia militias, have had a role in picking this guy. One of them is Judge Faiq Zaidan, Supreme Court judge in Iraq. One is probably Thomas Barrak, the U.S. Super Envoy for the Middle East.
I think some of the people behind Zaidi are people who care quite a lot about what the Gulf states think, the Emiratis, the Saudis, and others. Put those three things together with this current moment, you have a very particular opportunity. The U.S. has just demonstrated, for all of its hemming and hawing about Hormuz, that it is pretty serious about the threat posed by the Iraqi militias.
It said, “We don’t want Nouri Al Maliki as a prime minister.” He said, “We don’t want Iraqi militias and terrorist leaders in the cabinet,” and that’s held until this moment. Then during the war, we have mounted more strikes on the Iraqi militias than we ever have at any stage, right back to when we were physically in the country pre-2011 and even then further back. I mean, this is like 2008 levels of striking that we’ve been doing in this last war against Iraqi militias firing at both the U.S. and at the Gulf States and Israel from Iraq.
So, we’ve demonstrated that we’re pretty annoyed with these militias, and against the backdrop of everything that’s happened with Iran, everything that’s happened this year, everything that’s happened with Iran and Lebanese, Hezbollah and the Houthis in the previous couple of years. These groups are recognized as being a dangerous enemy, and in this war they’ve been more dangerous than they’ve been at any point in the past.
Why do I say that? In the past, Lebanese Hezbollah was the heavy lifter for the Iranian regime in terms of its external proxy rocket and missile force. Then the Houthis took over for a while. In this war, it’s been the Iraqis. They’re the ones who have received the most up-to-date missile, rocket, drone systems. They’re the ones who have done the most attacks on the Gulf states and on U.S. forces.
These guys, if we look, we just saw Mohammed Baqer al-Saadi, one of the members of the Iraqi militia, seized by the U.S. in Turkey, brought back to the U.S. because of terrorist attacks he was planning against the continental U.S. in North America, and had already planned in places like Europe and the UK. So, these guys were going international and even threatening key U.S. leaders and their family members.
All these things mean that the Iraqi militias are somewhat in the spotlight right at this exact moment that the Iraqi government is taking shape. There are moves in countries you can see where the people who want to reduce the power of the militias are starting to move chess pieces on the ground, because they may feel that they have U.S. and Gulf support ultimately.
I think this is an opportunity, but it’s also a moment that we could easily flub, and how do we flub this moment? The only real risk right at this exact second is that the U.S. government’s Middle East policy community is out to lunch on Iraq. One wouldn’t necessarily blame them for being out to lunch on a country like Iraq. They’ve got Iran, they’ve got Israel, Lebanon, they’ve got Gulf States, they’ve got all sorts of things going on. But I’ll just say this, Iraq is not a small place, as Joel said. It’s not Lebanon. It’s seven times the population, it’s seven times the income, it’s one of the largest oil producers in the world, top five.
But also, more importantly, with the amount of effort it would take to push Iraq in the right direction, if you applied that same amount of effort to Iran, you wouldn’t get a result. You wouldn’t get that result with Israel-Lebanon, probably. You wouldn’t change fundamentally your relationship with the Gulf states. Iraq’s a place where, with one unit of effort in how its prime minister acts, or actions they take against militias, whether they let any militiamen into the cabinet ultimately. We can actually put the place on quite a different track, potentially, or at least put their foot on the path to a new track. That, for me, says efficiency-wise, that’s something the U.S. might want to put some effort into right now, because it’s a fleeting opportunity, and it’s a place where you can actually achieve a lot more bang for the buck diplomatically. That’s my feeling for why this is a moment of quite significant opportunity.
Blaise Misztal:
All right, well, I have a couple more questions for both of you, but wanted to also open it up to the audience, so if you do have any questions for Mike or Joel, feel free to submit them using the Q and A function in Zoom, and then I’ll read them out.
But for now, Mike, let me stay with you. You mentioned the role of the Gulf States and helping choose Zaidi, and also the attacks of the militias on the Gulf States. We’ve also had the Gulf States, according to reporting, the Emiratis and Saudis, striking those Iraqi militias that have been attacking them inside of Iraq.
Does that create either new interest from Gulf States, or new leverage from the Gulf States, that can also be brought to bear to try to limit the strength of the militias inside of Iraq? Or is it principally still going to fall on the United States to try to break that stranglehold?
Michael Knights:
I think the Gulf states can alter the situation in Iraq on their own, but what they are signaling is they’re very, very upset with the number of attacks that have come out of Iraq during this war, especially considering the fact that the Gulf states at the start of this war did not base U.S. forces, were not involved as an offensive partner, but we’re attacked anyway.
When it comes to being attacked from Iraq, they’re not being attacked by Iran across the Gulf. They’re being attacked by an Arab neighbor next door that also has no part in the war. So, it’s kind of doubly offensive from them.
Iraq is also a place where the Gulf states can strike back in a way that sends a signal to Iran and to pro-Iranian elements in Iraq, but doesn’t have quite the same risk attached to it as attacking mainland Iran, which it appears at least the Emirates have done, even during this war.
But you know, in this next phase, as we’re into a sort of a weak ceasefire, messy ceasefire, in the Gulf, to some extent, it’s a lot easier to do cross-border stuff into Iraq, and the Iranian-backed groups have found that they can get away with firing stuff into the Gulf from Iraq in a way that perhaps direct attacks out of Iran would have been more difficult to accept, and might have affected the ceasefire or brought a U.S. response.
So, I think the proxy war involving Iraq and the Gulf is going to get more interesting. It’s not that the Gulf States played a role in picking Zaidi. It’s that a businessman like Zaidi, who’s a true international businessman, not just some militia front company who has to do most of their business in the shadows, but basically a respectable businessman like Zaidi understands that you cannot get on the wrong side of the U.S. and the Gulf States if you want to be connected to the global financial system, and if you want to have a chance of fixing some of the stuff wrong with Iraq’s economy, which is a state killer.
The way the economy is structured, the over dependence on oil, the massive deficit every year, the fact that the oil prices could go low and then double or triple that deficit at some point in the future. All of these things mean the survival of Iraq as a modern industrialized nation requires international support, including connection to the global financial system and the U.S. and the Gulf states.
So, what it means is we’ve actually got some people inside the system now in Iraq who are not looking narrowly, saying “I will never go on vacation in Europe, I will never openly have a bank account or a business in Europe, because I’m an Iraqi militiaman that’s been sanctioned by the U.S., or might be.”
No, this is the people who actually want to be a part of the world saying we should not upset the Gulf States in this manner. We should, at the very least, stop attacking them and maybe bring some of those people to justice, or at least disempower them in a way that the Gulf states can recognize. So, that would be some comments on the Gulf side of this.
Blaise Misztal
Thanks, Mike. Joel, let me turn to you and get your thoughts on what the U.S. could be doing to try to positively influence the situation in Iraq, to try to strengthen Prime Minister Al-Zaidi and get a good outcome here, in particular when it comes to trying to sideline the militias.
Joel Rayburn:
Well, first, just to extend Mike’s point. In the same way that the Lebanese government eventually had no choice but to declare its opposition and for all of the non-Hezbollah political blocs to band together and say “We cannot tolerate a state-within-a-state threat to our neighbor when our neighbor is capable of, and willing to, defend itself by striking Lebanon”.
The Iraqi government faces something very similar now, because in the past it’s just been a one-way street. At the direction of Iran, the Iraqi Shia militants have been attacking the Gulf countries without any response other than what the United States would do on behalf of Gulf States. But in this war with the Saudis and Emiratis and others being willing to support those kind of direct strikes into Iraq, Zaidi and his government now have to come to the same point, and they probably already have to say, “We cannot tolerate a state-within-a-state threat that’s going to just going to provoke a war with our neighbors when our neighbors are militarily pretty capable.”
But the Emirates and the Saudis have air forces that are quite potent, that the Iraqis can’t match, and that would be very damaging for Iraq. Iraq can’t win that war. Also, as Mike said, Iraq can’t afford to be, not let alone at war, they can’t afford just to be politically at odds with the Gulf. They need access to the Emirates for their fuel, for their oil and derivative exports, and for their finances. They need access to Qatari capital and support. They need that kind of investment from the Saudis as well in their energy sector. They’re not going to be able to grow without that. They also need a constructive relationship with Turkey.
Another thing that’s been hit, that’s hitting home to the Iraqi government, and this is a place where the United States really can play a constructive role, is that the Iraqis have let the Iranians and their proxies inside Iraq veto the development of all alternatives for Iraqi oil exports other than Strait of Hormuz. The oil needs to flow south in order for the Iranians and their proxies to siphon it off and to parasitically draw from it. So, pipelines to the west, pipelines to the north, all those kinds of infrastructure projects, the Iranians have used their influence to prevent the Iraqi government from doing this.
This crisis now shows even I think some of the Shia Islamist parties, that means death for Iraq. If they have no alternative, if it comes down to a closure of the Strait of Hormuz, it means it’s an existential problem. So even those parties in Baghdad that are pretty Tehran-aligned know we can’t put all our eggs in the Iranian basket here.
So I think you’re going to see Iraq really developing these alternatives. The Iraq-Turkey pipeline, which already exists, but which is underutilized. An energy export channel through Syria, through Jordan, and so on. Maybe even in conjunction with Kuwait, which doesn’t have any other outlet of its own. You could see that kind of thing. That’s where the United States can help both economically and politically, to broker the political economy of these kinds of alternative projects.
If I were advising the US government, that’d be one of the things that I would focus on. We are allies of Iraq, we’re allies of the Gulf, we cannot have a war among our allies. So not just for our own purposes, but for the interest of all our allies, we’ve got to insist and maintain a very hard line about diminishing, and really trying to try to remove altogether, militia influence in the government and in the Iraqi economy.
Beyond that they’ll wither on the vine if they don’t have a place in the government, and they can’t participate on a large scale in the economy. So, we have an interest in that, not just for ourselves, but also in the interests of our allies. I think it’s those two things: keep pushing on the militia presence and involvement and their revenue stream, and then help to broker these alternatives and Strait of Hormuz for Iraq and its other neighbors.
Blaise Misztal:
All right, to wrap up, I wanted to ask both of you what you’re going to be watching for in the coming weeks or months as early indicators of how this government in Iraq is going. Whether in fact it is a hopeful moment, as Mike said, or whether it’s Iraq returning to previous patterns.
But Joel, let me stay with you. What are you going to be watching?
Joel Rayburn:
So I’d keep a watch on if the United States will be able to continue its hardline stance on no militia presence in the government. Then if you wind up having militia frontmen or someone sort of infiltrate in here and there, will the U.S. have the will to take action about that?
Secondly, will the Secretary Bessent and the Treasury have started to take actions against facilitators of militia revenue streams, especially in oil in the energy sector in Iraq. Will that continue? Is that just a flash in the pan that’s connected with the confrontation with Tehran? If the confrontation winds up getting resolved, does that mean an end to Economic Fury, which Treasury Secretary Bessent has done as the economic pressure analogue to Epic Fury? A lot of the focus there has been on Iraq. Will that focus stay in place after the military confrontation with Iran dissipates? So I think those are the two things to keep an eye on.
Blaise Misztal:
Thanks, Joel. Mike, what about you? What are you going to be looking out for to judge how things are going?
Michael Knights:
Once we get into June, after the Eid religious period in Iraq, we will start to get answers to some of our key questions. We’ll get the cabinet finished off, as Joel said, in Iraq, and we’ll see if they manage to hold the line on non-militia presence in the cabinet.
I think that one of the things I’m going to be watching for, we’ll see a couple of efforts to pull the wool over the U.S. eyes.
There will be an initiative in June where a number of militias say, “Oh, look, we’re handing off our weapons to the state, and there’s no problem anymore. You can de-list us as terrorist groups, or you cannot list us in the future, and now we are good to join the cabinet, right?” The U.S. at that moment either is going to get suckered or it’s going to know what it’s doing, and that’s a key moment. They think they can do cosmetic disarmament, and we won’t notice, and that’s going to be a very important one.
The other thing is we’re going to see where Zaidi goes on his first foreign visit. In the past, often the earliest foreign visits of a new prime minister have included Iran. Let’s see if this one does. I think not. I think he’s going to go west, he’s going to go south. He’s going to go to the Gulf, and he’s going to try and come to the U.S..
But the fact is, even if you’ve got a blank sheet, we need to see some things done before you get admitted to a White House visit or a Mar-a-Lago visit. So, again, I want the U.S. to stay tuned in.
I think one of the key indicators for me is how many times Thomas Barrack visits Iraq, has high-level interactions with Iraqi leaders, and how much he’s paying attention to the details. The devil is in the detail on all this stuff, and if he’s dialed in, and if he’s taking action against the right Iraqi leaders, and watching the right indicators rather than fake ones, then we’ll be okay. This moment, we can take advantage of it.
Blaise Misztal:
Mike, Joel, it is very clear that both of you are paying attention to the details, and very much appreciate you sharing them with us. Thank you for your expertise. Thank you to everyone who tuned in from the audience. Have a good afternoon and I look forward to seeing you on the next webinar. Thank you.