ASSESSMENTS

Iraq Faces America's Economic Wrath

Jan 14, 2020 | 10:00 GMT

The U.S. Embassy in Baghdad is seen on Jan. 2, 2020, following an attack on the facility.

The U.S. Embassy in Baghdad is seen on Jan. 2, 2020, following an attack on the facility. If Iraq pushes U.S. troops to leave, the country will find itself in America's economic crosshairs.

(AHMAD AL-RUBAYE/AFP via Getty Images)

Highlights

  • Washington will tighten the enforcement of its existing sanctions on Iran and Iranian proxies in Iraq, meaning more companies, banks and individuals will fall afoul of U.S. measures.
  • The United States will probably expand its sanctions beyond just Iranian-backed militias in Iraq to target pro-Iran politicians directly.
  • The country could impose limited economic sanctions on Baghdad, but only in the event that it is forced to remove its troops from Iraq.
  • The United States is likely to tailor any economic sanctions so as to hurt Iraq's economic future rather than inflict immediate significant economic harm — the latter of which would only occur should American forces suffer significant casualties in the pullout.

For companies active in Iraq, threats to physical security -- whether from a possible military conflict between the United States and Iran, militia violence or a resurgent Islamic State -- aren't the only thing they need to worry about. That's because dark economic times could also be on the way, especially as U.S. President Donald Trump has threatened to enact sanctions on Iraq if Baghdad continues to push for a withdrawal of U.S. forces from Iraq following the U.S. assassination of Qassem Soleimani. If Baghdad pushes U.S. forces out, the aftermath, bluntly speaking, will be messy. Given that bilateral diplomatic relations would inevitably take a nosedive in such a situation, the United States would most likely impose punishing sanctions on Iraq. And even if such measures don't come to pass, the United States' campaign of maximum pressure on Iran will certainly leave Iraq worse for wear as well....

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