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Iraq Looks for Expanded Economic Ties and to Put Baghdad Back on Washington’s Political Map

Secretary of State Antony Blinken and Iraqi Foreign Minister Fuad Hussein prepare to address reporters before their bilateral meeting at the U.S. Department of State in Washington, DC, on February 9. (State Department photo by Ron Przysucha/Public D

2/26/2023 9:41:00 PM

By Ambassador Douglas A. Silliman

Iraqi Foreign Minister Fuad Hussein’s public outreach and official meetings seem to have put Iraq back on the policy agenda in Washington. But both sides will need to take further steps to sustain the positive momentum.


Fuad Hussein, Iraqi’s deputy prime minister and foreign minister, visited Washington February 9-15. As the first senior representative of Iraq’s new prime minister, Mohammed al-Sudani, to visit the United States, Hussein came seeking to expand and deepen “financial and economic relations” with the United States and declaring that his focus on the economy – and not security issues – showed that U.S.-Iraqi relations had reached a new stage and were “healthy.”

Unfortunately for Hussein, although his visit was long planned, he had to deal with senior officials in the administration of President Joseph R. Biden Jr. still focused on Russia’s invasion and occupation of Ukraine, the downing of a Chinese spy balloon, and concerns that Iran and Russia have used Iraq’s banking system to circumvent U.S. sanctions and gain access to U.S. dollars. To add more pressure, a February 2 letter from the new chair of the House Foreign Affairs Committee about Baghdad’s relations with the Kurdistan Regional Government and a February 10 letter from three other members of Congress that accused the Sudani government of aligning with the Iranian regime, being complicit in Islamic Revolutionary Guard Corps money laundering in Iraq, and discriminating against Iraqi Kurds showed that many in Washington remain focused on the negative – or at least more politically charged – aspects of relations with Iraq. From the Iraqi perspective, Hussein arrived in the wake of a currency crisis and steep fall in the Iraqi dinar following the Central Bank of Iraq’s implementation of new U.S. Treasury-mandated controls on Iraq’s dollar-exchange market.

With decades of policy experience and friendships with senior U.S. officials over four administrations, Hussein was a prudent choice to send to Washington. During his weeklong visit, he met with Secretary of State Antony Blinken, U.S. Special Presidential Envoy for Climate John Kerry, USAID Administrator Samantha Power, Deputy Treasury Secretary Wally Adeyemo, and other administration officials. With Blinken, he chaired the Cabinet-level Higher Coordinating Committee of the U.S.-Iraq Strategic Framework Agreement that National Security Advisor Jake Sullivan also attended. Hussein also had meetings in Congress, talked to U.S. business representatives, spoke to think tanks, and appeared in U.S. and international media.

To counter a strong narrative in Washington that Sudani’s government is complicit in the expansion of Iranian influence in Iraq, Hussein pointed to actions by the prime minister in opposition to Iranian goals in Iraq, particularly his January public statement of support for the continued presence of U.S. military forces in Iraq.

Hussein came to Washington with several concrete goals. First, he wanted to stave off imposition of U.S. sanctions on Iraq because of its dollar market, trade and importation of natural gas and electricity from Iran, and business dealings with Russia. On Iran, he achieved some success arguing that Iraq needs access to U.S. dollars to conduct legitimate international trade and that Iraq is dependent on Iran for more than 40% of its electricity production. U.S. sanctions might trigger a cutoff of Iranian gas and electricity supplies, which would have catastrophic effects on Iraq and the region. At the same time, other members of his delegation worked with U.S. Treasury and Federal Reserve officials to sharpen the technical details of the Iraqi central bank’s monitoring of the ultimate destination of U.S. dollar transactions in Iraq to strengthen confidence that fewer U.S. dollars would find their way into Iran. The strongly worded paragraph on currency markets in the Higher Coordinating Committee joint statement showed success in getting some flexibility from Washington but also made clear that U.S. expectations for Iraqi actions are high.

Similarly, the delegation argued that Russia is an important part of Iraq’s economy, so Washington should relax restrictions on transactions with Russia. The Russian oil giant Rosneft, for example, bought a 60% share in Iraqi Kurdistan’s main oil export pipeline in 2017 and committed in 2018 to fund a gas pipeline in the Kurdistan region as well. Washington, however, seemingly did not find the arguments for flexibility in transactions with Russia compelling, continuing its hard line against Baghdad’s economic dealings with Moscow.

Second, Hussein sought greater U.S. government and private sector investment in capturing the large volume of gas that is flared in Iraq and, therefore, wasted. He argued that Iraq spends $4 billion each year to import natural gas and electricity from Iran and, with the support of the U.S. government and private sector to replace those imports, the money saved could be used to provide services to Iraqis. Some in the delegation expressed willingness to reexamine earlier gas capture deals that had run into political opposition or died in the Iraqi bureaucracy. The joint statement showed strong U.S. government support for further development of Iraq’s energy sector.

Third, and behind the scenes, Hussein and his delegation sought to lessen the fears in the administration and Congress that Sudani is a product of Iranian support. They argued that the prime minister’s political backing comes not just from pro-Iranian political parties but from the two major Kurdish parties, Sunni parties, Christians, and moderate Shias. In addition to Sudani’s public support for U.S. forces, they pointed to his early policy focus on providing services to Iraqis and taking steps to confront corruption. The delegation pressed politely for an invitation for Sudani to visit the White House in the not-too-distant future as a sign of Washington’s support – something they argued could help the prime minister pursue policies, like economic and administrative reform, that do not have the support of pro-Iranian parties and militias. Coming from a trusted senior Iraqi Kurdish interlocutor, these arguments provided not only a counterpoint to fears of Iranian and militia domination in Baghdad but also a concrete step that Washington could take to strengthen the prime minister against potential pro-Iranian rivals.

Hussein’s most important accomplishment, however, was simply to put Iraq back on the U.S. foreign policy map in a positive way. The very senior U.S. participants in the Higher Coordinating Committee and Hussein’s extensive public discussion of Iraq seem to have convinced many in the administration to look again at how to make progress on the long-standing U.S. policy goal of a sovereign, democratic, and prosperous Iraq.

In the wake of his visit, both Baghdad and Washington have concrete steps they will need to take to build confidence.

From the Iraqi side, Baghdad will have to implement its dollar-market commitments faithfully. To expand the agenda beyond financial flows, Baghdad should consider more frequent trips to Washington by Cabinet-level officials, especially those with economic portfolios. Baghdad would be wise to select Cabinet officers able to argue convincingly that Iraq is committed, not only to signing memoranda of understanding with the private sector, but to doing business, perhaps with full implementation of a few significant business test cases. Finally, concrete progress in addressing the issues facing Iraq’s minority communities – particularly Iraqi Kurds, Yezidis, and Christians – could garner greater political support in Washington.

Washington, while remaining skeptical, should consider reciprocal visits by U.S. officials and invite greater discussion of the economic agenda that Baghdad is raising, especially on gas capture and climate issues. If Washington sees sufficient commitment from Sudani and his government to the agenda that the foreign minister set out, an invitation to the prime minister to visit Washington may not be out of the question.


Ambassador Douglas A. Silliman is president of the Arab Gulf States Institute in Washington. He previously served as U.S. ambassador to Iraq from 2016-19 and U.S. ambassador to Kuwait from 2014-16.