On the anniversary of the 2003 invasion, Iraq finds itself trapped between the same external powers that have defined — and destroyed — its last quarter-century
When American bombs first fell on Baghdad on 19–20 March 2003, the stated mission was liberation. Twenty-three years later, Iraq is again being bombed—this time not by U.S. forces seeking regime change, but by U.S. and Israeli strikes targeting Iranian assets and by Iranian-backed militias attacking American facilities.
The anniversary is heavy with irony. The invasion produced immense death, destruction, and prolonged instability. Iran—once Iraq’s bitter enemy during the brutal eight-year Iran-Iraq War (1980-88)—was arguably the biggest strategic beneficiary of the U.S.-led invasion, filling much of the political and security vacuum that followed the fall of Saddam Hussein.
Now those two legacies have collided. A country reshaped by American intervention has become a battleground for America’s confrontation with the regional power that intervention unwittingly helped empower.
A country still trying to find itself
Gallup recently reported that since 2009, Iraq had seen one of the biggest sustained increases in perceptions of safety anywhere in the world, a remarkable achievement after years of rampant sectarian violence, civil war, and the rise and fall of the Islamic State. That hard-won sense of normality is now directly at risk.
Iraq’s November 2025 elections reflected both progress and its limits. Voters faced a crowded field but produced no clear winner, triggering prolonged elite bargaining as the U.S. pressed Baghdad to curb militia influence and Iran moved to preserve its political and energy networks.
Prime Minister Mohammed al-Sudani had been pursuing an embattled agenda aimed at restoring national sovereignty through economic reform, infrastructure development, foreign investment, and reduced oil dependence. The hardest task was establishing a state monopoly on force—a goal complicated by the powerful Popular Mobilization Forces (PMF), formally part of Iraq’s security apparatus but with close ties to Tehran.
Caught in the crossfire
Since the U.S.–Israeli campaign against Iran began on 28 February 2026, Iran-aligned militias have repeatedly struck near Erbil International Airport and the U.S. consulate, attacked Baghdad’s U.S. Embassy, and launched hundreds of drones at bases, airports, hotels, and oil facilities across Iraqi Kurdistan. Nearly three weeks into the war, a renewed wave of rocket and drone attacks has underscored both the persistence and escalation of the threat.
In this latest iteration of the conflict, at least some Popular Mobilization Forces (PMF) factions appear to be operating with greater autonomy, driven by the perception of an existential struggle and by their deep economic, military, and ideological dependence on Iran. Kataib Hezbollah announced a conditional five-day suspension of attacks on the US embassy, linked to Israeli actions in Beirut and Baghdad, though both compliance and durability remain in doubt.
In response, U.S. airstrikes have targeted militia commanders and weapons depots across Iraq. Kurdish members of parliament warn that Baghdad’s silence threatens stability, while the government condemns what it calls “repeated hostile operations” but lacks the power to stop them. Meanwhile, NATO has suspended its training mission and begun withdrawing personnel, further weakening external support for Iraq’s already strained security forces.
The oil catastrophe
More than 90% of Iraq’s state revenues come from crude exports, leaving the government highly vulnerable to external shocks. The regional war has now translated that vulnerability into crisis. At the same time, Iranian gas exports to Iraq were halted following Israeli strikes on South Pars facilities, immediately straining Iraq’s already fragile electricity sector and exposing a parallel vulnerability rooted in its dependence on Iranian energy supplies.
Strikes have hit key sites across both the Kurdish region and the south, including Sarsang, Khor Mor, and Basra’s export terminals. Major fields such as Rumaila and West Qurna 2 are offline due to storage and export bottlenecks, while Shaikan and Atrush have halted on security grounds. On March 12, Iraq suspended oil operations after two fuel tankers were struck in its territorial waters near Basra.
With the Hormuz corridor closed, southern production has ground to a halt, and the northern pipeline remains offline—severing Iraq’s economic lifeline. Foreign operators are evacuating staff, and companies such as TotalEnergies have suspended production.
A cruel paradox defines the moment. Oil prices have surged from around $70 to over $100 per barrel since the conflict began, yet Iraq cannot capitalize. Revenue depends not on price but on the ability to export—and Iraq cannot export what it cannot secure.
Internal divisions have compounded the shock. Longstanding tensions between Baghdad and the Kurdistan Regional Government (KRG) delayed efforts to resume northern exports to Turkey. A deal has finally been struck, though its impact will be limited so long as export constraints persist elsewhere. With Iraq’s export system still crippled, Baghdad is now negotiating with Tehran for tanker access through the Strait—a stark indicator of its shrinking room for maneuver. Alongside these efforts, the government is exploring alternative export routes via Turkey, Syria, and Jordan, though these channels are likely to offer only limited volumes compared with pre‑war flows.
The 2003 inheritance
Iraq’s predicament today begins in 2003. The invasion that removed Saddam Hussein also dismantled much of the Iraqi state. More than $1 trillion in oil revenues flowed into government coffers in the decades that followed, yet little produced durable development, leaving an economy centered on distributing oil wealth rather than creating it.
That legacy is not only institutional but also structural. Iraq’s oil revenues—the backbone of the state—are held at the US Federal Reserve, giving Washington significant leverage over Iraq’s financial system and, by extension, its domestic governance.
This combination of external dependence and internal fragmentation explains Iraq’s vulnerability today. It cannot enforce neutrality without full control of its armed forces, diversify beyond oil without a broader productive base, or manage center–periphery relations within an unfinished and contested federal system.
What happens next?
Iraq’s immediate outlook is fragile. The Central Bank’s reserves may cover a year of imports, but prolonged conflict threatens widespread power cuts, delayed salaries, and rising unemployment in an economy almost entirely dependent on oil. The government’s ability to maneuver is constrained not only by financial and military dependence but also by competing pressures from external powers and entrenched domestic armed groups, leaving the state with limited room to chart an independent course.
Prime Minister Sudani’s reform agenda faces relentless pressure from militia-linked factions, while weak institutions and autonomous armed groups jeopardize not only domestic governance but also regional stability and energy markets. Political space exists, and negotiations continue, yet the levers of true authority—ceasefire enforcement, investment guarantees, and control over strategic assets—remain largely in the hands of external powers.
More than two decades after the 2003 invasion, Iraq remains caught between the state that was dismantled and the one that has yet to fully take root. Its economy, security apparatus, and political institutions continue to reflect the legacies of foreign intervention, fragmented governance, and dependence on external actors—shaping Iraq’s trajectory until it can assert real authority over its resources, armed groups, and foreign relations.
