Iraq’s strategic environment and geopolitics

Iraq between the Gulf, Iran, Türkiye and the Levant: a security environment with no room for isolation

By Ali Zuweid · 13 October 2026 · 10 min read

English translation published 13 October 2026. Read the Arabic original.

On 7 October 2026, the Central Bank of Iraq announced revised dollar transaction rates: 1,500 dinars for purchases from the Ministry of Finance, 1,510 for sales to banks and 1,520 for cash sales to the public. These are announced rates for different transactions, not a single market exchange rate. Central Bank announcement The decision came in a year when regional disruptions to shipping, energy and finance have become intertwined. Their coincidence does not establish that war alone caused the adjustment. It does, however, return the discussion to a question sometimes obscured by the language of neutrality: how can Iraq protect its economy when it bears the costs of a crisis it did not choose?

Iraq cannot treat the Gulf, Iran, Türkiye and the Levant as separate foreign-policy files. The resources financing public expenditure, the fuel supplying a power station, the water reaching a field and the route carrying imports all depend on decisions and risks beyond its borders. Numerous relationships are not, in themselves, the problem. The difficulty arises when essential functions rely on arrangements that are hard to replace if they fail together. Independence therefore needs a more precise test than the number of capitals a government visits: which function survives the loss of a partner or corridor, at what cost and for how long?

Several regional environments, inseparable functions

The relationship with Iran illustrates the distinction between importing electricity and importing the fuel required to produce it. The US Energy Information Administration’s 2025 Iraq brief puts electricity imported from Iran at about 2% of federal Iraq’s electricity supply in 2023, while reporting Iraq’s statement that Iranian gas supported more than 30% of electricity generation. Iraq energy brief These are historical figures, not measurements for October 2026. They nevertheless expose an important analytical error: a small share of directly imported electricity does not establish low dependence when domestic power stations require imported fuel.

The distinction acquired practical significance during the 2026 crisis. The International Energy Agency’s second-quarter report recorded a temporary halt to Iranian pipeline gas imports following strikes on South Pars, with consequences for Iraq’s gas and electricity situation. Gas Market Report That report does not establish that the interruption continues today, and cannot be converted into a permanent deficit figure. It does establish that a power station located inside Iraq is not insulated from its fuel source. Generation, fuel, networks and payment collection must consequently be assessed together before a new plant is counted as independent capacity.

Türkiye performs a different role from Iran, although the issues overlap. The northern gateway is important for transport and trade, while major headwaters of the Tigris–Euphrates system lie outside Iraq. A UN advocacy note published in January 2026 linked the water crisis to successive droughts, declining rainfall and inflows, alongside infrastructure weaknesses and exposure to extreme weather. Water scarcity note Those causes do not justify attributing the entire problem to an upstream state, nor do they remove the responsibility for transboundary cooperation. More reliable inflows and better demand management address different parts of the problem; neither makes the other unnecessary.

The Gulf connects to Iraq through navigation, energy, markets and finance, and its disruptions extend beyond Baghdad’s relationship with any single state. In March 2026, the International Monetary Fund explained how the conflict was being transmitted through energy, trade and financial conditions, with effects varying according to countries’ exposure. Analysis of transmission channels In my assessment, it is mistaken to assume that a higher oil price automatically compensates a producer for interrupted exports. Revenue requires a volume that can be shipped and paid for, while import and transport costs may rise simultaneously. A higher price and a lower volume can pull the budget in opposite directions.

In the Levant, Iraq’s interest cannot be reduced to a trade crossing or security file. UNHCR’s guidance for people returning from Iraq to Syria, published in June 2026, stated that it was not promoting return and opposed forced return because risks persisted in many areas, while supporting informed voluntary decisions. Return guidance This does not imply uniform conditions throughout Syria. It underlines that household decisions depend on safety, housing, services and documentation, and that the movement of people cannot be assessed like freight. Sound border policy distinguishes humanitarian protection, trade and the pursuit of crime, without allowing one to erase the other two.

Diversification must change the source of exposure

The number of suppliers can increase without changing the point of vulnerability. The same energy brief records that Iraq’s October 2024 gas agreement with Turkmenistan depended on Iran’s pipeline system. Gas supply arrangement The agreement is not being presented here as proof of completed deliveries today. The relevant distinction is that diversifying the country of origin does not necessarily diversify the route. Strategic assessment must distinguish the diversification of contracts from that of infrastructure and from the risks capable of disabling both at once.

Saudi Arabia’s experience during the crisis provides a specific example of an alternative’s value and limits. The EIA’s August 2026 outlook recorded the redirection of oil through the East–West pipeline to Yanbu on the Red Sea, while alternative maritime routes still involved risks, distances and costs. August outlook Iraq cannot reproduce that result merely by proposing a line on a map: Saudi Arabia has access to two coastlines and pre-existing infrastructure. The transferable lesson is that an alternative reduces a particular dependency and then requires assessment of its own dependencies, rather than being described as the end of risk.

This changes how Iraqi connectivity projects should be read. The US$900 million in road-corridor financing approved by the World Bank in June 2026 covers a northern axis towards Türkiye and a western one towards Syria and Jordan. Approved project scope Two directions expand the potential range of choices, but do not establish that both operate at the required capacity and reliability. Benefits cannot be counted twice if the routes share the same administrative bottleneck or depend on a single vulnerable domestic service.

I therefore propose a simultaneous-disruption test in project appraisal, distinct from assessing commercial viability under ordinary conditions. An essential function would be tested against a limited interruption to one route, then against two connected disruptions, identifying the basic demand still served and the cost of activating the alternative. This is a proposed analytical tool, not the result of a simulation I have conducted for Iraq’s networks. Its value is to distinguish an additional asset that repeats the same exposure from a less attractive everyday option that protects an essential service during a crisis. It extends the question of turning Iraq’s location into usable capacity.

Diplomacy needs institutions capable of delivery

Not every international lesson concerns a corridor or pipeline. In May 2025, Iraq and Kazakhstan launched a twinning initiative under the Water Convention, focused on institutional learning and integrated water-resource management. Twinning announcement The initiative does not establish a measured improvement in Iraqi inflows or give Iraq Kazakhstan’s regional arrangements. Its potential value is narrower and more practical: organising data and dialogue across sectors, and improving the capacity to implement cooperation. A state unable to reconcile its own figures for need and use will negotiate from a weaker position even when political goodwill exists on the other side.

Within Iraq, Article 8 of the Constitution sets out good neighbourliness, non-interference, peaceful dispute settlement, relations based on common interests and reciprocity, and respect for international obligations. Iraqi Constitution This framework can support a coherent policy without inventing a mathematically equal distance from every party. Dealings vary according to interests and obligations, while the underlying rule should remain predictable: protect sovereignty, honour commitments and prevent Iraqi territory from becoming an instrument for managing other states’ conflicts.

That rule requires clear domestic responsibilities and powers. A transport undertaking depends on customs, borders and maintenance; an energy undertaking depends on fuel, networks and payment; water cooperation depends on measurement, distribution and agriculture. If one institution negotiates and promises a service that it cannot require implementing bodies to deliver, foreign policy becomes a collection of uncertain commitments. This is not an argument for placing every decision in a single office. It is an argument for identifying who owns the agreement, who finances it, who measures delivery and how disagreements between federal, regional and governorate institutions are resolved within the law.

The cost of presenting every issue as part of one comprehensive bargain also becomes apparent. Combining water, energy and trade may appear strategically sophisticated while concealing an unequal distribution of benefits and burdens. Decision-makers need to understand each commitment’s effects on consumers, producers, the budget and the environment before combining them in a negotiation. Legally protected commercial information should remain protected, but confidentiality should not eliminate accountability for results. The capacity to distinguish strategy from slogans begins with implementation that can be examined.

Independence measured by continuity

In my assessment, the practical priority is to task the relevant institutions with preparing a shared register of essential services’ external dependencies. Each function would be connected to its supplier, route, replacement lead time and responsible authority. The purpose is not to publish sensitive operational information, but to establish a reliable basis for investment, reserves and negotiation. The register should be reviewed alongside the budget so that the state does not fund similar alternatives while leaving a single point of failure untreated.

The next step is to select specific investments according to how much service they protect during disruption, with public indicators of outcomes. Energy policy should measure reliability rather than the number of agreements; border policy should measure service time and its variability rather than the number of gateways; water policy should assess domestic management and external cooperation within their respective responsibilities. Openness then becomes accountable, and the cost of reserves or diversification can be compared with the cost of interruption, instead of being dismissed as expenditure without an immediate return.

Isolation will not provide Iraq with replacement water, another maritime outlet or a market untouched by regional events. Iraq can, however, reduce how much external disruption dictates its internal choices. The feasible form of independence in this environment is to retain executable options when relationships become more difficult, and to maintain national interests without turning every disagreement with a neighbour into a crisis in Iraqi daily life.

Ali Zuweid — Researcher in strategic affairs and national security