Iraq is increasingly caught in the crossfire of the Iran war as the only country facing strikes from both sides, threatening to drag the nation into a full-blown crisis after avoiding two years of regional turmoil.
As the conflict nears two weeks, disruptions to Gulf shipping and strikes on oil fields have almost halted exports, jeopardising a state that relies on such trade for most of its revenue. If the shutdown continues, Baghdad could be unable to meet its oversized public-sector payroll as soon as next month, risking widespread unrest, according to two Iraqi Kurdish officials.
The federal government has appealed to northern Kurdish leaders to resume exports via a pipeline to Turkey, but talks remain deadlocked over longstanding domestic issues. Meanwhile, a parallel conflict has escalated between Iran-backed Iraqi militia groups and the US, with near-daily drone strikes targeting American interests and US retaliatory strikes on militia bases.
Since the war began on February 28 following a major US and Israeli strike in Iran, drone and missile attacks have targeted American interests in Iraq, including military bases in Baghdad and Irbil airports, and US diplomatic facilities. Iran and its allied Iraqi militias have also struck oil fields and energy infrastructure to escalate the economic toll.
Iraq hosts both entrenched Iran-aligned forces and significant US interests, and its economy depends overwhelmingly on oil. The longer the conflict lasts, the greater the risk that economic shocks, political paralysis and friction with Iran-backed militias will unravel Iraq's hard-won relative stability. Leaders in Baghdad and Irbil urge caution, but the conflict's trajectory is slipping beyond their control.
The gravest threat is disrupted oil production, which could cripple government revenues. Baghdad has asked for exports of at least 250,000 barrels per day via the pipeline to Turkey, but talks have stalled after Kurdish negotiators conditioned the move on lifting a US dollar embargo and restoring economic benefits.
