Despite the decline of the “Axis of Resistance” and the deterioration of Iran’s military and regional capabilities, Iraq’s elections remain fundamental to Iran for deep economic, political, and strategic reasons. Iraq is not a tactical ally but the economic and strategic lifeline of the Iranian regime.
From an economic standpoint, Iraq represents the most important source of hard currency and illicit revenues for Iran’s regime amid ongoing international sanctions. A sophisticated heavy-fuel smuggling network generates between one and three billion dollars annually for Iran and its allied factions. This network has flourished particularly since Mohammed Shia’ al-Sudani assumed Iraq’s premiership in 2022, relying on the control of Iran-backed militias, especially Asa’ib Ahl al-Haq, over governmental structures and border crossings. In addition to smuggling, Iran gains around one billion dollars a year from illicit oil profits through financing its allied factions within Iraq’s oil sector. Losing political control over Baghdad would mean losing these vital revenues at a time when Iran’s treasury faces immense financial strain.
Politically, a fundamental shift has occurred in the regional equation. The strategy of the “Axis of Resistance,” in which Iran invested militarily and politically for decades, has failed to achieve its core objectives. Hezbollah in Lebanon is leaderless following the assassination of Hassan Nasrallah and has been forced by Resolution 1701 to withdraw from 190 of its 265 military sites in southern Lebanon, handing them over to the Lebanese army. Hamas has lost its ability to operate as an organized military force after a year-long, precise Israeli campaign. The Assad regime in Syria has completely collapsed, cutting off a vital supply route for Iranian arms transfers. Meanwhile, the Houthis in Yemen are exhausted by repeated airstrikes despite limited ongoing activity. What remains for Iran is Iraq, where it still maintains a tangible political and military presence. Losing Iraq would mean losing its last strategic corridor of regional influence.
The Israeli war on Iran in June 2025 revealed a bitter truth: Iran’s allied militias did not stand by Tehran despite years of investment. Iraqi factions launched only about forty drones and avoided direct engagement, raising questions in Tehran about their loyalty and commitment. Today, the Iranian regime seeks to reorganize its relations with Iraqi factions and secure its influence before any further political developments weaken it. This is Iran’s chance to reassert its dominance over its allied factions and force them to choose clearly between loyalty to the regime or drifting toward pragmatic alternatives.
Furthermore, the fragmentation of traditional Shiite alliances indicates a turn toward local priorities rather than ideological alignment with Iran. The pro-Iranian Shiite factions are divided and competing through separate electoral lists, a division that mirrors Iran’s own weakening position.
On the international front, Iran faces mounting American pressure on Iraq, with the Trump administration expected to adopt a harsher stance toward Iranian influence. The United States has banned foreign currency transfers from Iraqi banks aligned with Iran, restricted Iran-linked companies from accessing credit networks, and halted Iranian electricity supplies to Iraq. These pressures significantly limit Iran’s options.
In response, Iran has shifted its strategy from reliance on military power to dependence on governmental and institutional mechanisms. The visits of Ali Larijani, Secretary of Iran’s Supreme National Security Council, to Iraq and Lebanon embody this diplomatic turn. However, Tehran fears that its allied factions may drift toward normalization with the American option. Conversely, the re-election of al-Sudani, an outcome possible despite Iran’s efforts to undermine him, would signal that a “balancing” strategy between Tehran and Washington is feasible, posing a direct threat to the model of absolute loyalty that Iran has long enforced.
The views expressed in this article do not necessarily reflect those of +963 association.
