Iraq Faces Economic Shock if Armed Groups Join Next Government, Analyst Warns

ERBIL (Kurdistan24) — An Iraqi political and strategic analyst has warned that Iraq could face a grave economic crisis if political forces persist in including armed groups in the formation of the country’s next government, amid mounting U.S. pressure and the risk of punitive financial measures.

Abbas Jibouri, head of the Baghdad-based Rafid Center for Political and Strategic Studies, said Iraq is approaching a “dangerous crossroads,” particularly in light of U.S. threats to restrict or cut access to oil revenues—a move that could severely destabilize the country’s economy.

Speaking to local media on Sunday, Jibouri said Washington’s warnings should not be viewed as symbolic or purely political. “These threats represent a highly dangerous economic pressure tool,” he said, noting Iraq’s near-total dependence on the U.S.-controlled global financial system to receive its oil income.

He warned that any disruption could trigger an unexpected economic shock with direct consequences for public sector salaries, service projects, foreign currency reserves, and the stability of the Iraqi dinar.

Jibouri said the United States views the issue through both a regional security lens and its commitment to governance standards, particularly regarding the participation of armed groups in government.

Any step interpreted as “legalizing weapons outside the framework of the state,” he said, could prompt Washington to pursue punitive financial measures, including asset freezes or severe banking restrictions.

“Iraq today faces a difficult sovereignty test,” Jibouri said, describing the challenge as maintaining a balance between internal political consensus and international obligations imposed by the global financial system.

Ignoring this balance, he warned, could push Iraq into direct confrontation with the international community and revive scenarios of economic isolation and undeclared sanctions.

He argued that solutions do not lie in escalation or defiance, but in adopting a clear governance approach centered on consolidating the monopoly of force under the state, strengthening independent political decision-making, and reassuring international partners that the next government will operate according to state institutions rather than external influences.

Any interference with oil revenues—which account for more than 90% of state income—would place the heaviest burden on Iraqi citizens, Jibouri said, urging political forces to prioritize national interests and recognize that economic stability is inseparable from political and security stability.

AP: US threatens ‘economic suffocation’

Separately, the Associated Press reported on Saturday that the United States has begun threatening Iraq by restricting access to the U.S. dollar, a step the agency described as the beginning of an “economic suffocation” strategy.

According to the report, Washington’s threat to impose direct economic sanctions on the Iraqi government and limit dollar flows represents an unprecedented move in U.S.-Iraq relations. The shift follows U.S. access to Venezuelan oil and its reintroduction to global markets.

AP said Washington believes it can manage global oil markets and prevent price spikes if Iraqi exports are disrupted by compensating with Venezuelan oil. This scenario, the agency noted, could materialize if the United States continues blocking Iraq’s access to dollar transactions.

The report added that U.S. warnings are no longer limited to targeting individuals or institutions, but now include the possibility of comprehensive sanctions against the Iraqi government itself.

According to the AP report, U.S. officials have warned that if armed groups are included in the next Iraqi cabinet, Washington could take steps that Iraqis would describe as “dollar starvation.”

The threats follow repeated U.S. warnings to Baghdad against allowing armed factions to participate in the next government—warnings that, according to the report, Iraq has yet to address in a substantive way.

Several individuals and groups opposed by Washington have already secured senior positions or are expected to do so under current political arrangements.