Iraq’s New Prime Minister Faces the Impossible State: Can Ali Al-Zaidi Reform a Country Controlled by Militias, Oil, and Foreign Powers?

By Dr. Pshtiwan Faraj

Sulaimani, Iraqi Kurdistan — 20 May 2026

Iraq’s new government program promises state control over weapons, banking reform, energy independence, anti-corruption measures, and digital modernization — but the deeper question is whether Baghdad’s political system will allow any of it to happen.

 Iraq’s new Prime Minister Ali Al-Zaidi has unveiled an ambitious 14-pillar government program focused on militias, energy, banking reform, and governance. But deep structural obstacles threaten implementation.

Iraq has a new prime minister, a new cabinet program, and a familiar national dilemma.

The government of Ali Falih Al-Zaidi entered office promising reform across nearly every sector of the Iraqi state: weapons control, anti-corruption, banking modernization, energy independence, digital transformation, industrial revival, and institutional reconstruction.

On paper, the fourteen-pillar government program ratified by the Iraqi parliament on May 14 reads like the blueprint for rebuilding a functional modern state.

In practice, however, it exposes the central contradiction that has defined Iraq since 2003:

Can a government reform a system that many of the forces inside the government depend on preserving?

That contradiction runs through every chapter of the Al-Zaidi administration’s agenda.

The Core Crisis: Who Really Controls the State?

The most consequential section of the program appears immediately in Pillar One.

The government formally commits to placing all weapons under exclusive state authority — meaning no armed force outside the official Iraqi military and security institutions should operate independently.

In almost any other country, that statement would sound routine.

In Iraq, it is revolutionary.

The issue centers on the Popular Mobilization Forces (PMF), the powerful network of mostly Shiite armed factions created during the war against ISIS after 2014.

Although officially integrated into the Iraqi state, many PMF factions maintain:

• Independent command structures
• Separate financial networks
• Political wings
• Foreign relationships, especially with Iran

The Al-Zaidi government does not propose dismantling the PMF.

Instead, it promises to “define” their role legally while simultaneously strengthening their combat capabilities.

That ambiguity is deliberate.

And it reveals the political limits of the new government before it has fully begun.

The Empty Ministries Reveal the Real Power Struggle

The clearest sign of Iraq’s internal divisions came immediately after parliament approved the government program.

Nine ministries remained vacant, including:

• Defense
• Interior
• Planning
• Higher Education
• Labor
• Culture
• Reconstruction and Housing
• Migration
• Youth and Sports

The missing Defense and Interior ministers matter most because those institutions would be responsible for enforcing any future weapons monopoly.

The dispute exposed the deep fragmentation inside Iraq’s ruling coalition.

Former Prime Minister Nouri al-Maliki reportedly backed Qasim Atta for Interior Minister, but rival blocs blocked the nomination amid accusations of “betrayal” and political sabotage.

At the same time, Sunni factions competed fiercely over the Defense Ministry, including groups linked to Mohammed al-Halbousi.

Behind the scenes, another force was shaping the negotiations entirely: Washington.

Political sources indicated the United States strongly opposed candidates viewed as too closely connected to Iranian-backed armed factions.

That alone illustrates the impossible balancing act facing Al-Zaidi.

His government must simultaneously:

• Satisfy Iran-linked political factions
• Maintain relations with Washington
• Avoid confrontation with militias
• Project state sovereignty
• Preserve coalition unity

Those objectives increasingly conflict with one another.

Iraq’s Sovereignty Problem Is Becoming International

The foreign policy section of the program is written in cautious diplomatic language.

Baghdad promises “balanced relations” and rejects alignment with regional conflict blocs.

But reality is already colliding with that position.

The government reaffirmed commitment to the 2008 Strategic Framework Agreement (SFA) with the United States — the foundation of Iraqi-American military, economic, and diplomatic relations after the US invasion.

That commitment arrives during one of the most sensitive periods in recent Iraqi history.

According to reports cited shortly before the parliamentary vote, Israel allegedly established a covert military facility in Iraq’s western desert during its conflict with Iran. Reports also claimed Iraqi forces that approached the area were attacked, killing one Iraqi soldier.

The controversy triggered a deeper national question:

If foreign military operations can allegedly occur inside Iraq without Baghdad’s full control, what does Iraqi sovereignty actually mean today?

That question sits at the center of Al-Zaidi’s challenge.

His government program explicitly states Iraqi territory should never be used as a platform for attacks against neighboring states.

Yet Iraq remains trapped between:

• American military influence
• Iranian-backed factions
• Israeli regional operations
• Gulf economic pressure
• Turkish security interventions
• Kurdish autonomy disputes

In effect, Iraq is trying to reclaim sovereignty while functioning as an arena for multiple competing powers simultaneously.

The Banking System Could Become Iraq’s Next Battlefield

One of the most technically ambitious parts of the government program focuses on financial reform.

The administration proposes:

• A Supreme Council for Financial Stability
• Banking modernization
• Anti-money laundering enforcement
• International compliance standards
• Investment restructuring
• A sovereign “Generations Fund” modeled partly on Gulf and Norwegian wealth funds

This section matters because Iraq’s banking system has become a frontline issue in the broader US-Iran confrontation.

Dozens of Iraqi banks have faced American sanctions or restrictions in recent years over alleged money laundering and dollar-transfer violations linked to Iran and militia-connected networks.

That issue directly touches Prime Minister Al-Zaidi himself.

Before entering politics, he chaired Al-Janoob Islamic Bank, an institution sanctioned by the United States in 2024 over allegations related to illicit financial activity benefiting Iranian-linked actors.

Although investigations reportedly found no evidence personally implicating Al-Zaidi, the symbolism remains politically explosive.

Now the same man once associated with a sanctioned financial institution is tasked with reforming Iraq’s banking system to satisfy Washington.

That creates enormous pressure from both sides.

If reforms move too aggressively, militia-linked economic networks could resist internally.
If reforms fail, Iraq risks deeper financial isolation internationally.

Iraq’s Energy Crisis Is Becoming a National Security Threat

No issue affects ordinary Iraqis more directly than electricity.

And no issue exposes state dysfunction more clearly.

Iraq faces soaring summer demand estimated at roughly 40 gigawatts while current production remains far below national needs.

For years, the system survived partly because of Iranian gas imports.

But after the Trump administration ended sanctions waivers allowing Baghdad to purchase Iranian energy legally, Iraq’s energy vulnerability became critical.

The result:

• Reduced Iranian gas imports
• Severe electricity shortages
• Rising public anger
• Pressure on the government before summer

The irony is staggering.

Iraq simultaneously:

• Imports gas from Iran
• Burns massive amounts of unused natural gas domestically through flaring

Successive governments promised to solve this paradox.
None fully succeeded.

Al-Zaidi’s government now promises:

• Gas capture expansion
• Reduced flaring
• Domestic gas production
• Smart-grid modernization
• Private sector participation
• Tariff restructuring

But these reforms require years of investment and political stability — two things Iraq consistently struggles to sustain.

The Digital State Vision

One of the most overlooked aspects of the program may also be the most transformative.

The government wants Iraq to become:

• A regional digital hub
• An international data transit corridor
• A center for cybersecurity and AI infrastructure

The plan includes:

• National digital identity systems
• E-governance reforms
• Data governance frameworks
• Cybersecurity centers
• Artificial intelligence initiatives
• Digital infrastructure expansion

Geographically, Iraq sits between Asia, Europe, and the Gulf.

The government increasingly sees that location not just as a security burden — but as a technological opportunity.

If successful, Iraq could eventually position itself as a digital transit state connecting regional internet infrastructure across multiple continents.

Yet even here, contradiction emerges.

The same pillar promises:

• Press freedom
• Freedom of opinion
• Social media regulation for “societal stability”

Those objectives often collide in practice.

How Al-Zaidi handles digital freedoms versus online control may become one of the earliest indicators of the administration’s true political character.

The Oil Dependency Trap

Almost every promise inside the government program depends on one factor Iraq does not control:

Oil prices.

Roughly 90 percent of Iraq’s state revenue still comes from oil exports.

That means:

• Hospital projects
• School construction
• Investment funds
• Infrastructure plans
• Welfare programs
• Industrial revival
• Energy reforms

…all depend on global commodity markets.

This is Iraq’s structural curse.

The state wants diversification, but the political system itself is financed through oil dependency.

As long as oil dominates the economy, real structural reform becomes extraordinarily difficult.

Iraq’s Problem Is Not Vision — It Is Power

The Al-Zaidi government program is not lacking in ambition.

In many areas, it is more technically sophisticated than the programs of previous governments led by Mohammed Shia al-Sudani and Mustafa Al-Kadhimi.

The problem is implementation.

Nearly every major promise collides with entrenched interests:

• Militia power structures
• Sectarian quota politics
• Oil dependency
• Foreign influence
• Corruption networks
• Weak institutions

The upcoming post-Eid parliamentary session, where the remaining cabinet posts are expected to be negotiated, may reveal more about Iraq’s future than the government document itself.

Because in Iraq, political reality is rarely decided by official programs.

It is decided by the balance of power behind them.

And that balance remains deeply unstable.

 #Iraq #MiddleEast #Iran #Geopolitics #Baghdad