By Dr. Pshtiwan Faraj | Kurdish Policy Analysis

How U.S. Economic Pressure Helped Bring Ali al-Zaidi to Power in Iraq

 An analysis of how U.S. financial leverage, diplomatic pressure, and post-election politics helped shape Ali al-Zaidi's rise as Iraq's prime minister following the 2025 elections.

From holding dollars to congratulations; How did Washington help Zaidi come to power?

After the November 11, 2025 elections in Iraq, political conflict within the Shiite house reached its peak. The conflict was clearly focused on two main fronts: the front of Nuri al-Maliki and his allies, versus the front of Sudane Shiite Mohammed Mohammed.

To stay in power, Sudanese made a political maneuver and reached a surprise agreement with Maliki, which resulted in the coordination framework officially nominating Nuri al-Maliki as prime ministerial candidate on December 24,

This Coordination Framework decision immediately faced strong rejection from Washington. The Trump administration vetoed Maliki and sent a direct message to Shiite leaders: Insisting on Maliki means imposing the toughest economic sanctions on Iraq. This threat deadlocked the coordination framework and forced them to withdraw from Maliki's nomination.

On the other hand, Sudani's chances of re-nomination, which initially appeared to be the first winner without a US veto, were dashed. The 40-day war between the United States and Iran completely changed the equation; Sudani failed to prevent militias from attacking U.S. interests, utterly disappointing Washington.

The replacement of Mark Savaya and the appointment of Tom Barak as US envoy to Iraq in May 2026 were a clear sign of Washington's lack of support for Sudani, especially as Maliki and his allies began to press for his removal.

The United States used economic and security means to settle the situation. In April 2026, it announced dollar exports, reduced its level of intelligence cooperation, and blocked the transfer of $500 million in cash from the Federal Reserve Bank of New York to the Fed. These pressures forced the coordination framework to look for a compromise candidate that would also have the approval of the United States.

On April 27, 2026, Ali Zaidi was appointed by Nizar Amedi to form the government, and on May 14, his cabinet passed (with confidence in 14 out of 23 ministries). Zaidi, a former chairman of Southern Bank Corporation, is a business figure with no party, faction, or previous political experience. Soon, Washington acquiesced; On April 29, the US Embassy announced its support, and on May 14, Tom Barak congratulated him and sent a message of Trump and Secretary of State Robio's readiness for strategic cooperation.

from diplomatic support to strategic demands; What does Trump want from the Zaydi government?

Washington's support for Zaidi is not free, but is linked to the implementation of several basic conditions set by Tom Barak and senior US officials:

First, arms control and the dissolution of militias

The United States is openly calling for the suspension of the budget and salaries of Hashdi Shaabi, the dissolution of armed groups and the monopolization of weapons in the hands of the state. Under Sudani, the United States had reduced military assistance, F-16 training, and intelligence support for refusing these conditions. On June 15, 2026, Zaidi and Tom Barak issued a joint statement calling for the disarmament of foreign groups. US Secretary of Defense Pete Hegsett also cited more than 600 militia attacks on July 15 and called for their arming, emphasizing the key role of the Kurdistan Regional Government's Peshmerga and security forces in the fight against ISIS. In a meeting with Trump on July 14, Zaydi promised to complete the disarmament process by September

Second, confronting Iranian hegemony

Washington wants to get Iraq out of Tehran's influence. The early refusal of top Shiite leaders to appoint a prime minister reflected this policy. During the July 14 meeting, Trump stressed that Iran had been a huge burden on Iraq. This new route caused serious concern in Tehran; Iran's efforts to prevent Zaydi's visit to Washington have failed, with Supreme Leader's adviser Ali Akbar Velayati describing it as harmful and inappropriate. Iran sees Iraq as the main gateway to counter sanctions and protect its regional battlefield.

Third, economic ties and major energy agreements

The United States is shifting its strategy in Iraq from military to economic. Zaydi said US forces would withdraw by September 30 and make room for economic partnership. In this context, on July 17, 2026, US Secretary of Energy Chris Wright announced that more than $60 billion in agreements have been signed with US companies. These agreements (covering 48 memoranda of understanding) are distributed as follows: 

Oil and Gas: ExxonMobil and Halliburton's involvement, the award of the West Qarnah-2 and Nasiriyah fields to Chevron, and Shell's operations in the petrochemical sector. 

Infrastructure and Power: GE Vernova projects in the power sector and KBR in engineering. 

Communications: Granting Starlink an official license for space internet. 

Kurdistan Region and Soran-Syria Pipeline: Paving the way for HKN, Western Zagros and Hunt to resume operations in the Kurdistan Region, with an agreement between Baghdad and Damascus to rehabilitate the Kirkuk-Banias oil pipeline by Chevron.

Apart from its economic aspects, this investment will achieve Iraq's goal of energy independence from Iran, diversification of oil export routes, and creating Washington's direct interest in maintaining Iraq's stability.

The fate of the Zaidi government between US conditions and pressure from Shiite forces

Despite Washington's support, implementing security demands on the ground faces complex obstacles:

domestic and military obstacles

Zaydi has no parliamentary base or military force of his own; Its survival in power depends entirely on the approval of the coordination framework. A military confrontation with the militias could also lead to a no-confidence motion in parliament or an outbreak of Shiite-Shiite civil war.

It is the reaction of the Resistance Front

Despite a September 30 deadline for surrender, the Islamic Defense Front (IRI) made it clear on July 10 that it would not lay down its arms. On July 12, they offered Zaydi the conditions of withdrawing US troops and rejecting economic agreements. On July 16, they offered a $10 million reward for killing Trump and on July 19 threatened to target US interests if he expanded his operations against Iran.

Disarmament scenarios

The disarmament of these groups is only possible in two cases: either the collapse of the political system in Iran, which is their source of support, or a direct and intense US military attack at the official request of the Iraqi government. But Zayed's insistence on withdrawing US troops by the end of 2026 has given the groups more courage.

Balance exercise and visit to Tehran

Zaidi has to strike a balance between Washington and Tehran. Under pressure from Iran's allies, he is scheduled to visit Tehran later this week to sign several memoranda of understanding. The move is an attempt to appease Iran's proxies and demonstrate Iraq's neutrality in regional conflicts.

From blocking dollar transfers to rejecting rival candidates, Washington's economic leverage reshaped Iraq's post-election political landscape and paved the way for a compromise prime minister.

Iraq's government formation following the November 11, 2025 parliamentary elections evolved into more than an internal struggle among competing Shiite factions. It became a test of how external influence—particularly from the United States—continues to shape Iraqi politics through financial leverage, diplomatic pressure, and strategic calculations.

While Iraqi political leaders publicly framed the negotiations as a domestic contest, the eventual rise of Prime Minister Ali al-Zaidi illustrates the decisive role Washington played in determining which candidates were acceptable and which were not.

Rather than relying on military pressure, the United States employed Iraq's dependence on the global financial system and its longstanding security partnership with Washington to influence the outcome.

The result was the emergence of a political outsider whose appointment reflected not only domestic compromise but also international approval.

A Divided Shiite Political House

Following the November 2025 elections, the Coordination Framework—the coalition representing most of Iraq's major Shiite parties—became deeply divided over who should lead the next government.

The contest centered on two competing camps.

One was led by former Prime Minister Nouri al-Maliki, who sought a return to office with the backing of his political allies.

The other supported the incumbent Prime Minister Mohammed Shia al-Sudani, who hoped to secure a second term after presenting himself as a figure capable of balancing Iraq's competing regional and international relationships.

The rivalry soon paralyzed negotiations inside the Coordination Framework.

Maliki's Surprise Nomination

Seeking to preserve his political future, Sudani reportedly entered negotiations with Maliki's camp, producing an unexpected compromise.

On December 24, 2025, the Coordination Framework formally nominated Nouri al-Maliki as its preferred candidate for prime minister.

The decision immediately transformed Iraq's government formation process from an internal political dispute into an international diplomatic crisis.

Washington Draws a Red Line

According to Iraqi political sources, the Trump administration reacted swiftly.

Washington reportedly informed leading Shiite political figures that a return of Maliki to the premiership would trigger severe economic consequences for Iraq, including the possibility of expanded financial sanctions.

Given Iraq's heavy reliance on the U.S.-managed international financial system—including access to dollar transactions and the Federal Reserve—the warning carried significant weight.

Faced with the prospect of serious economic disruption, the Coordination Framework abandoned Maliki's nomination.

The episode underscored an enduring reality of Iraqi politics: while governments are formed in Baghdad, international acceptance remains a critical factor in their survival.

Sudani Also Loses Washington's Confidence

Maliki's withdrawal did not automatically restore Sudani's political fortunes.

Initially viewed as more acceptable to Washington, Sudani's position deteriorated during the subsequent U.S.-Iran confrontation.

The 40-day conflict between Washington and Tehran placed Iraq under enormous pressure as Iran-backed armed groups launched attacks against U.S. interests.

American officials reportedly concluded that Sudani had failed to effectively restrain those militias or adequately protect U.S. personnel and facilities.

As a result, confidence in his leadership declined sharply within Washington.

A Diplomatic Shift

The replacement of senior U.S. officials responsible for Iraq policy further reflected changing American priorities.

The appointment of Tom Barrack as the new U.S. envoy to Iraq in May 2026 was widely interpreted as signaling a reset in Washington's approach toward Baghdad.

At the same time, domestic political pressure against Sudani intensified, with Maliki and several Coordination Framework leaders seeking his removal.

The search for an alternative candidate accelerated.

Financial Pressure Changes the Political Equation

Rather than intervening directly in Iraqi politics, Washington relied on instruments that have historically proven highly effective.

Among the reported measures were:

• restrictions affecting Iraq's access to U.S. dollars,
• reduced intelligence cooperation,
• and delays in transferring approximately $500 million from the Federal Reserve Bank of New York to Iraq's central banking system.

These actions highlighted Iraq's structural dependence on the U.S.-dominated financial architecture.

The economic pressure reportedly convinced influential political leaders that prolonged confrontation with Washington would carry unacceptable costs.

The Coordination Framework therefore began searching for a consensus figure capable of satisfying both domestic political factions and international partners.

The Rise of Ali al-Zaidi

That search ultimately produced Ali al-Zaidi.

On April 27, 2026, Iraqi President Nizar Amedi tasked Zaidi with forming a new government.

Unlike many previous Iraqi prime ministers, Zaidi entered politics without a long history inside Iraq's dominant political parties.

As the former chairman of the Southern Bank Corporation, he built his reputation primarily in finance and business rather than partisan politics.

His technocratic profile made him an attractive compromise candidate.

Without deep factional rivalries, Zaidi offered the possibility of reducing tensions inside the Coordination Framework while also reassuring international partners.

Washington Quickly Signals Support

The American response was notably positive.

Within days of Zaidi's nomination, the U.S. Embassy publicly welcomed the development.

After Iraq's parliament approved his cabinet on May 14, 2026, securing confidence for 14 of the proposed 23 ministers, Washington moved quickly to establish a cooperative relationship.

Tom Barrack conveyed congratulations on behalf of President Donald Trump and Secretary of State Marco Rubio, emphasizing Washington's willingness to deepen strategic cooperation with the new Iraqi government.

The message suggested that Zaidi had succeeded where previous candidates had failed: becoming acceptable to both Iraq's governing coalition and the United States.

The Return of Economic Statecraft

The Zaidi episode illustrates how U.S. influence in Iraq has increasingly shifted away from military intervention toward economic statecraft.

Instead of shaping Iraqi politics through troop deployments, Washington now exercises leverage through:

• control over Iraq's access to dollar liquidity,
• financial oversight,
• banking regulations,
• sanctions authorities,
• intelligence cooperation,
• and diplomatic recognition.

This approach allows the United States to exert considerable influence while maintaining a relatively limited military footprint.

For Iraqi political leaders, maintaining access to the international financial system remains essential for economic stability, making U.S. approval difficult to ignore.

Strategic Implications

Zaidi's appointment may temporarily stabilize relations between Baghdad and Washington, but it also highlights Iraq's continuing struggle to balance competing external powers.

Baghdad remains economically tied to the United States while maintaining deep political, religious, and security links with Iran.

Future Iraqi governments will likely continue navigating this delicate equilibrium, attempting to preserve strategic partnerships with both sides without becoming the battleground for their broader regional competition.

Whether Zaidi can sustain that balance will shape not only Iraq's domestic stability but also the wider geopolitical landscape of the Middle East.

Conclusion

Ali al-Zaidi's rise to the premiership was not simply the product of domestic political compromise. It reflected the intersection of Iraqi factional politics, U.S. financial leverage, and shifting regional dynamics following the U.S.-Iran confrontation.

By blocking the return of Nouri al-Maliki, withdrawing support for Mohammed Shia al-Sudani, and signaling approval for a technocratic alternative, Washington played a decisive—though largely indirect—role in shaping Iraq's post-election government.

The episode demonstrates that in modern Iraq, access to dollars can be as influential as votes, and economic pressure can be as consequential as military power in determining who ultimately governs the country.

Conclusion

Zaydi's appearance as prime minister is an opportunity for economic reform and fighting corruption, especially with the support of the Sistani marja'a, the Sadr movement, the streets, and Kurdish and Sunni parties. Implementation of economic and infrastructure projects is also possible. But on complex issues such as disarming militias and cutting off Iranian interference, Zaydi's government is playing between meeting Trump's conditions and threatening local armed forces.

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