Eurasia Press & News
The Iraqi government did the right thing and froze the assets of Hezbollah and Yemen’s Houthis, but once the story made news on December 4, the government walked its decision back within hours.
In November, the country’s Committee for the Freezing of Terrorists’ Funds put the two Iran-backed groups on its naughty list, but that, according to the Prime Minister’s Media Office, was an “error.” In a statement to the Iraqi News Agency, the government announced an investigation into whomever is responsible for the two terrorist groups’ inclusion. The list itself was a response to a request from Malaysia to block funds of Islamic State and al-Qaeda affiliates, Prime Minister Mohammed Shia Al-Sudani’s office said.
Iran Sees Iraq as Its Playground
Iran has a robust proxy network inside Iraq centered on the militias of the Popular Mobilization Forces (PMF), an official Iraqi security organization. These militias have historically partnered with other arms of Iran’s “Axis of Resistance” against Western interests. Hezbollah assisted in the development of the Iraqi militia network in the mid-2000s and has continued to support, train, and fight alongside them. Iraq has also served as a bridge for Iran to its partners in the Levant, enabling the movement of personnel and weapons. That flow continues despite the overthrow of the Bashar al-Assad regime, Tehran’s parter in Syria.
During the war in Gaza, the Houthis and Iraqi militias announced joint attacks. Iraqi militias are even working with the “Yemeni armed forces” — militia code for the Houthis — to develop weapons and capabilities, according to one leader of an Iran-backed and U.S.-designated foreign terrorist organization.
Iraqi officials have denied allegations of a Houthi presence in Iraq, but it was reported that the group had an office in Baghdad until its supposed closure in March 2025 due to U.S. pressure.
For Iran, Iraq Is All About the Money
Iran’s partners in Iraq have political and economic influence that they use to help support Tehran and its ambitions. They make more than $1 billion annually through oil smuggling and related sanctions evasion. The PMF’s official budget of $3.5 billion largely goes to Iran’s Iraqi partners. The same cast of characters have also concocted schemes that exploit Iraq’s cash economy to funnel dollars to Iran and its partners — to the tune of billions in the past decade. In 2022, Baghdad established the Muhandis General Company, controlled by Iran-backed militias, which receives government contracts to siphon funds from the Iraqi state. Treasury designated the company for sanctions in October 2025 for supporting Iran-backed terror groups.
Keep Iran Out in the Cold as a New Government Forms
The Trump administration hopes to counter Iranian influence in Iraq, but it will face an uphill battle after Iran’s partners performed well in the November 11 election. The Iraqi government is currently in a caretaker phase, waiting for a new prime minister to be chosen, which limits its abilities.
But this is the perfect time to keep militia-affiliated politicians out of cabinet roles or the prime minister’s office, as the Trump administration is reportedly pressuring Baghdad to do. That effort should be expanded to prohibit anyone seeking these positions from coordinating with Iran’s U.S.-designated terrorist organizations outside Iraq, too. Additionally, the next government should prioritize economic and finance reforms aimed at curtailing Iranian financial exploitation.
Washington should also tell Baghdad that it cannot permit Iranian proxies to target those responsible for creating this list that almost held Iran’s proxies to account.
