The Iraqi economy depends overwhelmingly on hydrocarbons. Political institutions remain divided along sectarian lines, with Baghdad mediating between Iranian and U.S. interests. The state’s capacity has improved since ISIS’s territorial defeat, yet corruption and militia influence constrain reform and investment.

Modern Iraq emerged from Ottoman provinces under British mandate in 1920 and gained independence in 1932. The Ba’ath regime under Saddam Hussein centralized control until the 2003 U.S. invasion dismantled the state. Power fragmentation and sectarian conflict followed. Reconstruction has oscillated between oil windfalls and political paralysis.

• 1980-1988: Iran-Iraq War drains resources – 1990-1991: Gulf War; UN sanctions – 2003: U.S.-led invasion; regime collapse – 2014-2017: ISIS insurgency and territorial war – 2020s: Gradual stabilization, militia integration efforts

In 2025, Baghdad mediates between Tehran and Riyadh while hosting international reconstruction conferences. Security is fragmented but improving. Oil exports surpass pre-pandemic levels amid infrastructure upgrades by Asian contractors.

Iraq’s medium-term outlook hinges on governance reform and oil price stability. Federal-Kurdish relations over revenue sharing and Kirkuk oil fields remain unresolved. Incremental normalization and infrastructure renewal could restore limited regional influence.