Iraq acts boldly before retreating

Iraq recently became the focus of intense regional and international attention after the official publication of a decision to freeze the assets of certain “terrorist” organizations, including Lebanon’s Hezbollah and Yemen’s Houthis.

Issued in the Iraqi Official Gazette on 17 November 2025, the announcement initially suggested a major policy shift. However, the government quickly clarified that the inclusion of Hezbollah and the Houthis was a publication error, limited to ISIS and al-Qaeda affiliates.

Despite being corrected, the episode highlights the precarious balancing act Iraq faces between United States and Iranian interests, the challenges of internal governance, and the broader geopolitical dynamics of the Middle East.

The controversial asset freeze

The initial decision came from Iraq’s Committee for Freezing Terrorist Assets, a body tasked with implementing measures against groups linked to terrorism. According to the Central Bank of Iraq, the listing of Hezbollah and the Houthis alongside ISIS and al-Qaeda was unintentional, a result of the list being published before the final revisions.

Iraqi Prime Minister Mohammed Shia al-Sudani responded immediately, ordering an urgent investigation to determine the source of the error, identify those responsible, and ensure accountability. He stressed that Iraq’s political and humanitarian positions regarding Lebanon and Palestine are principled and independent, reflecting the will of the Iraqi people rather than external pressures. The government also emphasized that its cooperation in freezing assets is strictly limited to entities tied to ISIS and al-Qaeda, clarifying that the broader misperception was due to administrative oversight.

Internal and external implications

Although the incident was administrative, it had immediate regional reverberations. The United States, which has long sought to limit Iran’s influence in Iraq and across the Middle East, likely viewed the initial listing favorably as a signal of Iraq’s willingness to counter Tehran-backed groups. The timing was also significant, coming shortly after a visit to Baghdad by US Special Envoy Tom Barrack, who reportedly emphasized the need for Iraq to curb the influence of Iran-aligned factions, including Hezbollah and the Houthis, to maintain regional stability. Simultaneously, Iran maintains extensive military, political, and economic influence in Iraq through Shiite militias and political parties allied with Tehran (especially as the recent Iraqi elections witnessed a victory for Iran’s allies in the country), making any move perceived as targeting its proxies highly sensitive.

Political analysts note that this episode reflects an underlying debate within Iraq about its future relationship with Iran-aligned factions. Even if the listing was an error, it demonstrated that some elements within Iraq’s institutions are willing to challenge entrenched militia influence, a long-standing feature of Iraqi politics. The incident thus exposed internal tensions over the role of armed groups in Iraqi society. Since the 2019 October uprising, Iraqi citizens have increasingly called for the reduction of militia influence over political and security decisions. Analysts argue that the government’s handling of the error demonstrates both the fragility and the potential of Iraq’s institutions to enforce rule of law and maintain sovereignty over critical national decisions.

Experts also note that Hezbollah and the Houthis had previously relied on Iraq as a logistical and financial hub, serving as a conduit for funding and coordination. The temporary listing, even if withdrawn, signals that Iraq is under increasing pressure to ensure that its territory is not used to support foreign proxy networks.

In conclusion, the brief listing of Hezbollah and the Houthis on Iraq’s terror list, despite being a publication error, revealed the nation’s sensitive geopolitical position. Balancing competing pressures from the United States and Iran, Iraq must navigate a complex web of domestic and international expectations while asserting its sovereignty. Moving forward, Iraq’s ability to manage armed groups, enforce the rule of law, and maintain strategic autonomy will determine its influence and stability in an increasingly polarized region (especially as looming war seems near between Israel and Iran, along with its allies and proxies).