Iraqi Prime Minister Ali Al-Zaidi, initially viewed as a political newcomer with no prior government experience, made a deliberate statement by choosing Washington for his first official overseas trip — a departure from predecessors who traditionally visited Iran first. Al-Zaidi recently concluded his visit to Washington, D.C., where he met with U.S. President Donald Trump and secured a series of significant commitments, though many remain memoranda of understanding (MOUs) rather than binding agreements.

The visit yielded 48 announced agreements in total, headlined by major U.S. investment pledges. American and Western energy companies signed more than $60 billion in agreements and memoranda spanning oil, natural gas, pipelines, infrastructure, healthcare, and communications — including the introduction of Starlink to Iraq. The scale of the energy commitments is notable given that Iraq is OPEC's second-largest crude producer and oil revenues account for roughly 90% of government income, making the sector central to the country's reconstruction prospects. The pledges also represent a counterweight to China, which has been the largest foreign investor in Iraqi oil fields through state-owned companies since the post-2003 reconstruction era.

JPMorgan Chase to Open Branch in Iraq

Perhaps the most consequential development was the agreement to establish a branch of JPMorgan Chase in Iraq — the first major American bank to establish a presence in the country since 2003. The move is intended to facilitate financing for U.S. companies operating in Iraq, encourage broader foreign investment, strengthen Iraq's financial sector, and serve as a model for Iraqi banks seeking international partnerships. Iraq's banking sector has remained largely isolated from international finance, and the absence of major Western banks has been a persistent obstacle to foreign direct investment beyond the energy sector.

Shift Toward Economic Partnership

Both leaders emphasized that bilateral relations should increasingly center on economics rather than military affairs. Baghdad positioned itself as open to American investment, while Washington underscored trade and commercial cooperation.

Agreements with companies such as Chevron and ConocoPhillips cover oil field redevelopment, pipeline construction, and related infrastructure aimed at increasing production and improving export capacity.

Alternative Oil Export Routes

A key strategic outcome was support for pipeline projects designed to reduce Iraq's dependence on the Strait of Hormuz by connecting to Mediterranean and Turkish export routes. Amid recent disruptions to Gulf shipping, this represents a major long-term objective for Baghdad, particularly given that roughly a fifth of the world's daily oil supply transits the Strait.

During Al-Zaidi's visit, Iraq and Syria signed an MOU to rehabilitate the idled Kirkuk-to-Baniyas oil pipeline, which could eventually transport up to 2.5 million barrels per day to the Mediterranean. Separately, Iraq and Türkiye agreed to maintain oil export pipelines to the Turkish port of Ceyhan, though numerous differences between the parties remain unresolved.

Investment Climate and Anti-Corruption Measures

Iraqi officials announced additional steps to reduce regulatory obstacles and improve security for foreign investors. Ahead of the visit, 47 officials and members of parliament were arrested on corruption charges, with authorities displaying seized gold bars and stacks of U.S. dollars and Iraqi dinar. Iraq has made modest progress in international corruption indices but still trails its neighbors — a legacy of institutionalized corruption under Saddam Hussein, the dismantling of state institutions following the 2003 U.S. invasion, and reliance on a hydrocarbon-based rentier economy. For international investors, corruption and weak rule of law have historically ranked among the top barriers to entry in Iraq alongside security concerns.

Balanced Diplomacy Between Washington and Tehran

Although Washington pressed Baghdad on Iran-backed militias, Al-Zaidi avoided public confrontation with either the U.S. or Iran. His government continues to pursue working relations with both powers while emphasizing Iraqi sovereignty — a stance supported, at least rhetorically, by both Washington and Tehran.

As a symbol of this balancing act, Al-Zaidi attended funeral services in the holy city of Najaf for Ali Khamenei, the former Iranian leader, immediately before departing for the United States. Professor John Calabrese described Iraq's challenge as "becoming a bridge" between the U.S. and Iran, leveraging its geographic position after the fall of the Islamic State and the Assad regime, and amid the U.S.–Iran war.

Al-Zaidi pledged that armed groups would be demobilized once U.S. forces — cited as the justification for the militias — depart by September 30. Many of these militias are part of the Popular Mobilization Forces and are formally recognized as government entities. Demobilization assumes an on-time American departure despite the ongoing war involving the U.S., Israel, and Iran. Iraq's balancing act is further complicated by its reliance on Iran for a significant share of its electricity and natural gas supply, a dependence that successive governments in Baghdad have struggled to reduce.

Militia Tensions Persist

In late July, American and Saudi forces attacked Iraqi militias following militia attacks on Saudi oil facilities. Prime Minister Al-Zaidi was in Türkiye at the time, and the timing of the strike was described diplomatically as "not helpful." Iran subsequently claimed the U.S.–Saudi attack targeted facilities used by Arbeen pilgrims, millions of whom are expected to travel to Karbala in early August.

The U.S. could assist the demobilization process by providing timely intelligence to Baghdad and discreetly urging government action when militias prepare operations. If Al-Zaidi's commitment is delayed, administration sources may voice criticism while Trump touts the "tremendous chemistry" between himself and the prime minister.

Political Gains and Investment Outlook

The visit demonstrated that Iraq's new government has direct access to the White House, strengthening the prime minister's position against militia leaders and the powerful Coordination Framework. It also reassured international investors that Iraq intends to remain open for business despite regional instability.

Iraq aims to attract the foreign direct investment needed to rebuild infrastructure damaged by decades of conflict and sanctions, including the ambitious 1,200-kilometer Development Road connecting the Persian Gulf to Türkiye. The Development Road would position Iraq as a transit corridor linking Gulf and Asian trade to European markets, a role historically dominated by Egypt's Suez Canal and Turkish overland routes. The visit reinforced Iraq's image as a nation pursuing reconstruction and economic development rather than serving as an arena for regional rivalries — though outcomes depend heavily on Washington, Tel Aviv, and Tehran.

Remaining Challenges

Many of the 48 announced agreements are non-binding MOUs whose success will depend on execution. U.S. officials continue to expect progress on curbing Iran-backed militia influence, while Iraq must balance those demands against domestic political realities. Iraq also faces the risk that heavy reliance on FDI could invite foreign interference, particularly given America's deep involvement since the 2003 invasion.

Overall, the visit secured substantial prospective investment, strengthened ties with Washington without an open break with Tehran, and advanced Iraq's goal of transforming its relationship with the United States from one centered on security to one built on economic development. For the first time since 2003, Iraq appears to be pursuing a policy of positive neutrality — potentially following a path similar to Pakistan's, maintaining strategic relations with the United States while preserving pragmatic ties with Iran.

By James Durso for OilPrice.com