Despite the departure of final US-led coalition forces in late September and Baghdad’s designation of 1 October as “Sovereignty Day,” Iraq devalued the dinar by 14.5 percent to 1,520 per dollar after the US-Iran war cut oil exports from over 3.6 million to as low as 1.35 million barrels per day.

Oil still provides more than 88–90 percent of government revenue and is held in a New York Federal Reserve account, giving Washington economic leverage, while Tehran influences exports through the Strait of Hormuz and maintains ties to powerful armed factions within the Popular Mobilization Forces.

The article argues that true sovereignty will require diversifying export routes, broadening the fiscal base beyond hydrocarbons, and establishing a single national chain of command over the use of force by the June 2027 disarmament deadline set by Prime Minister Ali Al-Zaidi.

The enduring paradox of Iraqi sovereignty was exposed again last week. The final US-led coalition forces left the country late last month, ending a military presence that, in different forms, had lasted more than two decades. Baghdad designated Oct. 1 “Sovereignty Day,” with Prime Minister Ali Al-Zaidi declaring that Iraqi forces had assumed responsibility for the country’s security, while Iran-aligned factions celebrated the withdrawal as the defeat of the “American project.” Yet, on Wednesday, Baghdad devalued the dinar by 14.5 percent, from 1,300 against the US dollar to 1,520, after the US’ war with Iran disrupted oil exports and cut state revenues. Iraq has removed the most visible symbol of foreign interference but many of the pressures constraining its freedom of choice remain.

The currency decision showed how exposed the Iraqi state still is. Oil accounted for 88 percent of government revenue and 91 percent of merchandise exports in 2025, while the International Monetary Fund expects oil revenues to continue providing more than 90 percent of government income through 2030. Before the war, Iraq exported more........

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