Iran Could Lose Iraq: The Axis of Resistance Is Primed to Take Another Hit

Introduction

The once-formidable Iranian sphere of influence across the Middle East—the so-called “Axis of Resistance”—has suffered unprecedented setbacks in recent years. With Syria’s Assad regime toppled, Hezbollah severely weakened, and Hamas crippled, Iran’s regional network stands at its most vulnerable point in decades.

Evidence suggests Iraq may be the next domino to fall, potentially dealing a decisive blow to Tehran’s regional ambitions.

This shift would mark a dramatic reversal in a country where Iran has exercised significant control since the 2003 U.S. invasion.

The Crumbling Axis of Resistance

The Axis of Resistance represents an informal coalition of Iranian-supported militant and political organizations across the Middle East.

Formed by Iran, it unites stakeholders committed to countering the influence of the United States and Israel in the region.

This network includes Lebanese Hezbollah, the Islamic Resistance in Iraq, the Popular Mobilization Forces (PMF), and the Yemeni Houthi movement, sometimes incorporating Hamas and various Palestinian militant groups.

Since October 2023, this alliance has suffered catastrophic blows. The conflicts engulfing the Middle East have significantly weakened the Axis of Resistance and the strategy behind it.

According to our analysis , the network has experienced major setbacks in both the Israel-Hamas war and the Israel-Hezbollah conflict.

Most significantly, Syrian President Bashar al-Assad’s fall in 2024 disrupted a crucial segment of Iran’s regional network. As one high-ranking commander in Iran’s Revolutionary Guard Corps starkly admitted: “We lost, we badly lost”.

The collapse of the Assad regime marked the end of the greater Iranian project in the Levant for the foreseeable future. Iran had invested tremendous resources over the past decade to build its influence in Syria, which helped project force westward and move materiel to proxy forces around Israel.

This sudden loss deprives Tehran of its main entry point into the Levant and upends core assumptions underpinning Iranian regional strategy.

Iraq’s Strategic Importance to Iran

Unlike Syria, which is now lost, or Lebanon, where Hezbollah has been severely degraded, Iraq remains a critical pillar of Iran’s regional network. Since the 2003 U.S. invasion and the fall of Saddam Hussein, Iran has methodically built influence in Iraq, cultivating political allies and establishing powerful proxy militias that serve its interests.

Iran’s strategic interests in Iraq are multifaceted

Iraq provides a buffer zone against potential threats and a corridor for projecting power westward.

Iraqi militias within the Popular Mobilization Forces (PMF) serve as valuable proxies for advancing Iranian interests.

Iraq has been an important economic partner, particularly as a market for Iranian energy exports.

Control of Iraq creates strategic depth against regional adversaries like Saudi Arabia.

Through its proxy militias in Iraq, Iran has established significant political and military leverage. As an Iranian parliamentarian once boasted, Tehran effectively controlled four Arab capitals: Baghdad, Beirut, Damascus, and Sanaa.

With recent events, two of those four capitals—Damascus and Beirut—have largely slipped from Iran’s grasp.

Signs of Growing Iraqi Independence

Several converging factors suggest Iraq may be primed to be the next country where Iranian influence significantly diminishes:

Energy Independence Emerging

Perhaps the most tangible factor is Iraq’s decreasing energy dependence on Iran. The Biden administration’s last 120-day sanctions waiver permitting Iranian gas and electricity exports to Iraq expires on March 7, 2025.

The Trump administration has signaled it will not renew these waivers, in line with its February 2025 National Security Presidential Memorandum restarting maximum pressure on Iran.

Crucially, Iraq appears increasingly capable of managing without Iranian energy. While Iraq once depended on Iran for about 10 GW of power (40% of peak generation), Iran recently reduced this to just 1.5 GW.

This reduction occurred because Iran unilaterally shut off two-thirds of electricity exports and 85% of promised gas supplies to Iraq during the winter of 2024-2025.

Iraq has demonstrated it can adapt to these reductions. When Iran cut supplies with no advance notice, Iraq salvaged 3.3 GW by switching parts of three plants to Iraqi liquid fuel. With proper preparation, as much as 8.1 GW of the 8.8 GW of Iranian-fueled generation could be converted to liquid feedstock available in Iraq’s own inventory.

Shifting Political Calculations

Iraqi militias and politicians have been “walking on eggshells with Washington,” suggesting vulnerability to diplomatic and intelligence pressure. The significant deterioration of other parts of the Axis of Resistance has likely prompted Iraqi political actors to reconsider their alignment with Tehran.

The planned withdrawal of American forces from central Iraq by September 2025 represents a critical juncture. While this might seem to create an opportunity for Iran to consolidate control, it also reflects changing dynamics that could work against Iranian interests if properly managed.

As one analysis notes: “The obliteration of Iran’s threat network—Hamas, Hezbollah, the Assad regime—plus Iran’s air defenses mean that there is finally a chance to loosen Iran’s grip on Iraq—but only if momentum is maintained”.

Many important policy decisions now hinge on the perceptions of Iran-backed militias regarding the incoming Trump administration’s approach to Iraq.

Iran’s Internal Challenges

Iran’s ability to maintain its regional network has been undermined by internal weaknesses. Corruption within Iran’s ideologically driven political system and mismanagement of resources have functioned as key obstacles to its geopolitical ambitions.

Success in Iran’s gray zone strategy requires harmonizing diverse elements of statecraft and ensuring effective management of resources and operations—something the Iranian political system has struggled to sustain.

From the outset, the Islamic Republic’s statecraft has suffered from dysfunction, which has worsened significantly in recent years, leaving Iran facing deep challenges domestically and in foreign relations.

Government stakeholders within the system are united only in their opposition to each other, preventing the country from achieving development goals.

Fundamentally, Iran has been unable to translate its regional influence into economic leverage, failing to make its presence sustainable and constructive.

For example, Iran’s significant investments in Syria (around $20–$30 billion) did not yield long-term economic or strategic benefits, as the Assad regime’s instability drained resources without strengthening Iran’s position.

The Sectarian Dimension

Iraq’s complex sectarian dynamics continue to challenge Iran’s influence. While Iran has cultivated strong relationships with Shia political factions and militias, many Sunni Arabs and Kurds remain wary of Iranian dominance.

A Kurdish interlocutor expressed concern about Iraq falling almost completely into Tehran’s grip after a potential U.S. withdrawal.

Surprisingly, some Sunni Iraqis reportedly admire former President Trump for ordering the 2020 strike that killed Qasem Soleimani, the leader of Iran’s Quds Force and the architect of much violence in their country.

This sectarian divide creates natural limitations to Iran’s influence and provides openings for counter-Iranian political movements. The successful integration of parts of the Popular Mobilization Forces into Iraq’s official military structure has also weakened some Iran-backed militias.

Resilience Factors

Despite these vulnerabilities, the Axis of Resistance has historically demonstrated significant resilience. Groups such as the PMF, Hezbollah, or the Houthis are not mere “non-state actors” but are entrenched within state structures and wield significant power in their own right.

Axis members have developed economic relationships with multiple entities and states, both regionally and globally; these networks allow the axis to withstand external threats and policy interventions such as military strikes and sanctions.

Western policy interventions to date have been unsuccessful due to a focus on targeting individual components and limited understanding of the axis’s regional and global networks.

Conclusion

A Pivotal Moment

The current moment represents a potentially decisive turning point for Iran’s regional influence, particularly in Iraq. The combination of energy independence, shifting political calculations, Iran’s internal weaknesses, and sectarian dynamics creates an unprecedented opportunity to reduce Tehran’s grip on Baghdad.

However, this shift is not guaranteed. As the planned U.S. withdrawal from Iraq approaches in September 2025, much depends on whether Iraqi leaders, with appropriate international support, can capitalize on Iran’s moment of weakness to assert greater independence.

The transformation of Iraq from an Iranian client state to a more sovereign actor would represent perhaps the most significant geopolitical shift in the Middle East since the Arab Spring.

It would effectively dismantle what remains of Iran’s once-vaunted “Axis of Resistance” and could potentially trigger broader regional realignments.

For Iran, losing Iraq would not merely represent the loss of another strategic partner—it would strike at the heart of their regional security strategy and potentially accelerate internal pressures within the Islamic Republic itself.

The coming months will reveal whether Iraq becomes the next domino to fall or whether Iran can salvage its diminishing regional influence.