Speaking at the United States Institute of Peace, Hussein, who also serves as Iraq’s foreign minister, listed the fight against corruption as a top priority. “We are suffering from corruption as we suffered from ISIS,” Hussein said, referring to the Islamic State terrorists who at one point controlled vast swathes of Iraq and over whom the Iraqi government declared victory on December 9, 2017. “Fighting corrupt people is not so easy. Sometimes it is more difficult than fighting ISIS,” Hussein added.

Corruption Concerns and a Currency Crisis

Western governments are most concerned about corruption in Iraq, which Transparency International ranks toward the bottom of its Corruption Perceptions Index. The most recent high-profile corruption case involves stealing $2.5 billion from Iraq’s state-owned al-Rafidaen bank in what Iraqis have described as “the heist of the century.”

More recently, the U.S. Federal Reserve had restricted Iraq’s access to its dollars in an effort to address money laundering that the United States sees as benefiting Iran and funding terrorism. The United States controls the flow of dollars to Iraq as Iraq’s foreign reserves have been held in the U.S. Federal Reserve since the U.S. invasion and ouster of Saddam Hussein’s regime in 2003.

The resulting devaluation of the dinar prompted large protests in Baghdad. The Iraqi government responded by replacing the central bank governor and revalued the dinar in an effort to stabilize the situation.

Speaking in a discussion moderated by Sarhang Hamasaeed, the director of Middle East Programs at USIP, Hussein said the Iraqi central bank decisions were implemented in coordination with the U.S. Treasury Department and the Federal Reserve. The currency crisis, he said, has since blown over.

“Some people they are thinking that dollars that are coming from [the United States] to the Iraqi market [are] disappearing,” said Hussein. He said Iraq, which is heavily dependent on imports, uses dollars to make purchases from its trade partners that include the United States but also Iran. “With all these countries, when we buy, we pay, and we pay in dollars,” he said, adding that contrary to the perception in the West, dollars are not mostly smuggled from Iraq to other countries. Acknowledging some smuggling does take place, Hussein said: “This is painful for Iraqi people and the Iraqi government to only talk about smuggling dollars. There are, of course, some people who are smuggling dollars, as they are smuggling many other products.”

Addressing conspiracy theories that the United States is trying to undermine Iraqi Prime Minister Mohammed Shia al-Sudani’s government by restricting the flow of dollars, Hussein said his visit to Washington has proved otherwise. “This is the healthiest relationship between two countries, when you are talking about helping each other, understanding each other, supporting each other,” he said. “This is a very healthy relationship with the United States.”

Support for the New Government

Early elections on October 10, 2021, which followed two years of anti-government protests, resulted in political gridlock after the victor, Moqtada al-Sadr, failed to form a government and subsequently gave up all of his bloc’s parliamentary seats. Following a year of negotiations, in October 2022, Iraq’s parliament elected Abdul Latif Rashid as president. Rashid named al-Sudani as prime minister-designate. Al-Sudani was elected amid rocket attacks near parliament in Baghdad. Al-Sudani was the nominee of the Coordination Framework, al-Sadr’s main rival that is believed to be backed by Iran. The new government is a coalition of Shias, Sunnis and Kurds.

The Biden administration has taken incremental steps to build ties with al-Sudani’s government. U.S. President Joe Biden, joined by Jordan’s King Abdullah, spoke with al-Sudani on the phone earlier this month. Both Biden and al-Sudani understand the importance of the relationship between their countries and Hussein said the Biden administration has been supportive of the new government in Iraq.

In his meetings in Washington, Hussein and his interlocutors discussed the economy, energy, climate change and regional politics. Hussein described the meetings as positive and said: “There is a lot of support for the Iraqi government and for the process of democracy in Iraq.”

Roots of the Problem

In his opening remarks, Hussein recounted a recent history of Iraq. Starting with the overthrow of Saddam’s regime 20 years ago, the U.S. invasion, the war against ISIS, the quarrel between Oil and Petroleum Exporting Countries (OPEC) members that led oil prices to drop and the COVID-19 pandemic, Hussein explained Iraq’s problems have “got roots.”

However, Hussein said, the situation in Iraq today is very different. Describing the security situation as “going well,” he said terrorists are no longer a big threat to Iraqi society or its political system. Nevertheless, he said, “we must be aware because it’s not just about the fighters, it’s about the ideology.”

“To defeat the terrorists is easier than to defeat the ideology,” Hussein said, while noting it will take an “intellectual attack” to achieve this goal. Tens of thousands of women and children in al-Hol camp in northeastern Syria are vulnerable to ISIS ideology and need continued Iraqi, Syrian and international attention.  

Common Interests with the United States

Hussein laid out some areas of common interest with the United States. These include addressing the challenge posed by terrorism and climate change. He also discussed the importance of investing in Iraqi gas. “Everyone knows Iraq is an oil country,” said Hussein, “but Iraq can also be a gas country.”

The deputy prime minister said helping Iraq develop its gas sector will not just benefit Iraq and the Iraqi economy, it will also benefit other countries, including those in the West. A stronger Iraqi economy will benefit the region as well as attract U.S. companies, he added.

Developing the gas sector could also help the Iraqi government meet one of its priorities of providing reliable electricity supply to Iraqis. But this will take a couple of years to achieve. As for now, Hussein predicted a difficult summer ahead for Iraqis.

Iraq’s Foreign Relations

Baghdad has turned into a hive of diplomatic activism. In just this past month, senior officials from Russia, Iran, Saudi Arabia and Morocco have visited the Iraqi capital. Hussein said he will soon host Iran’s foreign minister.

“We are thinking about our interests in the first place — security interests, economic interests, political interests and strategic interests and then we are building our relationships on these interests,” Hussein explained.

Hussein said while it is impossible to ignore China, with which Iraq has a $20 billion trade relationship, Iraq also has a longstanding relationship with Russia. Iraq’s ties with Russia have been complicated by international sanctions on the latter in response to its war in Ukraine. Hussein said sanctions had made it impossible for Iraq to pay its Russian trade partners. “Our responsibility is to protect our banks,” he said, adding that Iraq has discussed its predicament with U.S. and Russian officials. In some other trade partners, Russia has left its money in those countries’ banks, Hussein said, hinting at a similar arrangement for Iraq. 

Hussein noted that Iraq has a good relationship with the United States but also with Iran. Acknowledging the tensions between the United States and Iran, he expressed the hope that Washington and Tehran would soon resume the nuclear dialogue that has paused in Vienna. “We are telling both sides that the tensions between both countries is not good, anyhow, for us,” he said.