TEHRAN/BAGHDAD – Iraq is bracing for potential economic disruptions following the reinstatement of United Nations sanctions on Iran, which experts say could impact the country’s fragile economy and energy supplies. 
While concerns are widespread, many analysts highlight Iran’s resilience and the historic economic ties between the two neighbors as reasons for cautious optimism amid the renewed pressure.
The UN sanctions on Iran were reimposed on Sept. 27 after a decade-long suspension, triggered by the “snapback” mechanism under the 2015 nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA). The sanctions target Iran’s nuclear activities but carry significant implications for regional trade and energy flows. The move was initiated by the E3—Britain, France, and Germany—who, despite pledging to protect Iran from unilateral U.S. sanctions, repeatedly failed to prevent their reimposition after 2018, undermining the nuclear deal and their credibility as mediators. 
Iraq’s deep economic integration with Iran, particularly in energy imports, makes the country highly sensitive to these renewed restrictions. Iran supplies a substantial portion of Iraq’s electricity and natural gas, vital for powering homes, industries, and infrastructure in a country still recovering from decades of conflict and political instability.
“Iraq is among the countries most affected by these sanctions due to its dependence on Iranian energy supplies,” said Ihsan al-Shammari, a prominent energy analyst based in Baghdad. “However, Iran’s longstanding trade relationships and its adaptive strategies under sanctions regimes suggest it will continue supporting its neighbors despite external pressures.”
Indeed, Tehran has a well-documented history of leveraging informal trade networks, cross-border commerce, and complex logistics to maintain its economic lifelines even under international sanctions. Analysts predict an increase in such informal trade between Iran and Iraq, which could mitigate the most immediate impacts on energy and goods availability.
Since the signing of the JCPOA in 2015, Iran and Iraq have forged stronger economic ties, particularly in energy cooperation. The deal’s suspension of sanctions led to a surge in Iranian exports to Iraq, helping to stabilize Iraq’s struggling power sector, which has long suffered from chronic shortages. Even after the United States unilaterally withdrew from the nuclear deal in 2018 and reimposed sanctions, trade between the two countries demonstrated notable resilience.
In the year leading up to the latest sanctions reinstatement, Iran’s non-oil exports to Iraq reportedly reached around $12 billion annually, encompassing a wide range of goods critical to the Iraqi market. Iranian natural gas exports alone were estimated at $4 to $5 billion per year, underscoring the energy sector’s importance for 
Baghdad’s domestic consumption.
Though sanctions and associated financial restrictions have posed challenges for cross-border trade and payments, both Tehran and Baghdad have shown strong political will to maintain these energy flows. Iranian gas and electricity remain integral to Iraq’s energy mix, helping power homes and industries across the country.
Political dynamics within Iraq further complicate the picture. Several Iraqi factions aligned with Tehran consider the relationship with Iran strategically vital and unwavering. Hadi Al-Ameri, the influential leader of the Fatah Alliance, recently reiterated Baghdad’s steadfast partnership with Tehran. He emphasized that essential goods such as dairy products would remain unaffected by sanctions, signaling a determination to preserve economic ties despite international pressure.
At the same time, the United States continues to exert diplomatic pressure on Baghdad to reduce its dependence on Iran. American officials have warned Iraq against ongoing cooperation with Tehran, cautioning that failure to comply could prompt sanctions on Iraq itself. This places Iraqi policymakers in a difficult position, balancing relations with two major powers while navigating the complex economic realities on the ground.
“The snapback sanctions represent a new form of pressure,” said Ali Habib, a political analyst based in Erbil. “Iraq cannot simply ignore these developments without risking serious repercussions. Yet, its reliance on Iranian energy remains critical to meeting domestic demand.”
Observers note that Iran’s adeptness at circumventing sanctions, combined with Iraq’s reliance on its neighbor for energy and trade, means that much of the economic relationship will likely continue, albeit through more complex and informal channels. The renewed sanctions may embolden informal networks on both sides of the border, further entrenching cross-border economic interdependence.
The history of Iran-Iraq trade under sanctions suggests that these informal pathways will be key to sustaining Iraq’s energy needs, enabling it to avoid the worst-case economic scenarios. Even as outside pressures mount, Tehran’s commitment to supporting regional allies like Iraq remains strong.
This intricate economic interdependence reflects the broader geopolitical realities of the region. Iraq’s position as a crucial transit and energy hub links it closely to Tehran, while also positioning it as a pivot point between Western interests and Iranian influence.
The unfolding situation serves as a test for Baghdad’s ability to balance these pressures while maintaining domestic stability. For Iraq, sustained energy supplies are not only an economic necessity but also critical for political and social cohesion in a country still rebuilding from years of turmoil.
As UN sanctions reshape the regional economic landscape, Iran’s capacity to leverage longstanding relationships and informal trade channels will be pivotal in mitigating disruptions. Iraq’s economic future remains closely tied to the resilience and adaptability of this bilateral relationship.