Iran's Plan B: The Rise of a Shiite Federal Entity in Iraq

Discussions on federalism in Iraq have long been entwined with political rivalry and conflicting interests. Federal regions have proposed reforms, as well as ways to exert political pressure to consider incorporating federalism in certain regions. In light of recent events—particularly the situation in Damascus and Trump's new Middle East strategy—discussions about a Shiite federation have gained momentum. The strategic location of southern Iraq, which possesses most the nation's oil resources, is one of the reasons the idea of establishing a Shiite federalist structure is more than just a pressure card this time around. In the face of U.S. sanctions, Iran can receive economic relief through a powerful Shiite federal organization instead of going through a central authority in Baghdad, which might later turn out to be uncooperative. At the same time, this puts Iraq at risk of more severe sanctions by the U.S. for its ties to Iran. Furthermore, any federalism under the existing conditions would merely cause Iraq to break up into smaller, more fragmented entities with less influence, region, and size, making it less resilient to any external intervention or internal crises.

The creation of a Shiite southern region is a powerful negotiating tool in the “Greater Middle East” mapping movements, as well as internal, regional, and even international political processes. Iraq's current political structure and approach to federalism need to be renegotiated at this crucial juncture, with more authority given to the provinces, keeping in mind issues that may arise in terms of corruption. Iraq as a state—with a federalist South region—could strengthen the decentralized system without causing the state to completely collapse by transferring some central government functions to the provinces and regions. To improve the decentralized system—without dissolving the state—this concept may involve transferring some central government authorities to the provinces. Given that the Iraqi public, including Shiites, is split on the question of a federal region or partition—and as neither seems to have the backing of the majority—this could be an achievable outcome for the many parties who fear the complete collapse of Iraq.

Discussions on federalism in Iraq have long been entwined with political rivalry and conflicting interests. Federal regions have proposed reforms, as well as ways to exert political pressure to consider incorporating federalism in certain regions. In light of recent events—particularly the situation in Damascus and Trump's new Middle East strategy—discussions about a Shiite federation have gained momentum. The strategic location of southern Iraq, which possesses most the nation's oil resources, is one of the reasons the idea of establishing a Shiite federalist structure is more than just a pressure card this time around. In the face of U.S. sanctions, Iran can receive economic relief through a powerful Shiite federal organization instead of going through a central authority in Baghdad, which might later turn out to be uncooperative. At the same time, this puts Iraq at risk of more severe sanctions by the U.S. for its ties to Iran. Furthermore, any federalism under the existing conditions would merely cause Iraq to break up into smaller, more fragmented entities with less influence, region, and size, making it less resilient to any external intervention or internal crises.

Kurdish Fears of a Strong Shiite Federal Entity in Iraq

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Proposals that uphold the concept of federalism throughout Iraq is beneficial to the Kurds since it confirms the validity of their model in Kurdistan and establishes the idea of federal governance as an indisputable fact. However, considering potential challenges, they are cautious about the Shiite federal option.

One of the main obstacles facing the Kurds is the creation of a Shiite region that may bolster southern Iraq's power, perhaps creating a new political and economic foe with a wealth of provinces. Its ability to negotiate with Baghdad might be strengthened if it were to become a strong federal entity, making it more difficult for Erbil to regulate its oil exports or seek a reasonable share of the federal budget. In addition, the rise of a Shiite federal structure will alter the political landscape within Iraq, which could face Erbil with a different reality, particularly given Iran’s expanding influence in the South. Such trends could influence Baghdad and Kurdistan's future relationship.

Sunnis Weigh Pros and Cons of Shiite Federal Entity in Iraq

With the growing sense of marginalization and Shiite supremacy over the central government, the idea of federalism gained momentum for many Sunni’s following the terrible ISIS experience in 2014 and the increasing influence of pro-Iranian armed organizations. At first, some Sunni forces argued that establishing federalist regions could provide them with some degree of political autonomy from Baghdad. However, as Shiite federalism gained popularity, these forces were forced to deal with a new, more challenging issue.

Shiite federalism is a concern more for economic prosperity than for Iraq's unity, even though the proposal of federal regions would provide Sunnis the chance to create their own entity. Given that most of Iraq's oil resources are found in the South, Sunnis are aware that if the Shiite federal suggestions were to be carried out, the Shiite region may monopolize these resources, putting any prospective Sunni region in a precarious economic situation. Some Sunni forces are now reevaluating their stance on regions in response to discussions of Shiite federalism, vacillating between praising it as a political solution and worrying that this new federal structure would deprive them of the resources required to properly run their territories.

Shiites Gain Upper Hand, Propose Federalism to Ensure Regional Autonomy

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Shiite forces gained serious political clout following the U.S. 2003 invasion of Iraq, where they were confronted with a crucial dilemma regarding Iraq's future governance. Either Baghdad has to maintain a strong centralized government or distribute power in a way that ensured greater autonomy for the south. As a result of talks, some aspects of federalism were incorporated into the 2005 Iraqi constitution. The establishment of a southern region akin to the Kurdistan region was made possible by Article 119, which guaranteed provinces the authority to create regions by popular referendum.

The creation of central and southern federalist regions, consisting of nine Shiite provinces extending from Basra to Babil, was first advocated by Abdul Aziz al-Hakim, the then-leader of the Islamic Supreme Council, in 2005. This was one of the most significant moments in the development of this proposal. Al-Hakim argued that federalism would enable the oil-producing provinces to reap the rewards directly from their wealth rather than sending the revenues to Baghdad and that it was the only way to prevent a return to marginalization. However, several groups felt that the proposal could weaken Baghdad and turn Iraq into rival states rather than one entity, and therefore it was opposed both within and regionally. Also, the turmoil that followed the U.S. invasion of Iraq in 2003 became a component of the U.S. strategy to destabilize and undermine countries into smaller, easier-to-manage entities. As evidence, Joe Biden and Leslie Gelb presented a plan in 2006, which reflected this concept. It suggested keeping Baghdad as a common zone but partitioning Iraq into three semi-autonomous regions: a Sunni region in the center, Shiite in the south, and Kurdish in the north. At the time, prominent members of the U.S. administration supported the plan, viewing it as the most effective strategy to maintain regional balance and keep Iraq from recovering its centralized power. Although it was never technically put into action, its implications were evident since the U.S. policy gave the semi-autonomous regions and districts broad powers and undermined the authority of the central government in Baghdad, opening the door for political federalism without a formal proclamation. The creation of an autonomous federal administrative body or the discussion of federalism in southern Iraq are not novel ideas; instead, it stems from an array of political occurrences where conflict and inequity continue to dominate the relationship between Baghdad and the southern provinces. Due to its oil wealth, the South was a significant selling hub, but it was still far from the political decision-making center. As a result, Shiite political circles started noticing that their actual political clout did not match their economic and demographic size. This belief led some to look for different options that would ensure that economic and administrative decisions were made independently, away from the capital's (Baghdad) influence.

Why Does Iraq's Shiite Federal Entity Remain in Limbo?

Twenty years have passed since al-Hakim's proposal, but the endeavor has not come to fruition, partly because of internal Shiite camp disputes and because of legal concerns. While certain groups think that decentralization will give the South administrative autonomy and protect it from Baghdad's political and security crises, others think that keeping centralized rule in Baghdad will give the Shiites more control over national decision-making. The idea of a southern federalist state was criticized by the religious establishment in Najaf, headed by Grand Ayatollah Ali al-Sistani, who instead urged to maintain Iraq's unity. They argued that any implemented amendments to the state's organization must be in accordance with legal and constitutional procedures, avoiding division or the emergence of fresh crises among its constituent parts. Thus, several Shiite groups were reluctant to openly support federalism for fear of conflicting with the religious establishment or offending the Sunni community, which at the time was adamantly against it.

The southern federal project was hampered not only by domestic but also by international factors. The United States, although initially in favor of federalism as a form of governance, was concerned about the establishment of a Shiite region that might grow completely subservient to Iran. In contrast, Iran was not thrilled about this proposal and chose to retain Shiite authority concentrated in Baghdad rather than restricting it to the South, aiming to maintain its influence over Iraqi decision-making in general. Because the Gulf states and Turkey viewed any attempt to establish an autonomous Shiite entity, it was seen as an immediate threat to the regional balance of power, and thus the idea was repeatedly rejected by the other countries in the region.

Iraq's System of Governance Under Scrutiny: Federalism and Partition Loom

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After the last two decades, incorporating federalism is no longer merely a fringe concept in Iraq. Key figures in the Iraqi political sphere have started to put it out as an achievable option in restructuring the country's governmental structure. In a television interview, former Prime Minister Nouri al-Maliki stated that “the Shiites will monopolize the oil if they are forced to partition,” a blatant sign that ongoing political disputes may lead to the creation of an independent Shiite federation that would control the southern oil resources. Hussein Mu'nis, a member of the Iraqi parliament, added on to stress that the Shiites' choice is not restricted to federal regions but may even include “independence for nine Shiite-majority provinces, if Shiite governance is not accepted.”

It is true that Iraq’s internal issues have historically been influenced by other outside forces; regional and international initiatives often overlap, and influential countries often shape the countries direction to follow their own strategic decisions. Hence, establishing federalism is not exclusively an Iraqi initiative; instead, it can be associated with international and regional strategies that aim to reorganize Baghdad's political system to suit certain needs of certain actors. The United States, Iran, and Israel view such a reform as an instrument that could be used to further their own interests. In the main centers of decision-making, the questions were not if federalism will occur but rather when, how, and who would gain the most from restructuring the political landscape of Iraq.

Iran's Blueprint for Dominance: A Shiite Federal Entity in Iraq

Iraq, however, has been seen by Iran as one of the most important states in which can stretch the strategic expansion of its regional dominance. Through its influence inside the Shiite parties and its decades in the making armed factions, it has attempted to ensure that the Baghdad's political system continues to be loyal to Iran. For Iran, the best course of action is to keep Tehran-aligned Shiites in charge of the central government in Baghdad. That being said, Iran may also consider supporting federalist regions as a fallback option in case its hold on Baghdad waned.

Iran's strategic approach to Iraq extends beyond politics, encompassing also economic and military influence. Iran was crucial in supporting the Shiite militia fight against U.S. occupation, and after 2014, Iran increased its backing for the Popular Mobilization Forces. Through several initiatives, Iran also increased its economic dominance, giving Iraq a channel of influence that was just as significant in terms of religion and economics as its control over security. Given this dynamic, Iran might consider supporting federalist regions as a strategy anytime it was convinced that other outside forces—the U.S., the Persian Gulf states, Turkey, or even Israel—were threatening its dominance in Baghdad.

The Israeli Plan for Iraq

Israel considers Iraq as a strategic actor in the region since the first Gulf War in 1991. Specifically, it view Iraq not as a country whose unity must be maintained but rather as a force that must continue to be weak and incapable of jarring the regional balance of power. For Israel, a united Iraq can be viewed as a long-term strategic threat and thus it backs plans to divide it up into smaller entities.

After the Abraham Accords were signed in 2020, Israel's influence in the region grew and efforts were made to gain ground in Iraq, especially in Kurdish and Sunni communities. During the Erbil Conference in 2021, Iraqi leaders made internal calls to normalize relations with Israel, which sparked intense controversy and Baghdad's official decline. Here, it is evident that calls for federalist regions were never solely a domestic political choice but rather continued to be a component of a larger regional and international dispute involving many external state actors.

Baghdad Faces Financial Crisis as South Pursues Oil Riches

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The proposed southern federal region, which extends from the capital (Baghdad) to the Persian Gulf, includes the provinces of Baghdad (partially), Babil, Karbala, Najaf, Qadisiyah, Muthanna, Wasit, Maysan, Dhi Qar, and Basra. With significant oil ports in Basra, in addition to significant religious sites and sovereign institutions in Baghdad, this region is home to the political, economic, and religious hubs of Iraq's Shia community and is among the richest in the entire country. The creation of federalist regions may encounter obstacles with issues pertaining to citizenship rights and political participation in those said regions, particularly if the entity develops a distinct sectarian identity in its legal and administrative structure.

With over 80% of the country's oil reserves, the southern part of Iraq is the economic backbone of the country. Furthermore, the region is home to strategically significant oil fields, including the Majnoon field in Maysan province, the Gharraf and Nasiriyah fields in Dhi Qar province, and the Rumaila field in Basra province. The region is anticipated to earn the largest portion of oil income if the proposed project is carried out, perhaps enabling it to become financially independent of the central government in Baghdad. This presents many noteworthy obstacles for national funding, since oil from the southern regions is the main source of revenue for the central budget. Additionally, the region in question may become a key hub for imports and exports because of its control over seaports, especially in Basra, and may in turn influence the commercial markets in Baghdad and other provinces.

Furthermore, by making the South a federal region, the central government in Baghdad would lose political clout and become an administrative body with almost total autonomy, expanding its capacity to make decisions without intervention from Baghdad. It would also allow Shiite forces in the region to compete with one another for control of the new organization’s federal governance and open the doors for the Kurdish, Shiite, and Sunni populated regions to consider creating their own federal structures. Apart from the difficulties in establishing security between the state capital, Baghdad, and the proposed new region, Baghdad's focus on restructuring its affairs following the loss of the South may allow terrorist groups to re-establish themselves in Sunni provinces. To re-establish themselves in Iraq, as well as extremist groups can take advantage of political and security tensions.

Of course, Baghdad has a constitutional right to challenge the creation of this region through its intricate legal processes. Some claims may argue that it violates the constitution, and it may decline to confirm a public referendum on the matter. It can also limit the region's efficacy by contesting any rulings it makes in front of the Federal Court, as it has done multiple times with the Kurdistan Region. Additionally, laws controlling the allocation of financial resources may be changed by the central government of Iraq to deny new regions separate portions of oil profits.

Conclusion

The creation of a Shiite southern region is a powerful negotiating tool in the “Greater Middle East” mapping movements, as well as internal, regional, and even international political processes. Iraq's current political structure and approach to federalism need to be renegotiated at this crucial juncture, with more authority given to the provinces, keeping in mind issues that may arise in terms of corruption. Iraq as a state—with a federalist South region—could strengthen the decentralized system without causing the state to completely collapse by transferring some central government functions to the provinces and regions. To improve the decentralized system—without dissolving the state—this concept may involve transferring some central government authorities to the provinces. Given that the Iraqi public, including Shiites, is split on the question of a federal region or partition—and as neither seems to have the backing of the majority—this could be an achievable outcome for the many parties who fear the complete collapse of Iraq.