Iraq's parliament approved 11 remaining cabinet portfolios and three deputy prime ministers on Thursday, completing the government of Prime Minister Ali al-Zaidi. The most consequential appointment: Laith al-Khazali, a senior leader of the Iran-backed Asaib Ahl al-Haq militia — designated a foreign terrorist organisation by the US in 2020 — now serves as deputy prime minister. His brother Qais leads the group. Both were sanctioned by the US Treasury in 2019 over the killing of Iraqi protesters. The cabinet completion is a political milestone, but the economic backdrop is the real story. Before the US-Israel war on Iran began February 28, Iraq exported roughly 3.5 million barrels of oil per day through the Strait of Hormuz, generating 90 percent of government revenue. That revenue stream is now choked. Al-Zaidi described the war as imposing "extraordinary economic challenges" — diplomatic understatement for a fiscal emergency. To cover basic state functions, al-Zaidi — a former banker — devalued the Iraqi dinar by nearly 15 percent against the US dollar. The government needs approximately 10 trillion dinars ($6.7 billion at the new exchange rate) per month just for salaries and critical spending. He disclosed that his government inherited public debt exceeding 208 trillion dinars ($139 billion), raising pointed questions about the fiscal management of former PM Mohammed Shia al-Sudani's administration. The appointment of al-Khazali crystallizes the tension at the center of Iraqi governance. Iran-backed paramilitaries have steadily embedded themselves in the formal state apparatus — a pattern that accelerates during security crises. Placing a US-sanctioned figure in a deputy PM role while simultaneously pledging to "disarm non-state armed groups" is either a contradiction or a consolidation strategy dressed as reform. Al-Zaidi's stated agenda — fighting corruption, disarming militias, and completing the withdrawal of US forces — reads like every Iraqi PM's inaugural checklist. The difference is context: a war next door, a currency in freefall, and a budget dependent on an export route that may remain contested for months or years. The pledges are less a policy agenda than a survival framework. The postponed vote on the migration and displacement minister hints at the political fragmentation still operating beneath the surface. Iraqi cabinet formation has always been a quota-sharing exercise among ethno-sectarian blocs, and one unfilled seat signals ongoing horse-trading. With the Hormuz crisis compressing fiscal space, the distributional fights over ministries will only sharpen. The structural picture is stark: Iraq remains a petrostate with a single export chokepoint, no meaningful fiscal reserves proportional to its spending obligations, and a political class that has now formally integrated a sanctioned paramilitary network into executive governance. Every month this war continues, the fiscal hole deepens by billions.
