Saudi-Iran Détente on Paper, Proxy Wars in Practice: The $100 Billion Iraqi Test Case
Despite historic normalization talks between Riyadh and Tehran, Iran’s political proxies in Iraq are reportedly blocking up to $100 billion in Saudi investments, exposing the fragile nature of Middle Eastern rapprochement.
The Abraham Accords’ Forgotten Theater
While much of the world celebrated the 2023 Saudi-Iranian normalization agreement as a potential game-changer for Middle Eastern stability, the reality on the ground tells a more complex story. Iraq, long a battleground for regional influence between its two powerful neighbors, has emerged as the ultimate stress test for this diplomatic breakthrough. The reported obstruction of Saudi investment projects by pro-Iranian factions suggests that old rivalries die hard, particularly when billions of dollars and strategic influence are at stake.
The timing is particularly significant. Iraq desperately needs foreign investment to rebuild its infrastructure after decades of conflict, and Saudi Arabia’s potential $100 billion commitment could transform the country’s western provinces. These areas, predominantly Sunni and historically marginalized, have been seeking economic alternatives to Iranian influence that has dominated Iraqi politics since the 2003 U.S. invasion.
The Economic Weapon in Regional Competition
What makes this development particularly striking is the scale of opportunity being allegedly squandered. A $100 billion investment package would represent one of the largest foreign commitments to Iraq’s reconstruction, dwarfing most international aid programs. For context, this sum equals roughly half of Iraq’s entire GDP and could fundamentally reshape the country’s economic landscape, particularly in underdeveloped western regions that have suffered from both ISIS occupation and subsequent liberation campaigns.
The reported interference also reveals the limitations of top-level diplomatic agreements in changing ground realities. While Saudi Crown Prince Mohammed bin Salman and Iranian officials may shake hands in Beijing, their respective allies and proxies in Iraq appear to be playing by different rules. This disconnect between diplomatic rhetoric and political reality undermines the credibility of regional normalization efforts and raises questions about whether sustainable peace can be achieved without addressing proxy relationships.
Beyond Baghdad: Implications for Regional Stability
The Iraqi investment blockade carries implications far beyond bilateral Saudi-Iranian relations. For the United States, which has invested tremendous blood and treasure in Iraq while trying to balance relationships with both Saudi Arabia and a stable Iraq, this development complicates efforts to reduce American military presence while maintaining regional stability. For China, which brokered the Saudi-Iran deal, it represents a potential embarrassment and a test of Beijing’s ability to guarantee the agreements it mediates.
More fundamentally, this situation exposes the structural challenges facing Middle Eastern integration. Unlike Europe’s post-World War II reconciliation, which was built on economic interdependence, the Middle East’s peace initiatives often float above deeply entrenched proxy networks and zero-sum thinking about regional influence. When peace agreements can be undermined by parliamentary maneuvers and bureaucratic obstruction, how real is the peace?
As Iraq continues to serve as the region’s most complex chessboard, one must ask: Can genuine Middle Eastern stability ever be achieved through high-level diplomatic agreements alone, or will peace require the far messier work of dismantling decades-old proxy networks and creating genuine economic interdependence at the ground level?
