Iraq’s oil exports have risen sharply over the past month even though the Strait of Hormuz remains heavily restricted. Exports rose from around 1.35 million barrels per day in July to 2.34 million bpd in August. Oil Minister Basim Mohammed Khudair has since said exports reached around 3 million bpd in early September, although the sustained level appears closer to 2.2 to 2.3 million bpd. The precise figure matters less than the direction. Iraq has restored a large share of its exports while remaining almost entirely dependent on Hormuz.

Most Iraqi crude still leaves from Basra and has to cross the Strait. SOMO, Iraq’s state oil marketer, has offered unusually large discounts, and traders have built shuttle-tanker and ship-to-ship arrangements off Oman. Iranian permission has become the most important part of the system. On August 22, Tehran granted passage to additional Iraqi tankers after repeated requests from Baghdad, and Iranian state media linked those permissions to talks during the visit to Iraq of Mohammad Baqer Qalibaf, speaker of Iran’s parliament. Iran had allowed some Iraqi vessels through earlier in the war. The August decision expanded and regularised that access at the same moment that Iraqi exports were recovering.

Context: The timing matters because the Hormuz discussions ran alongside negotiations over the weapons of Iraq’s Iran-aligned Shia factions. On August 10, Quds Force commander Esmail Qaani, who remains Iran’s principal handler of the Iraq file, arrived in Baghdad and met leaders of the Coordination Framework, the alliance of Shia parties that dominates the government, along with senior faction figures. An Iraqi source said that two of the central issues were the future of factional weapons and the passage of more Iraqi oil through Hormuz. The following day, another source said Qaani had urged the factions to keep their weapons for now, while warning them against confronting the Iraqi government and encouraging a political settlement. The approach would let the factions preserve their capabilities temporarily while avoiding a wider domestic crisis.

Qalibaf’s visit just over a week later reinforced the link. Reporting on his meetings again placed Hormuz and factional weapons in the same discussions, and a Coordination Framework source said that Qalibaf carried Iranian proposals designed to avoid a confrontation between Baghdad and the factions. These reportedly included freezing or concealing heavy weapons, possibly moving part of the arsenal temporarily to Iran, and allowing time for a political settlement on the factions’ longer-term future. The details rest on anonymous Iraqi sourcing. What happened next is more telling, because Baghdad’s position has since moved close to the formula attributed to Qaani and Qalibaf.

Earlier in August the government was still speaking in hard terms about bringing weapons under state control, with September 30 treated as the critical date. That language changed quickly after the Iranian visits. On August 23, National Security Adviser Qasim al-Araji said September 30 was the point at which discussions with the factions would begin, and no longer the date by which their weapons had to be handed over. He stressed negotiation, gradual disengagement between the factions and political parties, and the need to avoid treating the factions as enemies of the political system.

By September the shift was explicit. Nouri al-Maliki, the former prime minister who leads the State of Law coalition, said the language of threats had ended and rejected the term “disarmament” itself, arguing that the process should be described as organising or containing weapons. He distinguished heavy, medium and light weapons and pointed to a negotiated mechanism in place of wholesale dismantlement. By September 6, a source close to the Coordination Framework confirmed that the alternative under discussion was “organising or freezing” weapons after the factions refused to surrender them by September 30.

This is very close to what Qalibaf was reported to have proposed only two weeks earlier. The sequence runs as follows: Qaani discusses weapons and Hormuz together and argues against immediate disarmament; Qalibaf discusses both files and proposes freezing heavy weapons and a slower political settlement; Iran expands Iraqi access through Hormuz; Iraqi exports rise sharply; and Baghdad replaces dismantlement and deadlines with the language of reorganisation, containment and freezing.

None of this is surprising given how the Iraqi government works. The Shia factions are institutionally powerful, and Prime Minister Ali al-Zaidi holds a monthly meeting with the Coordination Framework. Anything the government does on the weapons file passes through the filter of parties sympathetic to Iran before it becomes policy.

Analysis: There is no evidence of a formal transaction in which Tehran allowed a specific volume of oil through Hormuz in return for specific concessions on weapons. The more plausible picture is a broader accommodation in which Iraq’s economic stability and the future of the factions are tied together. That link matters because the pressure to dismantle the factions came from Washington, and Washington’s strongest leverage over Baghdad is economic. Oil provides around 90 per cent of state revenue, and that revenue is held in the Central Bank of Iraq’s account at the Federal Reserve Bank of New York, which gives the US considerable influence over Iraq’s access to dollars and over the financial system on which the state depends.

That vulnerability runs through public salaries, which are the closest thing Iraq has to a social contract. The state employs and supports millions of Iraqis, and oil revenue finances most of that spending. If US sanctions tied to the factions disrupted Baghdad’s ability to pay salaries, the militia issue would quickly become far larger than a dispute between Washington and Iran-aligned groups. Iraqis could come to see economic hardship as the price of protecting those factions, generating protest and pressure inside the Shia community and sharpening Kurdish and Sunni opposition to a political order dominated by Shia parties. A serious salary crisis would threaten the state itself and the Shia-led system that Iran has an interest in preserving. This is why Baghdad initially moved so quickly to comply with American demands.

The factions openly read the dispute in these terms. On August 9, Akram al-Kaabi, leader of the Iran-aligned Harakat al-Nujaba, attacked arguments that Baghdad should comply with American pressure because Washington controls Iraq’s oil revenue and budget, and framed financial independence as part of the same sovereignty struggle as the weapons question. For Iran and its Iraqi allies, keeping Iraq economically functional widens Baghdad’s room to resist the most sweeping American demands and allows the weapons issue to be handled through negotiation instead of under fear of fiscal collapse.

Iran’s growing willingness to let Iraqi crude through Hormuz fits that logic. Tehran does not need to finance Iraq. It simply lets Baghdad sell its own oil. This improves revenue, eases the immediate danger around salaries and gives the government space to negotiate. In return, the weapons process has softened on two fronts. Dismantlement is becoming reorganisation, and September 30 is becoming the start of negotiations instead of their end, giving the factions time to bargain over their post-US form.

September 30 carries weight because it is also the fixed date for the end of the US-led coalition’s mission in Iraq. Al-Zaidi has called the date final, and Washington also expects the withdrawal to be complete by then. The withdrawal itself was demanded by the factions and by a parliament in which Shia parties hold the majority. The presence of US forces has been the central justification for the factions’ independent weapons, so once those forces leave the justification weakens considerably. That makes September 30 a natural point for restructuring the factions.

The factions are now trying to extract as much as possible from that restructuring. They appear ready to accept that their military arrangements will change, but they are broadening the process so that it delivers concessions on other security files. The most important concerns the Kurdistan Region. Several factions have demanded that any national discussion of weapons also cover the Peshmerga, federal control of borders and crossings, and the presence of Iranian Kurdish opposition groups.

The Peshmerga demand is largely a bargaining tool. The more important objective, for Iran and for its Iraqi allies, is the Iran-Iraq border on the Kurdistan side and the Iranian Kurdish armed groups based there. The war that began on February 28 exposed the vulnerability. Iranian Kurdish organisations prepared for possible military action inside Iran, and Israeli and American officials discussed their possible role in a ground offensive. The idea originated with Israel, with some US involvement subsequently considered, while Iraqi Kurdish leaders expressed serious reservations and resisted turning the Region into a launchpad for the war.

That experience changed Tehran’s view of the existing Iraq-Iran security arrangement. The 2023 agreement required Iranian Kurdish opposition groups to be disarmed and confined to civilian camps away from the border. Baghdad says dozens of bases were closed and heavy weapons transferred to Peshmerga control, and implementation continued after the war. Tehran, however, treats February as proof that the agreement was violated. Groups confined to camps were rearmed and readied for use, and nothing prevents the same happening in a future conflict. By May, Iran was pressing Baghdad to remove these organisations from Iraq altogether and relocate them to a third country. That demand has become part of the Iraq-Iran security talks, and the KRG has resisted it.

This gives the Peshmerga demand its purpose. Iran and the factions do not expect the Peshmerga to be abolished. Their achievable objective is to use the wider weapons negotiation to secure tighter federal authority over the Iran-facing border, narrow the KRG’s independent security arrangements, and push the Iranian Kurdish groups out of Iraq or into a far more restrictive settlement.

The developments point toward a managed post-US transition. Iran is helping Iraq keep its exports and finances working, which reduces Baghdad’s exposure to American economic pressure. The government is moving toward a slower and less confrontational restructuring of the Iran-aligned factions. The factions are using the process to preserve as much of their political and military structure as they can, and to extract wider concessions on Kurdistan and Iran’s western frontier.

The clearest evidence is the sequence since Qaani and Qalibaf visited Baghdad. Oil access expanded, the threat of confrontation receded, the September 30 deadline was softened, and Iraqi leaders began discussing almost exactly the formula of freezing, containment and gradual reorganisation that the Iranian side had reportedly proposed. There is no written quid pro quo. The pieces increasingly look like parts of the same bargain.