Three Months In: Iraq's Government Formation Is Going Nowhere

Three Months In: Iraq's Government Formation Is Going Nowhere

What happens when external pressure meets internal dysfunction? Apparently, nothing at all.

It's been three months since Iraq's November 11 elections. The constitutional process should be complete by now — president elected, prime minister appointed, cabinet formed. Instead, Iraq remains stuck in the same place it was in early January: no president, no government, no progress.

This isn't just political theatre. Government formation paralysis has direct economic consequences, and understanding why Iraq can't get past square one reveals fundamental institutional weaknesses that matter for the country's long-term economic trajectory.

The Constitutional Timeline (In Theory)

Iraq's constitution lays out a clear process:

1. First parliamentary session → Elect speaker (✓ Done: Dec 29, 2025 - Haibat al-Halbousi)
2. Within 30 days → Elect president with 2/3 majority (220 votes)
3. Within 15 days → President appoints PM from largest bloc
4. Within 15-30 days → Cabinet formed and approved

Total time: 60-75 days maximum.

Actual time elapsed: 80 days and counting.

What's NOT Happening

No Presidential Election

Iraq's parliament has attempted to elect a president three times and failed each attempt:

• January 27: Postponed due to KDP-PUK deadlock
• February 1: Postponed again — couldn't reach quorum
• No new date set

The problem? The two main Kurdish parties can't agree on a candidate:

• PUK (traditionally holds presidency): Nominated Nizar Amedi
• KDP (breaking tradition): Nominated Fuad Hussein

Neither side is backing down. Both need endorsement from Shia and Sunni blocs to win the required 2/3 majority. Neither has it.

No Prime Minister Agreement

The Coordination Framework nominated Nouri al-Maliki on January 24. Three weeks later, he's still the nominee. But:

• Trump's ultimatum (Jan 27): "Iraq has ZERO chance of success" if al-Maliki returns
• Internal CF divisions: Some leaders want al-Maliki to step aside to avoid US sanctions
• No alternative candidate: CF can't agree on who else
• Proposal on the table: One-year caretaker extension for al-Sudani government

No Movement on Government Formation

Because there's no president, there can be no PM appointment. Because there's no PM, there can be no cabinet. The entire constitutional process is frozen at step 2.

What Everyone's Waiting For

Immediate Prerequisites

1. Kurdish compromise: Either KDP withdraws Hussein, PUK withdraws Amedi, or they agree to jointly back a third candidate
2. Parliamentary session: Parliament must reconvene with sufficient quorum (220 MPs)
3. Al-Maliki decision: Either CF sticks with him (risking US response) or finds acceptable alternative

Medium-Term Variables

4. US pressure strategy: Will Trump escalate beyond words? Sanctions? Dollar access restrictions?
5. Iran's position: Tehran continues backing al-Maliki despite divisions within CF
6. Kurdistan Regional Government: KRG formation also frozen since October 2024 elections

Long-Term Structural Issues

7. Constitutional reform: Iraq's government formation process chronically exceeds timelines (2021: 11 months)
8. External dependencies: US controls oil revenue flows through NY Fed; pressure works because Iraq can't function independently
9. Institutional capacity: Can't execute basic constitutional process without external disruption

Why This Matters for Economic Fundamentals

Government formation paralysis isn't just political inconvenience. It has measurable economic impacts:

Policy implementation freezes. Caretaker governments have limited authority. Major economic decisions get delayed. The customs tariff crisis (strikes, port backlogs, Supreme Court ruling) continues without government capacity to adjust implementation or provide relief.

Investment decisions pause. International investors and Iraqi businesses hold off on major commitments during prolonged political uncertainty. This affects job creation, capital flows, and economic momentum.

Institutional credibility erodes. When a country can't complete its basic constitutional process within the mandated timeline — and this becomes a pattern, not an exception — it signals weak institutional capacity. Markets notice.

External dependencies deepen. The fact that a single Trump statement can freeze Iraq's entire government formation process demonstrates how dependent Iraq remains on US economic leverage. This dependency shapes policy choices and limits sovereign decision-making.

The Institutional Dysfunction Angle

Here's what makes this particularly revealing: Iraq's paralysis isn't caused by lack of constitutional rules. The rules are clear. The problem is that:

• External actors (US, Iran) have more influence over outcomes than internal constitutional processes
• Traditional agreements (muhasasa system, Kurdish power-sharing) break down under pressure
• Constitutional deadlines are routinely ignored with no consequences
• Political survival depends more on external patronage than domestic institutional legitimacy

This isn't about whether al-Maliki is "good" or "bad." It's about whether Iraq's political system can function predictably under pressure.

What to Watch

Three scenarios could break the deadlock:

1. Kurdish Compromise Most likely short-term resolution. Either party backs down, or they agree on compromise candidate. Presidential election proceeds, government formation moves forward.

2. Al-Maliki Withdrawal Either voluntary (face-saving choreographed exit) or forced (CF switches candidates under US pressure). Removes immediate obstacle to government formation.

3. Caretaker Extension Al-Sudani government continues for another year under caretaker status. Kicks the problem down the road but doesn't resolve underlying issues.

The least likely outcome? Actually following the constitutional timeline.

The Bottom Line

Iraq is now 80 days into a process constitutionally designed to take 60-75 days maximum. There's no president, no government, and no clear path to resolution.

This matters because government formation paralysis reveals the institutional weaknesses that shape Iraq's economic fundamentals over time. Strong institutions can execute constitutional processes predictably, even under external pressure. Iraq's cannot.

The waiting game continues. Markets, investors, and ordinary Iraqis are all waiting for the same thing: for Iraq's political system to actually function according to its own rules.

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Disclaimer: This content is for informational and educational purposes only and does not constitute financial advice. Currency and economic outcomes are subject to numerous variables, and readers should conduct their own research or consult qualified professionals.