As Iraq enters 2026, the country stands at a crossroads marked by political uncertainty, economic fragility, environmental stress, and regional shifts—but also moments of genuine hope. Drawing from our year-end Iraq Briefing (video), here are ten developments that will shape Iraq and the Kurdistan Region in the year ahead, and why they matter.

1. Government Formation: A High-Stakes Test of Politics and Security

Iraq begins 2026 still grappling with the complex process of forming a new federal government. Prime Minister Mohammed al-Sudani seeks a second term, backed by incumbency advantages and a coalition that won 46 seats. But powerful militia-aligned parties collectively hold around a third of parliament and wield significant negotiating leverage. Meanwhile, figures like former Prime Minister Nouri al-Maliki are openly resisting Sudani’s continuation in office.

A parallel impasse persists in the Kurdistan Region, where the government has yet to form following the 2024 elections. It’s a nationwide moment of political recalibration.

What makes this year different is the pressure for armed militias to disarm and reengage as purely political actors. Groups such as Asaib Ahl al-Haq have signaled tentative (and conditional) openness to this shift—a potentially transformative development for Iraq’s political order.

2. The Planned Return of all remaining Iraqis from Syria’s al-Hol Camp

The long-running al-Hol displacement camp—once home to over 60,000 people with perceived ties to ISIS—is slated for closure. Roughly 4,000 Iraqis remain there, and the Iraqi government intends to repatriate them by June 2026.

Communities devastated by ISIS are expressing deep anxiety over these returns, citing risks of radicalization and insufficient government support. The stakes are high: successful reintegration could strengthen national recovery, while failure could aggravate security threats.

This comes as over one million Iraqis remain internally displaced, many still unable to return home due to poor security conditions or stalled reconstruction.

3. Grand Faw Port and the Infrastructure Pivot

After years of delays, Iraq expects the Grand Faw Port to become operational in 2026. With planned capacity exceeding 55 million tons of cargo annually, Grand Faw is the keystone of Iraq’s long-envisioned “Development Road”—a strategic transport corridor linking the Gulf to Europe via Turkey.

Also due in 2026: a new LNG receiving and regasification terminal, which could help Iraq diversify away from erratic natural gas imports from Iran. Combined with ongoing (but uneven) efforts to reduce gas flaring, these projects signal a potentially pivotal year for Iraq’s energy and infrastructure landscape.

4. Basra’s Federalism Initiative

In a story that quietly emerged late in the year, activists in Basra secured approval to begin collecting signatures in support of transforming Basra into a federal region—a legal status under Iraq’s constitution that would grant expanded administrative powers.

Basrawis have long argued that the province’s enormous oil wealth—roughly 75% of Iraq’s total production—yields too few benefits locally, while pollution, water crises, and economic neglect fall heavily on residents. Although the federalism bid faces steep political resistance, it reflects deepening frustration and long-standing demands for greater local governance.

5. Iraq Acquires Advanced Air Defense Systems

Iraq is preparing to receive and deploy new medium-altitude air defense systems acquired from South Korea under a nearly $3 billion deal. While some view this as long-overdue modernization, there are concerns that the systems could draw Iraq into regional conflict dynamics—especially if tension between Iran and Israel escalates.

These systems also represent a major financial commitment at a moment when Iraq’s budget is under growing strains.

6. Austerity Amid Economic Headwinds

Iraq’s economy is heading into a challenging year. With oil prices sliding from above $70 to below $60 per barrel over the course of 2025, the government introduced austerity measures aimed at cutting spending and raising non-oil revenue.

But the reality is stark: oil still provides 95% of government income, and non-oil revenues remain minimal. If oil prices stay low, Iraq may struggle to meet basic obligations like public sector salaries—a scenario that would create serious instability.

7. Drought, Water Scarcity, and Public Health

Iraq experienced its worst drought since 1933 in the past year, hitting agriculture, food security, and public health. Water scarcity has already displaced nearly 180,000 Iraqis, and the crisis is compounded by severe pollution flowing downstream toward Basra, where salinity, industrial waste, and sewage create a hazardous mix.

The drought and water quality emergency will continue to shape internal migration, agricultural output, and national stability in 2026.

8. A Post-UNAMI, Post-USAID Iraq

For the first time since 2003, Iraq enters a year without the UN Assistance Mission for Iraq (UNAMI). The end of UNAMI means the loss of an international observer for elections, human rights reporting, and political mediation.

Simultaneously, the abrupt shutdown in 2025 of USAID programs removed critical support for civil society and mine-clearance operations. Iraq remains one of the most heavily contaminated countries in the world, and without USAID’s major demining investments, rural communities face real risks.

Whether Iraqi federal and local authorities step up to fill these gaps will be a big question in 2026.

9. The Fragile Baghdad–Erbil Oil Export Deal

Oil exports from the Kurdistan Region resumed in 2025 after a major breakthrough between Baghdad and Erbil—but the deal remains fragile. Political shifts from government formations in both capitals and militia attempts to sabotage energy infrastructure pose risks.

Moreover, the Iraq–Turkey pipeline agreement expires in July 2026, and Ankara has signaled it will seek new terms. The outcome will directly affect the livelihoods of millions in the Kurdistan Region.

10. A Rare Good-News Story: Iraq’s World Cup Run

Amid the uncertainty, one bright spot stands out: Iraq’s national football team is just one step away from qualifying for the FIFA World Cup for the first time since 1986. After a decisive win over the UAE in Basra, Iraq advances to the global playoffs in March.

Players like midfielder Amir Al-Amari have become symbols of hope—reminding Iraqis of the unity and pride still possible in the year to come.

As Iraq moves into the new year, these ten stories offer a roadmap for anyone seeking to understand the opportunities and risks ahead. EPIC will continue monitoring these developments closely through our weekly Iraq Security and Humanitarian Monitor (ISHM).

If you value EPIC’s independent, non-partisan analysis, please consider supporting our work.

Your tax-deductible gift will directly power our 2026 work to:

• Provide essential analysis of Iraq’s new government and the ongoing struggle for reform.
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• Produce groundbreaking research that holds power to account.

Wishing you a peaceful and hopeful New Year.