Baghdad faces mounting U.S. pressure to curb Iran-aligned militias embedded within its own security apparatus or risk losing sovereignty and strategic support.

Kata’ib Sayyid al-Shuhada (KSS), an Iraqi militia backed by Tehran, has now been formally designated a terrorist organization by the United States, which has put up a reward of up to $10 million for information leading to its leader, Hashim Finyan Rahim al-Saraji—better known as Abu Alaa al-Wala’i. The group stands accused of targeting U.S. personnel in both Iraq and Syria. Emerging from Iraq’s Kataib Hezbollah and operating in close coordination with Iran’s Islamic Revolutionary Guard Corps (IRGC), KSS exemplifies a deeper contradiction at the heart of the Iraqi state. That contradiction borders on the absurd: KSS is not only tolerated within Iraq’s security apparatus but is embedded within it, overseeing the state-funded 14th Brigade of the Popular Mobilization Forces (PMF).

As regional tensions escalate, Washington has responded with a series of direct strikes against PMF elements. These operations underscore a stark reality: the PMF, though formally a state-sanctioned paramilitary umbrella, has repeatedly engaged in attacks against U.S. interests and allied forces, including Kurdish Peshmerga units. On April 17, the U.S. Treasury’s Office of Foreign Assets Control imposed sweeping sanctions on seven Iraqi PMF commanders, identifying them as key figures in some of the country’s most violent Iran-aligned factions, including Kata’ib Hezbollah, Harakat al-Nujaba, and Asa’ib Ahl al-Haqq.

The pressure on Baghdad is no longer subtle. Leaders within Iraq’s ruling Shiite Coordination Framework have reportedly received a blunt message from Washington: the participation of figures like Abu Alaa al-Wala’i in high-level political consultations—such as recent discussions over the selection of a new prime minister—is unacceptable. According to informed sources, the United States has warned that it will neither engage with nor support a future Iraqi government in which militia leaders wield decisive influence. More consequentially, Washington appears to have already begun tightening the screws. Security cooperation has reportedly been curtailed, and the flow of U.S. dollars tied to Iraq’s energy revenues has slowed. In one striking example, the U.S. Treasury blocked a $500 million cash shipment destined for Iraq—funds derived from hydrocarbon revenues held at the Federal Reserve Bank of New York since 2003.

Beyond financial pressure, intelligence-sharing initiatives have also been scaled back, further complicating Iraq’s already fragile security environment. Baghdad now finds itself navigating an increasingly untenable balancing act: maintaining a vital strategic partnership with the United States while shielding militia networks that are, paradoxically, embedded within its own state structure. The result is a government caught between dependence and defiance.

The PMF’s most powerful Iran-aligned factions, though nominally subordinate to the prime minister, have consistently operated with a degree of autonomy that borders on outright insubordination. Nowhere is this clearer than in their posture toward the United States. For some of these groups, confrontation with American forces is not merely tactical but ideological—a defining feature of their identity. Their renewed prominence amid the latest U.S.-Iran tensions has revived a question that has haunted Iraqi politics for years: what, ultimately, is to be done with the PMF?

Successive governments have answered that question with hesitation. The choice has oscillated between containment and dismantlement, with containment emerging as the default—not because it is effective, but because it is politically survivable. The PMF’s most entrenched factions are deeply woven into Iraq’s political and economic fabric. They draw state salaries, maintain parallel chains of command, and benefit from sustained Iranian support. Efforts to fold them fully into the formal military hierarchy have repeatedly faltered, most notably under former Prime Minister Mustafa al-Kadhimi. The result is a hybrid structure: part state institution, part independent militia network, and wholly resistant to reform.

This unresolved tension now threatens to reshape Iraq’s relationship with Washington. The 2008 Strategic Framework Agreement—long the cornerstone of U.S.-Iraq cooperation—appears increasingly vulnerable. Baghdad has struggled to protect U.S. diplomatic facilities and personnel from attacks by PMF factions, particularly during periods of heightened U.S.-Iran confrontation. And Washington is not alone in its frustration. Regional actors, too, have grown wary of Iraq’s inability—or unwillingness—to rein in these groups. PMF-linked operations have crossed borders, violating Syrian sovereignty, threatening Jordan, and targeting sites in Kuwait and Saudi Arabia.

What is emerging, gradually but unmistakably, is a transformation of the Iraqi state itself. The integration of ideologically driven, foreign-aligned militias into the country’s security architecture is not a temporary expedient; it is reshaping the very nature of governance. Iraq risks becoming a garrison state, where loyalty is no longer anchored in constitutional authority or national identity but in factional allegiances and external patronage.

This is more than a policy miscalculation. It is a structural crisis—one that threatens to hollow out Iraq’s sovereignty, erode public trust, and foreclose the possibility of meaningful reform. If this trajectory continues, the notion of national unity will become little more than a rhetorical façade, masking a fragmented system in which power is diffuse, accountability elusive, and authority contested.

Baghdad now stands at a decisive juncture. The question is no longer whether the PMF can be managed, but whether the Iraqi state can reassert primacy over the forces it has allowed to flourish within it. Without a coherent and enforceable strategy, the risk is not merely stagnation but transformation—the slow replacement of the republic by a shadow state, militarized and beholden to interests beyond its borders. The precedent is not hypothetical. Lebanon offers a cautionary tale. And Iraq, if it fails to act, may soon find itself following a similar path.