IRAQ AS IRAN'S FORWARD OPERATING BASE: WHAT SOLDIERS KNEW IN 2008 AND WASHINGTON PRETENDED NOT TO
Iraq is not a country with a corruption problem. Iraq is the operational center of the most sophisticated state-embedded financial crime network in the Middle East.
The following is an open-source intelligence assessment. All sources are publicly available. The analytical judgments, experiences and opinions are my own.
THE GROUND TRUTH SOLDIERS ALREADY KNEW
When I deployed to Iraq in 2008-2009, there was no ambiguity on the ground about who we were actually fighting on most days. Iranian manufactured EFPs (explosively formed penetrators responsible for the MRAPS of new) were killing American soldiers. Intel reports about weapons caches bore IRGC markings, Iranian documents were found in the vicinity of sniper positions, etc. The intel picture, even at our level, pointed consistently in one direction: Tehran. At first I thought that maybe it was because we were closer to the Iranian side of the country, but as I got older and wiser, I realized it was much bigger than that.
In essence, what took the better part of two decades for official Washington to say plainly, troops in theater already understood. We were, in meaningful and direct ways, fighting Iran. What’s changed isn’t the threat. It’s that the infrastructure Iran built during that period has now fully matured, and it’s built directly into the Iraqi state.
The Popular Mobilization Forces (PMF, or al-Hashd al-Sha’bi) are the analytical centerpiece of everything that’s happened since. Understanding them is the key to understanding why Iraq has become, functionally, Iran’s most important strategic asset in the region.
Here’s the essential picture:
The PMF is an Iranian-backed paramilitary umbrella group that operates within Iraq. Although formally and legally part of the Iraqi Armed Forces and reporting directly to the prime minister, PMF leaders act independently from state control, and in practice, answer to the supreme leader of Iran. The organization encompasses approximately 67 primarily Shia armed factions.
This is not an informal arrangement. In 2024, the PMF’s Chief of Staff openly declared that the PMF took orders from Iran’s Supreme Leader Khamenei. The PMF chairman cooperates with the Iranian IRGC to implement Iranian instructions in Iraq and reinforce Iranian influence over the militias. And this is no small thing as the PMF boasts 238,000 fighters with an annual government budget of $3.6 billion. Its forces encompass over seventy factions, including a handful of U.S.-designated terrorist groups, most notably Harakat Hezbollah al-Nujaba, Asa’ib Ahl al-Haq, and Kataib Hezbollah.
The funding source matters here. These are not rogue militias operating on the margins. They are funded by the Iraqi state, a state whose budget is substantially underwritten by oil revenues that flow through U.S.-supported international financial architecture.
Read that last line again please
The proxy attack campaign against American forces is not a response to Gaza, or to any particular political event. It is a sustained, strategic pressure campaign with deep roots.
The historical record is damning: between 2003 and 2011, Iran-backed militias killed at least 603 U.S. troops in Iraq which was roughly one in every six American combat fatalities in Iraq.
That number bears repeating. One in six.
The post-2023 escalation brought this reality back into public view: between October 2023 and November 2024, Iran and its proxies conducted more than 180 attacks against U.S. forces in the Middle East, wounding more than 180 U.S. service members and killing three. The most publicized of these was the Tower 22 strike in Jordan where Iran-backed Kataib Hezbollah terrorists killed three U.S. service members and wounded more than 40 others in a drone attack against the Tower 22 military base in Jordan in January 2024.
The campaign has continued into 2025 and beyond. Iran turned to its proxies to resume attacks on U.S. forces in Iraq and Syria in mid-2025, conducting six attacks in a three-day window after there had been no Iran-backed attacks against U.S. forces since December 2024.
THE LEGITIMIZATION PLAY: IRAN’S BOLDEST MOVE YET
What’s happening now in Baghdad may be the most consequential development in this long-running campaign, and it’s receiving almost no mainstream coverage.
Iran and its PMF allies in the Iraqi parliament have been advancing legislation that would permanently enshrine the PMF as an autonomous arm of the Iraqi state, with its own budget, independent financial authority, and insulation from future disbandment. The law under consideration would establish the PMF as an autonomous security organization separate from other government military or security agencies, including granting it financial independence.
Secretary of State Rubio has directly warned Iraqi Prime Minister al-Sudani that the legislation would “institutionalize Iranian influence and armed terrorist groups undermining Iraq’s sovereignty.”
The Iraqi government’s response has been to describe the PMF as a legitimate state institution which, legally, it increasingly is. By describing militias as unaffiliated or discussing their involvement in unsanctioned activity, Iraq is attempting to bill these groups’ integration as an improvement over rogue status. In reality, joining the PMF only provides these militias a veneer of legitimacy.
THE FINANCIAL ARCHITECTURE: A CFE’S ASSESSMENT
What most analysts call an influence operation, someone that sees the world trough a financial lens sees what is happening in Iraq, as something more specific: a systematic scheme to extract public funds, launder terrorist financing through a sovereign treasury, and use state-issued documentation to sanitize sanctioned oil for global markets. Iraq is not a country with a corruption problem. Iraq is the operational center of the most sophisticated state-embedded financial crime network in the Middle East.
Scheme One: The Ghost Soldier Payroll
This is where the fraud examination lens becomes essential, because the mechanism is textbook just operating at sovereign scale.
According to Iraq’s parliamentary finance committee, the PMF’s official force size surged by 95 percent in a single budget cycle from 122,000 personnel to 238,000. The PMF’s own chairman claimed a more modest figure. The discrepancy between the chairman’s number and the parliamentary budget submission is itself a red flag any fraud examiner would immediately flag: when an organization’s leadership and its budget submissions tell different stories about headcount, the question is less about which number is right and more about where the money for the phantom positions is going. The Iraqi state reportedly does not have accurate membership lists for the PMF. Each registered faction submits a list of names to be paid, and PMF leaders frequently intervene to push payments through unchallenged.
This is a classic ghost employee scheme; fictitious payees entered into a disbursement system with controls deliberately bypassed by those in authority. The mechanism is identical to what we document in municipal governments and corporate HR departments, except here the supervising authority answers to Tehran, not a board of directors.
Estimates put total financial extraction including ghost soldiers, PMF budget capture, oil smuggling, and institutional corruption at $8 to $12 billion annually, a sum approaching Iran’s entire military budget.
Scheme Two: The Sovereign Treasury as Terrorist Financing Vehicle
The PMF’s forces encompass over seventy factions, including a handful of U.S.-designated terrorist organizations, with an annual government budget of $3.6 billion.
Read that slowly. The Iraqi government ( a supposed U.S. partner) is directly funding designated terrorist organizations through its annual appropriations process. This is not an allegation. It is a documented reality.
The 2023-2025 budget included $305 million added to the PMF’s investment budget for its new Muhandis General Company, and a separately authorized “Secret Expenses for PMF” fund which is a privilege previously extended to only one other organization, the Iraqi National Intelligence Service.
A paramilitary force led by U.S.-designated terrorists now has its own classified budget line. No audit trail. No external oversight.
Scheme Three: The Oil Blending Operation
This is where Iraq becomes Iran’s most critical financial lifeline and where the fraud methodology becomes almost elegant in its simplicity.
OFAC sanctioned a network for smuggling Iranian oil disguised as Iraqi oil, operating by covertly blending Iranian oil with Iraqi oil and marketing the product intentionally as solely of Iraqi origin. Conservative estimates put one network’s annual value generation at approximately $300 million.
That’s one network. The scale is far larger. A December 2024 Reuters investigation found that a complex oil-smuggling network in Iraq could generate more than one billion dollars annually for Iran (by the way Iraq is no stranger to oil schemes cough cough UN oil for food scam cough cough).
The operation is as follows: vessels conduct ship-to-ship transfers with tankers affiliated with Iran’s shadow fleet, often at night, using AIS spoofing and location reporting gaps, with vessels registered to Marshall Islands-based shell companies to mask beneficial ownership.
The contamination of the broader cargo stream is staggering: one analysis found that 61% of LPG cargoes sold as Iraqi were actually Iranian.
Scheme Four: Dollar Access Laundering Through Sovereign Accounts
This layer has received almost no mainstream attention, and it is arguably the most systemically dangerous from a financial crime perspective.
Congressional investigators expressed concern that the scheme may include the abuse of Iraq’s access to the U.S. dollar through oil sales giving Iran illicit access to the dollar through Iraqi sovereign oil transactions.
Iraq sells its oil in dollars. Those dollars flow through U.S. correspondent banking. Iran, cut off from dollar access by sanctions, has found a mechanism to launder Iranian oil revenue through Iraqi sovereign accounts and into the global dollar system. FinCEN identified approximately $9 billion of potential Iranian shadow banking activity that occurred through U.S. correspondent accounts in 2024 alone.
Nine billion dollars. Moving through U.S. correspondent accounts. On behalf of a designated state sponsor of terrorism. That number should be a front-page story. It is not.
From a fraud standpoint, what exists in Iraq is not a series of isolated corruption incidents. It is an integrated financial crime enterprise with four distinct but interlocking revenue streams: ghost payroll, direct budget capture, commodity fraud via oil blending, and dollar-access laundering through sovereign accounts.
Each layer funds and legitimizes the others. The ghost payroll finances militia operations. The PMF budget funds weapons procurement. The oil blending generates hard currency for IRGC Quds Force operations across the region. And the dollar-access channel provides the financial system connectivity that keeps the entire network liquid.
The Iraqi sovereign state is not a victim of this system. In critical respects, its leadership is the system. And that is largely why we did not “win” in Iraq as those of us who served are often reminded of. In my opinion maybe we didn’t “win” in a traditional sense, but the intelligence (especially financial) that came from OIF was priceless.
TO SUMMARIZE
Iraq’s PMF represents the most successful long-term state capture operation Iran has executed in any country
The attack cadence against U.S. forces is structural, not reactive and it is a strategic campaign to expel the American presence from the region
Current Iraqi legislation, if passed, would cement Iranian proxy control within the apparatus of a nominal U.S. partner state
Financial flows through the PMF budget represent a significant money laundering and sanctions evasion exposure that remains under-examined
The 603 Americans killed in Iraq by Iranian-backed forces between 2003-2011 represent a debt of accountability that has never been properly reckoned with
Amanda is the founder of Immaculate International, a boutique private intelligence firm. She served in Iraq in 2008-2009 . She is a licensed private investigator and holds the Certified Fraud Examiner credential.