Investigation ordered after Iraq appears to designate Hezbollah and Houthis terrorists

The apparent designation of Lebanon's Hezbollah and Yemen's Houthi movement as terror groups by the Iraqi government sparked confusion and recriminations on Thursday, with authorities later saying the sanctions were announced in error.

The decision, published on 17 November by the justice ministry in the official gazette, surprised many, as the Iraqi government appeared to group the two organisations in the same bracket as al-Qaeda and the Islamic State group.

Hezbollah and the Houthis, formally known as Ansar Allah, are not only close to neighbouring powerhouse Iran but also allies with several powerful parties, armed factions and figures in Iraq.

Initially, many saw the designation as a sign that Prime Minister Mohammed Shia al-Sudani, whose outgoing government is largely composed of parties with links to Iran, was buckling under American pressure.

Little attention was paid to the move until Thursday, however, when news outlets belatedly began to pick up on it.

Later that day, the state news agency issued a clarification, saying that Hezbollah and the Houthis had been added by mistake, and the justice ministry publication was an unrevised version that should not have gone out.

Two sources told Reuters that the acting deputy governor of the central bank had sent a letter asking the Committee for the Freezing of Terrorists’ Funds to delete the clause containing the names.

Sudani announced there would be an investigation "to hold accountable those responsible".

'Labeling these groups as terrorist organisations carries significant risks and could provoke serious internal tensions with allied factions'

- Ali al-Mikdam, Iraqi analyst 

The controversy prompted questions from observers: were Hezbollah and the Houthis genuinely placed on the list by mistake, or was the government trying to backtrack to curb anger from its allies?

"Lebanese Hezbollah is closely linked to internal factions with extensive political and military influence within the state, including within the Popular Mobilisation Forces," said Iraqi analyst Ali al-Mikdam, referring to the paramilitaries that are heavily composed of Iran-backed groups.

"Therefore, labeling these groups as terrorist organisations carries significant risks and could provoke serious internal tensions with affiliated or allied factions."

Mikdam, who was himself previously abducted and beaten by assailants with suspected links to the Popular Mobilisation Forces, told Middle East Eye that the government had caused a headache for itself.

"Imposing a full ban or implementing internal sanctions immediately is extremely difficult and requires gradual steps and internal consensus, rather than abrupt decisions that risk political confusion," he said.

"This is precisely what occurred, as the government, under intense pressure, hastily framed the move as an 'unintentional error' and withdrew it from the official gazette."

US pressure

US President Donald Trump has been applying pressure across the Middle East in an attempt to curb Iran's influence in the region, and his administration has sought to shut down sources of funding for organisations affiliated with Tehran.

Baghdad has long tried to play a delicate balancing act, attempting to maintain good relations with the US while remaining close to neighbouring Iran, which has widespread commercial, military and political interests in Iraq.

As Israel's genocide in Gaza has set much of the region on fire, Sudani has received praise in some quarters for managing to largely keep Iraq out of the fray.

Staunchly anti-Israel armed factions occasionally attacked the Israelis from Iraqi territory in solidarity with Palestinians under attack in Gaza, with the odd Israeli air strike in response. But a feared Israeli assault as seen on Iran in June never materialised.

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Nevertheless, increasing numbers of American officials, including newly appointed US envoy to Iraq Mark Savaya, have been pushing the government to crack down on armed groups and break ties with Iran.

Sudani said on Thursday that Iraq's position on "the aggression on our people in Lebanon or in Palestine" was "principled and not subject to exaggeration".

But Hussain Mouanes, an MP for the parliamentary bloc affiliated with the Iran-backed Kataeb Hezbollah armed faction, said the government had been "irresponsible" and described them as a "subordinate authority that lacks the dignity to represent its people or defend Iraq's sovereignty".

Hayder al-Shakeri, an Iraqi analyst with Chatham House, told MEE that he suspected the fallout was primarily due to the timing and the bad publicity it generated.

"I think this kind of listing is primarily a bureaucratic tool that comes from Iraq’s wider commitments on anti-money laundering and counter-terrorist financing, including obligations the Central Bank has taken on with international partners," he said.

"On paper it might carry heavy weight, but in Iraq many actors see them as a formality rather than a sign of real enforcement."

He noted that Iraq was also still in the middle of a government-formation process following elections last month, and the publication of the names could seem like a "direct challenge" to power Iran-backed parties in Iraq.

"That is why the prime minister and others rushed to say it was a mistake and distance themselves from it," Shakeri said.

Sudani is currently seeking a new term as prime minister of Iraq, something that will require the consent of a range of parties with links to Iran and its allies, despite the prime minister's party winning the most seats.

It remains to be seen, therefore, if he will be able to paper over this latest controversy or if it will have a lasting impact on his leadership aspirations.

"The step can be described as inadequately considered, and its rapid implementation generates political confusion, leaving the government vulnerable to influential Iraqi political actors, many of whom are aligned with regional currents, including Iran and affiliated militias," said Mikdam.