This article is part of the World Economic Forum's Geostrategy platform

In June, several rockets landed near U.S. installations in Iraq, and in July-August, explosions shook weapons storage facilities and a convoy of Iraqi paramilitary groups tied to Iran.

These incidents helped push U.S.-Iranian tensions to the edge of confrontation, underscoring the danger of the situation in Iraq and the Gulf.

While the U.S. and Iran have so far avoided clashing directly, they are pushing the Iraqi government to take sides. Iraqi leaders are working hard to maintain the country’s neutrality. But growing external pressures and internal polarisation threaten the government’s survival.

The U.S. and Iran should refrain from drawing Iraq into their rivalry, as doing so would undermine the tenuous stability Iraq has achieved in the immediate post-ISIS era. With the aid of international actors, Iraq should persevere in its diplomatic and domestic political efforts to remain neutral.

Clear warnings

The rockets that fell close to U.S. assets in Iraq in mid-June and the explosions that struck the assets of Iraqi paramilitary groups with ties to Iran in July and August are ominous signals.

They are clear warnings of how badly escalation between the U.S. and Iran could destabilise Iraq and the region as a whole.

Washington and Tehran should keep Baghdad out of their confrontation: the costs to both of renewed instability in Iraq would exceed any benefits to either

Even short of hostilities, Washington’s “maximum pressure” campaign against Tehran could wind up placing as much stress – and inflicting as much harm – on its nominal ally Iraq as it does on its enemy Iran.

For Iraq, the timing hardly could be worse. It is still recovering from the havoc wreaked by the Islamic State (ISIS) and the costly battle to defeat the jihadists; its institutions and security forces remain brittle; and its government, elected a little over a year ago, hangs on to a slim, precarious parliamentary majority.

Washington and Tehran should keep Baghdad out of their confrontation: the costs to both of renewed instability in Iraq would exceed any benefits to either. Attempts to compel the Iraqi government to choose sides would likely fail and lead to chaos instead.

Spiralling rivalry

The Iraqi leadership is working hard to insulate the country from regional turmoil. It is stepping up diplomatic engagement with Iran, the U.S. and its immediate neighbours, as well as shoring up domestic consensus behind the objective of remaining neutral.

These efforts are important but may be insufficient to protect Iraq from the spiralling U.S.-Iranian rivalry. If relations between the U.S. and Iran continue to deteriorate, let alone if the two countries come to blows, the struggle is likely to deepen political polarisation between Iraqis supporting and opposing Iran. Even under current conditions, internal tensions may precipitate a descent into political disarray.

Both the U.S. and Iran are likely to lose from a feud in Iraq. Contrary to the Trump administration’s expectations, its “maximum pressure” campaign is not countering Iran’s extensive influence in Iraq, which Tehran exercises in myriad ways.

As part of its pressure, Washington would like Iraq to cut back its purchases of natural gas and electricity from Iran and forge closer links to U.S.-allied Arab states. But these U.S.-directed efforts are likely to lead Iran to intensify its own pressure on Baghdad, seeking to impede the Iraqi government’s efforts to strengthen its institutions, diversify its energy supply and broaden its foreign relations.

Security vacuum

Should tensions between Washington and Tehran continue to grow, U.S. personnel in Iraq could become more vulnerable to attack by pro-Iranian militias. A resulting security vacuum could enable an ISIS comeback.

Tehran, too, should have an interest in shielding Iraq from its standoff with Washington. Stability in its neighbour carries both economic and security benefits: it allows Iran to blunt the impact of U.S. sanctions by preserving ties to the Iraqi economy, and it lessens risks of an ISIS resurgence that inevitably would threaten Iran.

Others can also help immunise Iraq from harm, beginning with the Iraqi government itself.

Steps it could take include making clear to the Trump administration which U.S. expectations it is in a position to satisfy and which it is not; bolstering efforts to bring the Iran-linked paramilitary groups under central government control; and intensifying outreach to regional states – notably Saudi Arabia, the United Arab Emirates (UAE) and Jordan – to counterbalance Iran’s role without exacerbating risks of armed confrontation on Iraqi soil.

For its part, Europe, which has an important stake in consolidating the achievements of the anti-ISIS campaign and avoiding more turbulence in the area, should work with Baghdad in seeking to de-escalate U.S.-Iranian tensions and prevent them from dragging Iraq, and the wider region, into a dangerous spiral.

Iraq: Evading the gathering storm, International Crisis Group