Iraq’s Terror Flip‑Flop STUNS Washington

Magnifying glass over the Middle East and Egypt.

Iraq’s sudden terror‑finance “error” over Hezbollah and the Houthis exposes just how far Iran’s proxies still reach into Baghdad’s institutions—and why America cannot afford to look away.

Story Snapshot

Iraq briefly listed Hezbollah and Yemen’s Houthis for asset freezes, then hurriedly canceled the move as an “administrative error.”
The whiplash highlights how deeply Iran‑backed militias and parties still shape Iraq’s security and financial decisions.
US counter‑terror finance pressure collided with Baghdad’s dependence on Tehran’s proxies, producing political chaos.
The reversal shows why Trump’s tougher line on Iran’s network of militias remains vital for American security and regional stability.

Iraq’s Brief Move Against Hezbollah and Houthis Vanishes Overnight

On November 17, 2025, Iraq’s Official Gazette quietly published Decision No. 61 from the Committee for the Freezing of Terrorists’ Assets, listing 24 entities for asset freezes, including Lebanon’s Hezbollah and Yemen’s Houthis. The order declared their movable and immovable assets and economic resources frozen, accusing them of involvement in a terrorist attack but offering no details. For the first time, Baghdad’s own counter‑terror finance machinery formally treated these Iran‑backed groups like terror financiers, aligning on paper with long‑standing US and Western designations.

In late November and early December, Iraqi media, activists, and regional observers noticed the listing and recognized its significance. Iraq had previously reserved its asset‑freeze measures for ISIS and Al‑Qaeda‑linked entities, directly tied to bloodshed on Iraqi soil. Putting Hezbollah and the Houthis in that same framework shocked Iran‑aligned factions in Baghdad, who rely on close ties with both groups. The move looked like a tentative step toward meeting US and UN demands to choke off funding for Iranian proxies operating across the Middle East.

Backlash From Iran’s Allies Forces a Swift Retraction

As the decision circulated, powerful Shiite parties and militias within Iraq’s Coordination Framework reacted angrily. These factions, many armed and funded through Iran’s “axis of resistance,” see Hezbollah and the Houthis as essential partners, not targets. One senior paramilitary leader branded the listing a “stab in the back” and accused Prime Minister Mohammed Shia’ al‑Sudani of bending over backwards to satisfy Washington. For American readers used to the Trump administration’s clarity on terror groups, the episode underscored how often Iraqi leaders still hedge between Tehran and the West.

On December 4, the Central Bank of Iraq scrambled to contain the storm. Acting deputy governor Ammar Hamad Khalaf, who chairs the asset‑freeze committee, issued a formal directive ordering the deletion of the paragraphs naming Hezbollah and the Houthis. The bank insisted it had never approved freezing their funds and said their inclusion had been “apparently published in error.” The Justice Ministry and government then pledged to correct the Official Gazette, effectively erasing the unprecedented step almost as soon as it became public.

“Administrative Error” or Window Into Iran’s Grip on Baghdad?

Prime Minister al‑Sudani ordered an investigation and claimed Iraq had authorized freezes only for individuals and entities tied to ISIS and Al‑Qaeda, in line with UN Security Council Resolution 1373. His office stressed that Iraq’s stance toward Lebanon and the Palestinians remained unchanged, messaging clearly aimed at reassuring Iran‑aligned allies and regional audiences. Officials framed the Hezbollah‑Houthi listing as nothing more than a bureaucratic mistake, even though publication in the Official Gazette usually signals cross‑agency vetting and legal review.

The Ministry of Communications, which holds a seat on the asset‑freeze committee, quickly distanced itself, saying its representative did not attend the session that produced the controversial decision and took no part in any vote. That attempt to sidestep responsibility drew attention to the murky internal process behind terror‑finance designations. For conservatives who favor transparency, rule of law, and accountable institutions, the spectacle of ministries dodging blame reinforced concerns that key Iraqi bodies remain heavily politicized and vulnerable to militia pressure rather than anchored in stable, pro‑Western governance.

US Pressure Meets Iran’s “Axis of Resistance”

For years, US policy has sought to disrupt funding to Hezbollah and the Houthis through sanctions, banking restrictions, and diplomatic pressure on regional partners. Under Trump’s renewed leadership, Washington has pushed even harder to cut lifelines to Iranian proxies that threaten US troops, allies like Israel, and international shipping routes. Iraq, sitting at the crossroads of these networks, is a key test case: will its institutions enforce counter‑terror finance rules consistently, or cave whenever Tehran’s allies object?

Iraq’s current governing coalition, dominated by the Coordination Framework, relies heavily on Iran‑backed parties and militias with longstanding ties to Hezbollah and the Houthis. Both groups maintain representatives in Iraq and enjoy sympathy among many Shiite factions. That reality explains why a single appearance of their names in Iraq’s asset‑freeze system sparked political panic. The quick retreat signaled to Tehran’s partners that Baghdad would not meaningfully join Western efforts to squeeze their finances, even when legal tools already exist through UN resolutions and Iraq’s own committee structure.

What This Means for American Security and Conservative Priorities

For US conservatives focused on national security, this episode is a reminder that paper commitments mean little when hostile networks have burrowed deep into foreign governments. Iraq briefly appeared to align its terror‑finance practices with American and European designations of Hezbollah and the Houthis. Within days, pressure from Iran‑aligned factions reversed that step and forced Baghdad’s central bank and prime minister to declare it all a misunderstanding. That kind of backtracking directly undermines the broader fight against terrorism financing and Iranian expansionism.

Trump’s return to the White House has brought a tougher posture toward Iran’s proxies, including new sanctions, stronger border security against terror infiltration, and a renewed emphasis on putting American interests first. Yet Iraq’s Hezbollah‑Houthis flip‑flop shows how entrenched the problem remains. For readers who endured years of appeasement, open borders, and weakness under left‑wing leadership, this story illustrates why sustained, unapologetic pressure on state sponsors of terror—and the governments that shield their militias—is essential to protect US citizens, allies, and the principles of sovereignty and strength that conservatives value.