Iraq backtracks after listing Hezbollah and Houthis as terror groups

Iraq’s Committee for Freezing Terrorists’ Funds said Thursday that it would correct an official list of designated terrorist organizations following furor from pro-Iran figures in the country over the inclusion of Hezbollah and the Houthis.

Both groups, based in Lebanon and Yemen, respectively, are backed by Iran and seek Israel’s destruction. Iran has vast influence over policies in neighboring Iraq.

The committee said in a statement carried by Iraq’s state news agency that Baghdad had approved a list of “entities and individuals associated with ISIS and Al-Qaeda” that will have their funds frozen following a request by the government of Malaysia. Most of the groups and people on the list were from Southeast Asia.

“Other entities’ names were included due to the list being published before undergoing revision,” the statement said, without naming either Hezbollah or the Houthis. “The Iraqi Gazette will be corrected with the removal of entities and parties from the list of entities associated with the terrorist organizations ISIS and Al-Qaeda.”

Afterward, the office of Iraqi Prime Minister Mohammed Shia al-Sudani repeated those claims in its own statement on the state news agency. The premier’s office also announced an investigation “to determine responsibility and hold accountable those responsible for the error.”

The premier’s statement also affirmed that Iraq’s position “on the aggression against our people in Lebanon or in Palestine are matters of principle which are non-negotiable and reflect the will of the Iraqi people,” referring to the wars between Israel and Hamas in Gaza and against Hezbollah in Lebanon that were launched after the October 7, 2023, Hamas massacre and subsequent Hezbollah attack in Israel.

Sudani’s statement comes amid reports in Arabic media that he faces an uphill battle to hold onto the leadership of his parliamentary bloc — which includes pro-Iranian elements — despite its victory in last month’s elections.

The decision received wide media attention in Iraq on Thursday morning after pro-Iranian lawmaker Mustafa Sanad pointed out on Facebook that Hezbollah and the Houthis were on the list of groups slated to have their funds frozen.

He lamented that the two Iran-backed groups “are classified as terrorist organizations” while US President Donald Trump “is nominated for the Nobel Peace Prize.”

“Shame on you,” he added, addressing the Iraqi government, which he said had adopted “a disgraceful stance” not taken by other Arab governments.

Hussain Mouanes, a lawmaker representing a bloc affiliated with Iraq’s Kataeb Hezbollah, also criticized the government on Thursday for what he called “irresponsible” conduct.

He accused the government of being a “subordinate authority that lacks the dignity to represent its people or defend Iraq’s sovereignty.”

Hezbollah and the Houthis did not immediately respond to requests for comment.

An Iraqi government adviser cited by Qatari-owned newspaper Al-Araby Al-Jadeed said Hezbollah and the Houthis were designated as terror groups as part of Iraq’s commitments to the US Treasury. The US designates both as terror groups. The commitments were taken to avoid sanctions on Iraqi institutions including the country’s central bank and state oil company, the adviser says.

Another political source cited by the outlet distanced the Iraqi government from the decision, which the source attributed to the country’s judiciary.

The United States has long sought to reduce Iran’s influence in Iraq and other countries in the Middle East where Tehran has allies as part of its so-called Axis of Resistance, which has taken a battering by Israel since the war in Gaza erupted in 2023.

Iran views its neighbor and ally Iraq as vital to keeping its economy afloat amidst international sanctions. But Baghdad, a partner to both the US and Iran, is wary of being caught in the crosshairs of Trump’s policy to squeeze Tehran.

The Islamic Republic wields hefty military, political and economic influence in Iraq through its powerful Shiite militias and the political parties it backs in Baghdad. But Iran has been weakened over the past year by Israel’s heavy blows to Tehran’s militia proxies, raising its susceptibility to US pressure.