Iraq's £14 billion Development Road Gamble.

Iraq begins construction on its trade corridor linking Asia to Europe.

For the two decades since the fall of the Ba’athist regime, Iraq has been plagued by sectarian conflict among Sunni, Shia, and Kurdish communities, alongside entrenched systemic corruption within its vast bureaucracy. These challenges have hindered critical infrastructure development and stymied efforts to diversify an economy heavily reliant on oil, which accounts for approximately 88% of total government revenues.

Amid growing concerns over the reliability of the Suez Canal and Red Sea shipping routes, stemming not only from the canal’s limited capacity of 97 vessels per day but also from escalating attacks on commercial vessels by the Houthi militia, Iraq has identified a strategic opportunity to reposition itself as a vital transit hub for global trade.

In response, Iraqi Prime Minister Mohammed Shia Al-Sudani has announced an ambitious infrastructure initiative known as the “Development Road.” The plan envisions a network of railways and highways connecting the under-construction Grand Faw Port on the Persian Gulf to the Turkish border, where cargo will continue onward to the Mediterranean and major European ports. The initiative, valued at approximately £35 billion, aims to capture a share of Asia-Europe maritime trade while also attracting foreign investment and fostering long-term economic stability.

The Development Road is positioned as a joint venture with Turkiye, a long-standing strategic partner in Iraq’s oil sector and a critical regional player. While construction is already underway, including major port expansions in southern Iraq, questions remain regarding the feasibility of the project. Key concerns include the country’s persistent security challenges, administrative inefficiencies, and the broader geopolitical dynamics of the region.

External Competition

Unfortunately for Baghdad, they are not alone in recognizing the strategic potential of establishing a regional trade corridor. Since the signing of the Abraham Accords in 2020, significant momentum (backed by strong lobbying efforts from the United States) has been directed toward Arab states to develop an alternative route. This proposed corridor, known as the India-Middle East-Europe Economic Corridor (IMEC), would link ports in the United Arab Emirates with Port Haifa in Israel via a network of road and rail infrastructure traversing Saudi Arabia and Jordan, ultimately providing access to the Mediterranean.

IMEC quickly gained favour among many Western nations, particularly the United States, as a preferred alternative to regional initiatives such as Iraq’s Development Road. However, the geopolitical landscape shifted dramatically following the October 7th attacks and the subsequent invasion in Gaza. In response to rising social pressures on Arab nations, several Gulf states were compelled to cut ties with Israel, with Saudi Arabia still reluctant to formally recognise Israel. As a result, the IMEC corridor has been effectively suspended for the foreseeable future, casting doubt on its viability and redirecting attention to alternative initiatives like Iraq’s Development Road.

Join-Venture Risk

While the suspension of the IMEC corridor has redirected investor attention toward Iraq’s Development Road initiative, it has also highlighted a significant vulnerability: the fragile nature of Iraqi-Turkish relations. Given that the success of the Development Road is heavily reliant on integration with Turkish infrastructure and access to European markets via Turkish ports, any deterioration in bilateral relations poses a substantial risk to the project’s viability.

This concern is not without precedent. Relations between Iraq and Turkiye have been marked by volatility over the past decade, often strained by contentious issues such as Turkiye’s ongoing military presence in northern Iraq, particularly within Kurdish territories. Tensions escalated notably in 2022, when a Turkish airstrike resulted in the deaths of nine Iraqi civilians, triggering widespread condemnation and diplomatic fallout.

Another persistent point of friction involves water security. Both the Tigris and Euphrates rivers, which are critical to Iraq’s agricultural sector and broader water supply, originate in Turkiye. As the impacts of climate change intensify and average temperatures rise, concerns over upstream water control and the management of these resources have become increasingly urgent. Iraq has repeatedly voiced alarm over reduced water flow, citing its detrimental effects on food security, rural livelihoods, and environmental sustainability.

Moreover, domestic political dynamics further complicate the bilateral relationship. Anti-Turkish sentiment remains a potent force within Iraqi society, particularly among factions aligned with Iran-backed Shia militias and clerical figures who have been influential supporters of Prime Minister Al-Sudani. These groups have historically organized protests and called for stronger resistance to perceived Turkish interference in Iraqi sovereignty, and their influence could further destabilize diplomatic ties.

Given these challenges, the durability of Iraqi-Turkish cooperation remains uncertain. For the Development Road initiative to achieve its full potential, Baghdad must prioritize sustained diplomatic engagement with Ankara, pursue constructive dialogue on contentious issues such as military activity and water sharing, and work to insulate strategic economic projects from political and ideological pressures. Without such efforts, the initiative risks being derailed not by technical or financial shortcomings, but by the very geopolitical vulnerabilities it seeks to alleviate.

The Kurdistan Region

One of the less publicly acknowledged, yet strategically significant, objectives of the Development Road initiative for Baghdad is to reduce the economic independence of the Kurdistan Region. By limiting the Kurdistan Regional Governments (KRG) access to the revenues and benefits generated by the project, the federal government aims to weaken the autonomous region’s financial standing, thereby increasing its reliance on Baghdad for budgetary support. The long-term intention, as perceived by some analysts, may be to pressure the Kurdish leadership into relinquishing certain autonomous powers, potentially including a reduction in the size and scope of the Peshmerga forces and greater integration with federal institutions.

However, despite any attempts to side-line the KRG, geography presents a non-negotiable reality. The Kurdistan Region encompasses Iraq’s entire land border with Turkiye, including the vital Ibrahim Khalil crossing in Zakho (the primary gateway for overland trade between the two countries). As such, any viable route for the Development Road, whether rail or highway, must traverse Kurdish territory before reaching Turkish infrastructure. This geographic necessity diminishes any federal strategy to exclude the KRG from the project’s benefits.

Furthermore, the KRG, particularly the ruling Kurdistan Democratic Party (KDP), maintains strong diplomatic and economic ties with both Turkiye and key Western allies. These relationships enhance the KRG’s leverage in negotiations and could be instrumental in shaping the international reception of the project. Should Erbil perceive its interests as being marginalized, there is a credible risk that Western stakeholders (many of whom view the KRG as a stable and cooperative partner) may reconsider their support for the corridor or even impose diplomatic and economic pressure on Baghdad.

Therefore, it is imperative that the federal government approaches the KRG not as a competitor, but as a critical partner in the success of the Development Road. A collaborative framework, grounded in mutual respect, transparency, and equitable benefit-sharing, will be essential to overcoming long-standing disputes over border control, revenue allocation, and public sector salaries. Only through sustained and constructive dialogue with Erbil can Baghdad ensure that the Development Road achieves its full potential as a transformative national and regional infrastructure project.

Internal Corruption

Historically, infrastructure development in Federal Iraq has been severely undermined by systemic corruption, with a lack of transparency and an overburdened bureaucracy contributing to malpractice across nearly all levels of governance. Corruption has extended from senior officials to lower levels of administration, where even local officials have been implicated in embezzlement schemes.

With the announcement of a £14 billion budget allocated to the Development Road initiative, concerns have been raised regarding the potential for misuse of funds. There is growing speculation that influential political figures and private sector actors may attempt to exploit the project for personal gain, whether through lobbying for lucrative construction contracts to be awarded to affiliated companies or by securing high-paying managerial positions for relatives and associates.

Such practices risk triggering internal competition among political elites and business interests, prioritizing personal enrichment over development. If not addressed through unbiased oversight mechanisms and anti-corruption safeguards, this could lead to the inefficient execution of the project. The result may mirror past initiatives across Baghdad, characterized by incomplete roads, abandoned housing complexes, and half-finished infrastructure plans that stand as symbols of mismanagement and lost public trust. If Al-Sudani has any hope in delivering a trade corridor that will bring in investment, he must implement a similar anti-corruption model framed by the Kurdistan Region that has make Erbil, and other major cities, so business and investor friendly; with many top international corporations using Erbil and a centre for business in Iraq, rather than Baghdad.

Since Al-Sudani became Prime Minister in 2022 he has been on a fears anti-corruption campaign, working closely with lawmakers to empower courts to take action and to conduct regular performance evaluations in key institutes. However, with a cut for the 2025 federal budget, pressure is being placed on Al-Sudani and his costly anti-corruption efforts.

The Bottom Line

Ultimately, the success and effective implementation of the Development Road initiative will depend on a wide array of interrelated factors, some within Iraq’s control and others shaped by broader regional dynamics. External variables, such as competition from rival trade corridors like IMEC, the ongoing crisis in the Red Sea due and the Houthis, and the ever-present possibility of intervention from Iran and its network of proxies in Iraq looking for a way to alleviate the economic crisis facing Tehran, are largely beyond Baghdad’s direct influence. On these issues, the Iraqi government can only observe, respond diplomatically, and strategically position itself to adapt to changing geopolitical realities.

However, a significant number of critical factors lie squarely within the control of Baghdad. Top among these is the need to confront and mitigate the deeply rooted corruption that has historically plagued public infrastructure projects. Without robust transparency and accountability mechanisms, there is a substantial risk that a considerable portion of the £14 billion earmarked for the Development Road could be siphoned off by political elites and vested business interests, severely compromising the initiative's integrity and effectiveness.

In addition, the federal government must engage in serious and constructive negotiations with the Kurdistan Regional Government. Given the complex political and territorial history between the two, ensuring cooperation and alignment between federal and regional authorities will be essential for the infrastructure networks and the distribution of benefits across the country.

Equally important is the need to foster a stable and business-friendly environment that can attract long-term foreign investment. This involves not only macroeconomic reforms but also the implementation of clear regulatory frameworks, legal protections for investors, and assurances of political stability. By demonstrating a genuine commitment to reform and economic openness, Iraq can begin to rebuild the trust of international investors who may otherwise be wary of engaging in large-scale projects in the region.

In summary, the Development Road initiative represents more than just an infrastructure project, it’s a litmus test for Iraq’s capacity to overcome decades of foreign dependency and chart a new course toward sustainable development and regional power. If executed effectively, the project could serve as a catalyst for broader economic transformation, building a stronger and more diverse job market as the region steers away from oil dependency. Conversely, failure to deliver could reinforce existing perceptions of dysfunction and destroy a rare opportunity for lasting progress. The implications extend far beyond Iraq’s borders, with the potential to reshape trade, cooperation, and stability across the Middle East.