Iraq Assists in Lebanon’s Captagon Raid: The Signals

The dismantling of one of the Middle East’s largest Captagon factories in Lebanon’s Beqaa Valley in mid-July highlights both the scale of regional narcotics production and the emerging role of Iraq’s intelligence services in countering transnational organised crime.

The operation illustrates the convergence of security and public health threats posed by synthetic drug production, while also signalling Iraq’s ambition to project regional security influence, beyond its traditional focus on countering the Islamic State group (IS).

Yet, Iraq’s participation in the Captagon-busting operation in Lebanon, and in another operation in Syria in the same month, carries broader geopolitical implications than the raid itself. This analysis predicates three intersecting arguments to explain Baghdad’s public announcement:

First, Prime Minister Mohammad Shia al-Sudani is signalling to Washington and allied European capitals that Iraq is willing, even if symbolically, to cooperate with the US-backed Lebanese government on regional security issues. Such cooperation could indirectly challenge the interests of Iran’s allied networks, including Hezbollah.

Second, Sudani is positioning himself for a second term, where cultivating goodwill in Washington is essential against several other possible candidates. Put simply, the Iraqi prime minister is demonstrating that he can engage pragmatically with the United States. While Sudani may not secure a second term, he is raising the bar for his potential successor to cooperate with Washington.

Third, Iraq faces looming economic headwinds in 2026. Oil prices are projected to average around $60 per barrel in 2026, according to Morgan Stanley’s forecasts, raising the prospect of fiscal strain. To avert a crisis, Iraq may need IMF assistance, support that hinges on US backing. Sudani’s message is therefore one of pre-emptive goodwill, signalling more alignment with Washington before economic pressures intensify.

Taking these three points together, Iraq appears intent on hedging its bets. Baghdad seeks to avoid being locked into Iran’s orbit at a time when Israel and the Gulf states are emerging as resilient military and economic powerhouses in a changing regional order. This does not necessarily signal Iraq’s alignment with the United States and its regional allies. Rather, under Sudani’s leadership, Iraq is employing selective anti-militia measures and counter-narcotics initiatives as gestures towards Washington.

Balancing the US and Iran: A Strategy of Rising Risk

Sudani’s government, like its predecessors, seeks to balance between Washington and Tehran by offering concessions to both. The conflict that began on 7 October 2023, followed by the 13 June war, has further constrained this balancing act, compelling the prime minister to make geopolitically sensitive concessions to a US administration that prioritises transactional politics.

Baghdad has already demonstrated some willingness to restrict Iranian crude oil smuggling, complicating Tehran’s ability to evade US sanctions. The symbolic extension of Iraqi efforts to Lebanon and Syria may suggest a parallel intent toward Hezbollah and the broader narcotics ecosystem that underpins its resilience during times of crisis.

The actual impact of the Captagon raid on Hezbollah’s networks remains uncertain. It is unclear whether the facility was central to Hezbollah’s operations, linked to it or criminal gangs in the Beqaa Valley, or even deliberately exposed by Hezbollah itself as a concession to the Lebanese government of Nawaf Salam in exchange for delaying or disabling disarmament. Did Baghdad simply use this as a free-riding opportunity to showcase its security capabilities? Regardless of the specifics, Iraq’s announcement in its self carries a symbolic message to Washington, one that signals cooperation.

Domestically, the government avoided announcing the operation immediately after it took place in July. The timing was sensitive, coming so soon after the 13 June war between Israel and Iran. Although Baghdad has openly accommodated Washington, most notably by taking a harder line against Iran-backed Iraqi paramilitary actors, it remains cautious not to appear aligned with Israel during its devastating offensive against Iran and Hezbollah. Delaying the announcement was therefore likely a calculated move to pre-empt any political backlash and deny Iran-backed groups an opportunity to exploit the issue.

In recent analysis for RUSI, Dr Burcu Ozcelik and myself argued that Prime Minister Sudani appears intent on deterring some key Iran-backed groups from overstepping against his government. Should his prospects for a second term materialize, he may seek to further centralise Iraq’s security apparatus. The weakening of the ‘Axis of Resistance’, particularly Lebanese Hezbollah, would serve such an agenda. Could this represent the premiership and some of the intelligence services’ unspoken vision for consolidating power at home?

Several Hypotheses

How did the Iraqi government come to play a role in a counter-narcotics operation in Lebanon? Two plausible hypotheses emerge. First, members of Lebanese Hezbollah residing in Iraq may have, deliberately or unintentionally, shared intelligence with Baghdad. Second, Iraqi intelligence agencies may have traced narcotics flows domestically back to their source in Lebanon’s Beqaa Valley. At this stage, both explanations remain equally plausible.

The first hypothesis warrants closer scrutiny. Following Hezbollah’s decapitation by Israel in August 2024, many Lebanese Shia, including Hezbollah members and loyalists, relocated to Iraq and Iran. This wartime migration likely facilitated deeper ties between Lebanese narco-entrepreneurs and their Iraqi counterparts, including Iran-backed militias engaged in the illicit trade. A recent Financial Times report by Raya Jalabi quoted an interior ministry official in eastern Deir Ezzor province in Syria, who noted that the primary security threat is no longer Islamic State militants but Iraqi Shia militias operating Captagon networks on both sides of the border. If Iraqi Shia armed networks are involved in the Captagon trade, it is likely because Hezbollah and Assad regime-era traffickers introduced the business into Iraq.

In earlier work, I argued that the political economy of Iraqi militias follows cyclical patterns of boom and bust, comparable to those observed among jihadist groups in the Horn of Africa. During periods of high oil prices, militias can more easily embed themselves within state structures to capture rents and engage in oil smuggling.

When prices fall, armed groups turn to more diversified sources of income to offset revenue losses. At such moments, narcotics trafficking becomes a particularly attractive option. However, several factors shape the appeal of this trade, including domestic demand, regional supply-chain networks, and the impact of international sanctions.

If global oil prices plummet to an average of $60 per barrel, causing a downturn in Iraq’s economy, this may have implications for the narcotics trade in Iraq and the wider region.

Hezbollah in Iraq Post-2003 Invasion

With the Beqaa Valley operation, is Prime Minister Sudani compromising Hezbollah’s interests, or even damaging elements of its broader financial networks? Alternatively, is his approach to Hezbollah better understood as a balancing act, mirroring the careful calibration he applies between the United States and Iran? These remain hypotheses rather than conclusions, yet posing sharper questions brings us closer to meaningful answers.

Hezbollah’s engagement with Iraqi armed groups dates back to their very formation during the armed resistance against US forces after the 2003 invasion. From the outset, Hezbollah played a critical role in training and indoctrinating Shia militants on behalf of the Islamic Republic of Iran, and specifically the Islamic Revolutionary Guards Corps’ Quds Force (IRGC-QF). This means that Lebanese Hezbollah is constitutive of the DNA of many of the Shi’ite armed groups, and political networks, that exist today in Iraq.

For Sudani, compromising Hezbollah without striking a satisfying balance with the group may offer him more risk – especially reputationally as a Shi’ite and former Dawa Party member – than reward, or offer him both equally. Rationally speaking, an informal bargain between the government and Lebanese Hezbollah may look like offering them refuge and protection in Iraq, while allowing Sudani to take credit for Captagon-busting operations in Lebanon that Hezbollah is – possibly – willing to compromise on as part of domestic bargains.

A Role for the UK Government

Prime Minister Sudani appears to pursue uneasy balances: taking limited action against Iran-backed groups while simultaneously reinforcing the Popular Mobilization Forces (PMF). His approach to countering Captagon networks in Lebanon and the region as a whole may follow a similar pattern.

Some of these balancing acts do not align with the UK government’s regional policy. Yet, acknowledging the limitations of intervention, London can still play a constructive role through the three following recommendations:

First, the UK, with international partners, need to help the current and next government develop an integrative approach to countering rogue armed groups, narcotics trafficking, and oil smuggling, simultaneously. This could be achieved by co-developing a comprehensive agenda with Baghdad and the Iraqi Kurdistan Region’s national security, counter-terrorism, and counter-narcotics agencies. This agenda would also integrate human rights safeguards alongside law enforcement.

Second, the UK can further bolster domestic efforts in Iraq through supporting counter-narcotics coalition-building in the region with Saudi Arabia, Jordan, Syria, Lebanon, and Turkey.

Third, the UK must also adopt a broader perspective by developing a policy framework that tackles the climate change-water-drug nexus, parallel to an empowering economic agenda, supported by the Iraq Economic Contact Group (IECG). Along with strengthening law enforcement, such a combination ensures a holistic approach to Iraq’s security and stability.

Geopolitical competition should not obscure the structural drivers of narcotics proliferation in Iraq. The trade flourishes not only due to politically protected criminal enterprises and porous borders, but also because weak governance, growing social restrictions, and fraying social safety nets, especially in southern Iraq, aid demand for narcotics. Climate change compounds these challenges by undermining livelihoods and driving internal displacement.

© RUSI, 2025.

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