Since 2014, the Iraqi state and society have suffered immensely from Daesh and the war against this extremist group. Iraq has made enormous sacrifices to topple Daesh from the strong position of power that it enjoyed in the country up until relatively recently. An academic and activist group called Iraq Body Count estimates that roughly 70,000 Iraqi civilians died between 2014 and 2018 due to terrorism, violence and armed attacks. Much of the infrastructure of Iraq, which was bombed over 13,000 times by scores of Western and Arab militaries in the U.S.-led coalition since August 2014, remains in ruins.

Threat of a new Gulf war

It is far from clear how Iraqis will emerge from this bloody chapter and rebuild not just their nation's bridges, roads, schools and hospitals but also their national identity as Iraqis in the 21st century.

By all measures, the economic, political and security challenges that lay ahead for Iraqis are daunting. Against the backdrop of these enormous difficulties, the escalating tension between the U.S. and Iran is a major concern for Iraq. Across Iraq, there is much fear of a new Persian Gulf War, particularly given the likelihood of Iraq being dragged into a military confrontation between Washington and Tehran that could begin in the Strait of Hormuz.

Many pundits are busy speculating whether there will be a war between the U.S. and Iran. It is not clear whether this nightmarish scenario will unfold. Yet officials in Iraq — an ally of both Washington and Tehran — are increasingly nervous for good reason. Such a military conflict would almost inevitably lead to further death and destruction on Iraqi land.

Furthermore, even if it does not, Iraq's economy would inevitably suffer significantly from any situation involving the closure of the Strait of Hormuz, the artery through which Iraqi oil exports transit to markets worldwide.

The leadership in Baghdad recognizes the importance of maintaining close ties to both the U.S. and Iran for the purpose of advancing Iraq's vital interests. Abandoning one of these countries in favor of the other is simply not a strategy that Iraqi officials can consider given the extent to which Baghdad relies on warm and cooperative relations with both Washington and Tehran.

Sharing a border, Iraq has deep links to its Persian neighbor not only by virtue of geography, but also through trade, investment, energy, tourism, culture, religion, history and close defense relations.

Likewise, as the Iraqi economy needs U.S. investment, particularly in the war-torn country's oil sector, while Iraq, which hosts American military bases, remains dependent on the U.S. military for dealing with security threats posed by the remnants of Daesh, officials in Baghdad are keen to ensure that Iraq remains on good terms with President Donald Trump's administration.

"From an Iraqi perspective, [Iran and the U.S.] are important and I think Iraq cannot succeed if it has to choose between [the two countries] because of the geopolitical situation with Iran and the role the U.S. has played in Iraq," explained Atlantic Council's Abbas Kadhim. "So, the ideal way for Iraq is to have either the [U.S. and Iran] work out their differences in a better way or get Iraq out of the conflict and just duke it out somewhere else."

Iraq's policy of balance

Iraq's foreign policy vision largely rests on regional neutrality. Avoiding alliances that make Iraq perceived as a threat to other blocs in the Middle East is not only a wise strategy for Baghdad, but it's also an Iraqi constitutional mandate. Like Oman, Kuwait and Qatar, the government in Iraq is coming under greater pressure to abandon its neutral foreign policy in favor of entering an anti-Iranian alliance of Arab states.

Rather than succumbing to such pressure to pick sides in the increasingly polarized Middle East, Iraq – again, much like Gulf Cooperation Council (GCC) states that have warm ties with Tehran – is seeking to play a middle-man role between the White House and Iranian leadership.

For all of Iraq's political, religious and ideological divisions, Iraqis across the spectrum largely join a consensus in believing that such neutrality between Washington and Tehran best serves their national interests in this sensitive period following Daesh's fall from power in major Iraqi cities.

Yet despite the neutrality doctrine's popularity among diverse groups of Iraq, a major challenge has to do with the fact that there are scores of heavily armed non-state actors that oppose this strategy of neutrality operating in Iraq outside the central government's control.

As tensions ratchet up between Washington – and now London too – on one side, and Iran and its various proxies, allies and partners on the other, it is possible that specific Iraqi Shiite militias could escalate the regional friction further with certain moves against U.S. military personnel or other American or British interests in Iraq.

Unquestionably, such actions would meet a response from Washington or London that could quickly trigger a new chapter of violence in Iraq. In fact, Iraq has already become a major battleground between the U.S. and Iran, most recently underscored by the drone attack in northern Salahuddin that targeted a base belonging to Brigade 16, an armed group of Iran-backed Iraqi Turkmens who operate within the Popular Mobilization Units (PMU).

As Iraq continues to find itself in this extremely difficult situation as the saber rattling and the flexing of military muscle continues in the Gulf, most recently with news of the deployment of 500 U.S. military personnel to Saudi Arabia and the U.S. targeting an Iranian drone in the Strait of Hormuz, Baghdad officials will remain extremely worried, and justifiably so.

The prospects for a full-blown war between the U.S. and Iran would add more years, if not decades, to the past four decades of military and economic warfare that have been imposed on Iraqis.

Undoubtedly, Iraqi officials will continue exercising their diplomatic clout in efforts to avert a military confrontation between the U.S. and Iran. This is simply the best option that Iraq has at this juncture.

Yet the "$64,000 question" is whether Baghdad can succeed in maintaining such neutrality given the countless variables – both within Iraq and throughout the region—that Iraq's government simply lacks the means to control.

* CEO of Gulf State Analytics, a Washington-based geopolitical risk consultancy