Preview Since the start of the conflict against the Islamic State, foreign direct investment in Iraq has steadily fallen. Despite the country's strong potential and oil resources, foreign investors are still reluctant to enter this market of 40 million consumers. Iraq is struggling to evolve into a competitive market economy with a vibrant private sector. Instead, the country continues to be plagued by pervasive state control of economic activities, Dutch disease, political instability, security problems and corruption. More importantly, the Iraqi economy is heavily influenced by external interference, particularly from Iran. This situation deprives Iraq of economic opportunities with the Gulf States and Western countries. The current situation of economic crisis and high inflation is forcing the new Iraqi government to make a choice between its trading partners with opposing interests.