US President Donald Trump just made the first step to dismantle a deal that took more than four years to negotiate, from the first overtures made by the Obama administration to Iran in 2011 to the final signing of The Joint Comprehensive Plan of Action (JCPOA) in 2015.

Trump is seeking to undo the diplomatic legacy of the previous administration, arguing that the Iran nuclear deal failed to prevent the development of Tehran's ballistic missile programme and end its support for terrorism.

Trump ostensibly wants a grand bargain that will cover all of these issues. The irony is that in the past such a grand bargain was put on the table and rejected. Iran itself proposed it in 2003, and it was Trump's Republican predecessor, George W Bush, that failed to pursue it. That failure led to Iran waging a low-intensity proxy war against the US in Iraq.

Just as Iran had options then to communicate its displeasure when the US failed to engage with it, so it has now. And all of them would lead to more instability in Iraq and the region as a whole.

The 2003 Iranian grand bargain

By failing to recertify the Iran deal, Trump bucked the issue to Congress, and it is up to the legislative branch to decide US' commitment to the deal. However, the symbolic nature of Trump's action cannot be undone.

From Tehran's perspective, particularly the hardliners, the US is fickle and cannot be trusted. In their eyes, Iranian-US relations have not progressed, but have gone back to the way they were under the Bush administration.

After 2001, Bush included the Islamic Republic in what he called the "axis of evil", which included Iraq and North Korea. In 2003, the US was on Iran's border, having just successfully invaded a member of that "axis". It was in then that Iran offered the US a comprehensive negotiation proposal, where the Islamic Republic was willing to open its nuclear programme for inspections, work as a partner to stabilise Iraq, and cooperate against fighting al-Qaeda, offering Washington then what Trump asks of Iran now.

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The response to the offer from the office of Vice President Dick Cheney allegedly was, "We don't talk to evil."

When Washington refused to engage with it through diplomacy and collaboration in 2003, Iran decided to undermine US interests in the region. One tool at its disposal was the variety of Iraqi armed groups targeting US forces. Thus, the US had to combat two distinct foes during Iraq's insurgency: al-Qaeda in Iraq (which later morphed into Islamic State of Iraq and the Levant) and a set of Iranian proxies.

Many of the Shia militias in Iraq today grew out of Iran's low-intensity proxy war against US forces. Tehran's rationale then was that the Bush administration sought regime change and considered bombing Iran's nuclear facilities.

The lesson from 2003 is that when the US failed to talk to Iran through dialogue and diplomacy, Iran could talk back through its many armed proxies in the region. This is an option for Iran today, as it was in 2003.

Syria and Iraq at stake

The commander of Iran's Revolutionary Guard Corps already made an implicit threat in response to Trump's aggressive rhetoric against Iran. There are still US forces in both Iraq and Syria and in the Syrian context, Iran and the US are on the brink of a proxy war. Iran has at its disposal the option to escalate the Syrian conflict in response to the actions of the Trump administration.

To undermine US interests in the region, Iran can also use diplomacy and continue to wean Iraq away from Washington.

The situation in Iraq is precarious, given that the central government has to placate Arab Sunnis that lived under the Islamic State of Iraq and the Levant (ISIL), and reconcile with the Kurdish region that has just voted for independence. ISIL still has the potential to wreak havoc in Iraq, and only a stable government in Baghdad can prevent this from happening.

Since 2003, the central government in Baghdad has been an institution contested by the US and Iran, each trying to place their parties at the apex of power. By 2014, Tehran and Washington realised it was in their interest to cooperate in Iraq's domestic politics. They both agreed that the decisive legacy of former Prime Minister Nuri al-Maliki in Iraq contributed to ISIL's rise and both states encouraged him to step down for a less divisive candidate, Haider al-Abadi. But this consensus can easily disappear.

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Iraq will have new parliamentary elections in 2018. In the wake of Trump's action, Iran can offer financial largesse to parties and candidates that will support its policies, and perhaps unseat Abadi as prime minister.

Not only does Iran have a say in the formation of the central government in Iraq, but also has influence over Kurdish parties in Iraq. The US will continue to face difficulties in defusing the diplomatic crisis between Baghdad and the Kurdistan Regional Government, unless Tehran is involved.

Whether the Trump administration likes it or not, Iran is a major player in the Middle East and its future stability depends on it. The consequences of not engaging with Tehran and pursuing aggressive policies towards it (as Bush and Cheney did) are very much evident today, not only in Iraq but in the rest of the region.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.