U.S. troops pulled out of the country, ending a long war that started in 2003. But in Baghdad's fortified Green Zone, there were evidence of an on-going commitment, by the American government, to support Iraq's nascent democracy. In the heart of the Green Zone stands the massive U.S. embassy--the largest embassy of any country in world, employing a staff of 1500.
Building democracy in Iraq proved to be a challenge amid volatile politics and dangerous security situation.
Despite the dramatic decline of violence across Iraq, there are still ongoing incidents of bombings and shootings. Roadside devices targeting security forces, officials, army patrols and Iraqi civilians (including Shiite pilgrims) occur regularly.
Although Iraq's precarious political situation is covered by the media, the ongoing killing of Iraqi civilians no longer makes the headlines.
Soon after the U.S. troops exited the country, political crisis erupted. The government of Prime Minister, Nuri al-Maliki charged Vice President Tariq al-Hashemi--who is now a fugitive in Turkey-- of running a death squad.
Hashemi's political party, the secular yet Sunni-dominated Iraqiyaa List, led by Shiite Ayad Allawi, protested against the charges by boycotting the parliament.
Although the government standstill ended late January 2012, it did not change the volatile political atmosphere in the country, nor did it put an end to the bloody violence.
On June 2012, another political altercation, led to the opposition's unsuccessfully attempt to unseat al-Maliki.
Despite Maliki's announcement that he is not seeking a third term, opponents have increasingly accused him of being a "dictator" and hampering Iraq's road to democracy.
Iraq increasingly seen as Iran's ally, attempted to placate its Arab brethren by spending $450 million to host the first Arab Summit since the wave of uprisings that took hold of the region.
Their attempt was not futile as it led to better relations between Baghdad and Riyadh. For the first time since Saddam's invasion of Kuwait in 1991, Saudi Arabia named an ambassador to Iraq.
The year also saw an improvement of relations between Iraq and Kuwait.
In December, an Iraqi official said that Iraq will pay government owned, Kuwait Airways Co. $500 million in compensations for 10 aircraft taken during Iraqi's invasion of Kuwait in 1990.
Two-and-a-half years ago, the airline won a court order in the UK that led to the freezing of Iraqi Airways' global assets. The legal row had previously marred Kuwait-Iraq relations.
But as Iraq's standing in the region slowly improves, deeply rooted domestic conflicts have reemerged.
On November 2012, tensions between Baghdad and the autonomous Kurdistan region in northern Iraq erupted; the reason-- the establishment of a new military command, covering the disputed oil-rich province of Kirkuk. The future of Kurdish-Iraqi relations remains tense as the autonomous territory holds close relations with the Americans and the conflict in Syria has the potential to further empower the territorial aspirations of the Kurdish people.
Internationally, U.S.-Iraq relations also suffered in 2012. The U.S. accuses Iraq of aiding Iran by allowing them to use Iraqi airspace to ship arms to the government of Bashar al-Assad. Iraq has continually denied the accusations and has challenged the U.S. to bring evidence.
Iraq's International standing was further questioned when the United Nations accused Baghdad of committing human rights violations. Iraqi activists reported that 90 teenagers had been stoned to death earlier in the year, simply for copying a style characterized by American punk rock bands.
Although the year 2012 saw the end of U.S. presence in Iraq, corruption, sectarian violence and political instability continues to hold the country hostage.