The outbreak of the Iran-Iraq war and the failure of the initial invasion drastically increased required quantities of weapons required. Iraq sought to replace its tank losses with various sources, namely China and the USSR. In 1981-82, Iraqi officials would start making enquiries about the AMX-32 MBT, as France was already a significant weapons supplier for the country. It was decided to order some 150 of them with options for more, to be delivered from 1983 on. Iraqi crews would be trained by their French counterparts.
As delivered, the AMX-32 was of the 105mm version displayed in 1981, as GIAT decided not to offer the 120mm version that was heavier and degraded mobility with a then-unnecessary gun. Instead of the intercooled turbocharged HS-110-2SR, the less powerful HS-110-2 was used as it was better suited to hot climates. Nonetheless the AMX-32 would still possess much better mobility than the T-55s and Type 59/69s that were also used by Iraq.
With relatively well-trained crews and modern electronics, the AMX-32s would serve well in the war, being particularly valuable in night engagements.
This vehicle and the French training would have a major impact on Iraqi views of armored warfare. Although admittedly outdated in terms of mobility and protection, the AMX-32 possessed a then modern optics and FCS suite with a panoramic sight and LLTV, as well advanced tungsten APFSDS that was actually more capable than 125mm ammunition delivered to the Iraqis. The hydromechanical transmission also offered greater agility and reverse speed than the Soviet-style mechanical ones. This led Iraq to reassess their decision to blindly order Eastern vehicles. However, the war ruined the country, and it was thus decided to focus on cheaper upgrades and equipment. This spelled the doom of French efforts to sell the better armored and more mobile AMX-40E4 also offered to Egypt.
Instead, more AMX-32s were ordered. Iraq also drew plans to have the French expand the factory in Taji that was built by the West-Germans in 1986 to help maintain Eastern tanks and was selected to build T-72M1s with Polish kits. This expansion was supposed to allow the upgrade of T-55-oids with a new French package, featuring the same 105mm gun as the AMX-32, new ammunition racks, the Poyaud V8X 750hp engine combined with a ESM-200 Minerva transmission, suspension improvements, passive night sights for the gunner and commander, and finally a simplified FCS with a laser rangefinder. Iraq also requested France to design tungsten APFSDS and a new FCS for the 125mm gun used in the T-72. However, the latter upgrade never saw the light of day as it was not ready before the invasion of Kuwait and the subsequent embargo, and only 200-300 Type 69s were upgraded in time. These vehicles and the AMX-32 would actually be marked as a greater threat by NATO during the Gulf War due to their firepower, but the deficiencies of the Iraqi army meant that these would only destroy a couple dozen vehicles before being wiped out.
A few AMX-32s were left in France due to the embargo. Eventually, along with refitted captured Iraqi types, they would be sold to an unnamed African country.