By examining conceptual and historical approaches on modern state and state formation in the context of Iraq, this paper addresses four interrelated methodological aspects of studying state formation (1) to contest the simplicity of Eurocentric knowledge production in studying state formation especially in the periphery, (2) to bring capital and nation‐state into a relational analysis and to call for research on how they constitute each other historically and geographically, (3) to integrate methodologically local and world‐historical context in understanding the historical complexity of state formation, (4) to problematize the concepts of “capital relation” in order to recognize nature and transformation of nature in the study of state formation.