U.S.
Restarts Dollar Currency Shipments to Iraq Amid Efforts to Curb Iranian
Influence
The Trump administration had halted the
shipments to Iraq as part of its efforts to pressure the Baghdad government to
distance itself from Iran.
·
The United States resumed air shipments of U.S.
dollars to Iraq after suspending them in April 2026.
·
The suspension was intended to pressure Iraq to reduce
Iranian influence and crack down on Iran-backed militias.
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The U.S. had also withheld Iraq's oil revenue
earnings in dollars, an unprecedented move against a close ally.
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According to Iraqi officials, the issue has been
resolved and dollar transfers have resumed.
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U.S. restrictions on security cooperation and
funding for Iraq's security services remain in place.
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The suspension coincided with Iraq's selection of a
new prime minister, with Washington opposing candidates perceived as close to
Iran.
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The U.S. demanded that Iraq bring Iran-linked
militias operating outside state control under government authority.
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Dollar transfers are crucial for Iraq's cash-based
economy, enabling businesses and individuals to pay for imports.
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The transfers are processed through Iraq's account
at the Federal Reserve Bank of New York under strict transparency rules
to prevent money laundering and illicit financing.
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One key U.S. concern was the alleged smuggling
of U.S. dollars by Iran-backed militias.
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Prime Minister Ali al-Zaidi has ordered all
militias to come under direct state control as part of his reform agenda.
·
Powerful Iran-backed groups, particularly Kataib
Hezbollah, have rejected the government's efforts to assert control.
·
Iraq continues to face pressure as it balances
relations between the United States and Iran amid regional geopolitical
rivalry.
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Prime Minister Ali al-Zaidi has also
launched a major anti-corruption campaign, leading to the arrest of 47
current and former officials in the latest crackdown.
The
United States has resumed some air shipments of U.S. dollars to Iraq, several
months after it suspended them in a bid to pressure the government to distance
itself from Iran, according to two aides to Iraq’s prime minister.
The
Trump administration stopped the flow of dollars to Iraq’s cash-based economy
in April, withholding the country’s own money earned from oil sales. It was an
extraordinary measure in light of the longstanding alliance between the two
countries.
At
the time, Iraqi officials said Washington had also suspended cooperation with
and funding for Iraq’s security services. These measures remain in place,
according to another Iraqi official, who spoke on condition of anonymity
because he was not authorized to discuss the matter publicly.
The
punitive measures were taken at a moment when Iraq was in the process of
selecting a new prime minister and the United States was trying to block
candidates viewed as sympathetic to Iran. Washington was also demanding that
Iraq’s government rein in an array of Iran-linked militias that operate largely
outside of government control and have periodically attacked U.S. targets in
the country.
“The
dollar shipments to Iraq have resumed,” said Haider al-Aboudi, a spokesman for
Iraq’s new prime minister, Ali al-Zaidi, adding that “the problem has been
resolved.” Mudhar Muhammad Salih, a financial adviser to the prime minister,
confirmed resumption of the transfer.
The
U.S. State Department referred a request for comment to the Treasury
Department, which did not immediately respond.
A
few years ago, new international banking rules worked out in an agreement
between the United States and Iraq required greater transparency surrounding
the wire transfers of dollars held as foreign currency reserves for Iraq in an
account at the Federal Reserve Bank of New York.
The
intent was to stem the illicit flow of dollars to criminal actors and money
launderers, and to those helping militant groups in neighboring
countries, including Iran.
The
Iraqi central bank facilitates wire transfers daily from its account at the New
York Fed on behalf of Iraqi businesses and individuals to pay for goods from
outside Iraq. The transfers are critical because few businesses have
international bank accounts.
One
of the motivations behind the U.S. suspension in April was to stem the
smuggling of dollars by Iran-backed militias, an official from Iraq’s
semiautonomous Kurdistan region said at the time.
Mr.
al-Zaidi, the prime minister, is a political newcomer who took power in late
April, soon after the U.S. suspension of the dollar shipments. The United
States did not oppose his appointment, and he quickly took steps to try to
clamp down on Iran-linked militias in his country. One of his first actions was
to order all the country’s militias to come under direct state authority.
Iraq
has long been caught in a tug of war between its two biggest allies — the
United States and Iran — and at times the country has turned into a proxy
battlefield for the two foes.
Previous
attempts to bring the militias under tighter government control have failed.
And some of the most powerful Iran-linked militias in Iraq have already
rejected the prime minister’s latest attempts to take control over them.
Chief
among them is Kataib Hezbollah, a group that has attacked U.S. targets in Iraq
in recent months and has claimed responsibility for high-profile kidnappings,
including that of a U.S. journalist in Baghdad this year.
The
resumption of dollar shipments also comes as Mr. al-Zaidi began an
anticorruption campaign, arresting dozens of current and former officials,
including members of Parliament, on corruption charges, according to the
state-run Iraqi News Agency.
On
Sunday, the authorities arrested 47 people, according to the report, and
operations were ongoing to pursue others suspected of corruption.