The Trump administration is increasing pressure on Baghdad by cutting off key channels of U.S. support, including dollar cash transfers and parts of its military assistance, as Washington demands action against Iranian-backed militias operating in Iraq, Iraqi and U.S. officials said.
At the center of the dispute is a blocked shipment of nearly $500 million in U.S. currency that was set to be flown to Iraq's central bank, The Wall Street Journal reported Tuesday.
The cash came from Iraqi oil revenues held in accounts at the Federal Reserve Bank of New York, but Treasury Department officials stopped the transfer over concerns tied to militia activity, officials told the Journal.
It was the second such delay since fighting with Iran erupted in late February.
Washington has also reportedly told Iraqi leaders it is pausing some funding for counterterrorism efforts and military training until attacks on U.S. interests end and concrete moves are made to break up the armed factions.
The tougher posture comes after repeated militia strikes on U.S. sites in Iraq and nearby countries, which American officials say were carried out in support of Tehran. It also reflects a broader push by the United States to move Iraq's government away from Iran's orbit during the nearly two-month conflict involving the U.S., Israel, and Iran.
Iraq's central bank publicly downplayed the situation Tuesday, saying in a statement that it had "fulfilled all requests from banks and exchange companies for U.S. dollars," while avoiding any reference to the suspended cash deliveries.
For years, Iraq's dependence on physical U.S. currency has given Washington unusual leverage. Since 2003, Iraqi oil revenue has been held in New York, with billions of dollars later shipped to Baghdad to keep the country's largely cash-driven economy functioning.
The U.S. briefly halted those transfers in 2015 amid fears the money was reaching Islamic State militants.
U.S. officials say the latest freeze is not permanent, but they have not laid out specific conditions for restoring it.
"The Iraqi government's failure to prevent these attacks while some elements associated with the Iraqi government continue to actively provide political, financial and operational cover for the militias adversely impacts the U.S.-Iraq relationship," State Department spokesperson Tommy Pigott told the Journal. "The United States will not tolerate attacks on U.S. interests and expects the Iraqi government to immediately take all measures to dismantle the Iran-aligned militia groups in Iraq."
Groups such as the Badr Brigade, Kataib Hezbollah, and Asaib Ahl al-Haq hold major sway in Iraq's politics and financial system. Some have also been folded into the country's official security apparatus. As Iraq weighs its next prime minister, those factions — along with Tehran — are backing figures likely to preserve strong ties with Iran.
Nicole Weatherholtz ✉
Nicole Weatherholtz, a Newsmax general assignment reporter covers news, politics, and culture. She is a National Newspaper Association award-winning journalist.
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