Iraq Agrees to New Controls on U.S. Dollars, Resuming Halted Cash Shipments

Iraq has agreed to implement new financial controls to prevent U.S. dollars from reaching Iran, paving the way for the resumption of American currency shipments that were halted for four months. The deal was reached with the U.S. administration, according to a Wall Street Journal report citing American and Iraqi officials.

The U.S. Treasury Department stopped the physical delivery of banknotes to Baghdad in late February amid a conflict with Iran. This action cut off the Iraqi government from accessing cash generated by its oil sales, which are held in an account at the Federal Reserve Bank of New York.

Terms of the Agreement

Under the new arrangement, Baghdad has committed to tightening its financial oversight to curb the illicit flow of dollars. Key measures include:

• Preventing Iran and its allies from acquiring dollars through Iraq's network of currency-exchange businesses.
• Halting U.S. dollar salary payments to members of Iran-aligned militias.

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These controls are part of a broader U.S. effort to bring Iraq closer to Washington's sphere of influence and financially isolate Tehran by preventing the circumvention of American sanctions.

Background on the Suspension

The suspension of cash shipments, which are transported via chartered cargo aircraft, exerted significant pressure on Iraq's economy. The Federal Reserve, acting on Treasury Department orders, canceled at least two scheduled deliveries, including one valued at approximately $500 million, according to officials cited in the report.

Iraqi officials confirmed that the crucial cash shipments resumed late last month following the agreement. Access to physical U.S. dollars is vital for the stability of Iraq's financial system and its ability to conduct both government and commercial transactions.