Iraq Agrees to New Controls on U.S. Dollars to Resume Cash Shipments, Report Says

Iraq has reportedly reached an agreement with the U.S. to resume physical shipments of American currency after a four-month suspension, according to a report from The Wall Street Journal citing U.S. and Iraqi officials. The deal is contingent on Baghdad implementing new controls to prevent U.S. dollars from being illicitly funneled to Iran and its allied militias.

Details of the Agreement

Under the terms of the new arrangement, the Iraqi government has committed to tightening its oversight of the nation's financial system. The primary goal is to stop the flow of dollars to entities under U.S. sanctions.

Key measures reportedly include:

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

According to Iraqi officials cited in the report, the cash deliveries, which are transported via cargo aircraft, resumed late last month following the agreement.

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Background on the Suspension

The U.S. Treasury Department ordered a halt to the banknote deliveries in late February. This action was part of a broader U.S. strategy to reduce Tehran's influence in Baghdad and enforce sanctions against Iran, which has historically used Iraq's financial system to access dollars.

The suspension cut off the Iraqi government from physical cash generated by its oil sales, the revenue from which is held at the Federal Reserve Bank of New York. On orders from the Treasury, the Fed canceled at least two shipments, including one valued at approximately $500 million, officials said.

Market Implications

The resumption of dollar shipments is a critical development for Iraq's economy, which relies heavily on physical U.S. currency for government operations and to maintain stability in its financial markets. The four-month halt placed significant pressure on Baghdad, demonstrating the leverage Washington holds over Iraq's access to its own oil revenues. For investors, the agreement signals a potential de-escalation of financial pressure on Iraq, though the long-term effectiveness of the new controls remains to be seen.