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

Iraq has reportedly reached an agreement with the U.S. to resume physical shipments of American dollars after a four-month suspension, contingent on new controls to prevent the cash from being diverted to Iran. The deal, reported by The Wall Street Journal citing U.S. and Iraqi officials, allows Baghdad to once again access its oil revenues held in New York.

Details of the Agreement

Under the terms of the new arrangement, the Iraqi government has committed to implementing stricter measures to block the flow of U.S. dollars to Iran and its allied militias. According to the report, these controls will specifically target Iraq's currency-exchange businesses, a common channel for illicit transfers.

Baghdad also reportedly agreed to prevent dollars from being used for salary payments to members of Iran-aligned militias. The physical cash shipments, which are transported on chartered cargo aircraft, resumed late last month, Iraqi officials told the Journal.

Background on the Suspension

The U.S. Treasury Department ordered a halt to the banknote deliveries in late February. This action effectively cut off the Iraqi government from accessing physical cash from its oil sales, which are deposited at the Federal Reserve Bank of New York.

Ad

The suspension was a measure to pressure Baghdad to sever financial lifelines to Tehran, which uses Iraq to circumvent American sanctions. During the halt, the Federal Reserve canceled at least two planned cash shipments on Treasury's orders, including one valued at approximately $500 million, according to officials cited in the report.

Market and Economic Context

Access to physical U.S. dollars is critical for Iraq's cash-based economy and for maintaining stability in its currency markets. The four-month suspension likely placed significant liquidity pressure on the country's financial system.

The resumption of shipments restores a key source of physical currency needed for government operations and commercial activity. The episode highlights the significant leverage Washington holds over Baghdad's finances through its control of the international banking system and access to dollar clearing.