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

Iraq has reportedly reached an agreement with the U.S. to implement stricter financial controls, paving the way for the resumption of physical U.S. dollar shipments that were halted four months ago. The deal aims to prevent currency from being diverted to Iran and its affiliated militias, according to a report from *The Wall Street Journal* citing U.S. and Iraqi officials.

Details of the Agreement

Under the terms of the new arrangement, the Iraqi government has committed to measures that block the flow of dollars to sanctioned entities. These controls will specifically target Iraq's currency-exchange businesses and salary payments made to members of Iran-aligned militias.

According to Iraqi officials cited in the report, the cash deliveries resumed late last month. These shipments are critical for the government of Prime Minister Ali Al Zaidi, providing physical currency derived from the country's oil sales, which are held in an account at the Federal Reserve Bank of New York.

Background on the Suspension

The U.S. Treasury Department ordered the Federal Reserve to stop the banknote deliveries in late February. The move was part of a broader U.S. strategy to isolate Iran financially and encourage Baghdad to distance itself from Tehran following a recent conflict.

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The suspension cut off a key source of liquidity for Iraq's economy. During the halt, the Fed canceled at least two planned cash shipments on Treasury's orders, including one valued at approximately $500 million, officials said.

Implications for the Region

The resumption of dollar flows is a significant development for Iraq's financial stability, as physical cash is essential for government operations and the broader economy. For the U.S., the agreement represents a potential step forward in its efforts to enforce sanctions against Iran by closing a major loophole.

The effectiveness of Baghdad's new controls will be closely monitored. A successful implementation could significantly curtail a key source of hard currency for Iran and its regional proxies, while a failure could lead to renewed financial pressure from Washington.