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

Iraq has 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 for four months, according to a report from The Wall Street Journal citing U.S. and Iraqi officials.

Details of the Agreement

Under the terms of the deal, the Iraqi government has committed to new measures designed to prevent U.S. dollars from being illicitly transferred to Iran and its allied militias. The controls will specifically target Iraq's currency-exchange businesses and salary payments to militia members aligned with Iran, the report said.

The agreement successfully ended a suspension that began in late February. According to Iraqi officials cited in the report, the cash deliveries, which are transported on chartered cargo aircraft, resumed late last month.

Background on the Suspension

The U.S. Treasury Department ordered the halt on banknote deliveries as part of a broader effort to pressure Baghdad to sever financial ties with Tehran. The move cut off the Iraqi government from physical cash derived from its oil sales, which are deposited at the Federal Reserve Bank of New York.

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During the four-month suspension, the Federal Reserve canceled at least two cash shipments on the Treasury's orders. One of the canceled shipments was reportedly worth approximately $500 million.

Market and Geopolitical Implications

This development is significant for Iraq's economy, which is heavily reliant on oil revenues denominated in U.S. dollars. The resumption of cash shipments eases significant financial pressure on Baghdad. For the U.S., the agreement marks progress in its strategy to limit Iran's access to the international financial system by leveraging the dollar's global dominance.

For investors, the deal may signal a reduction in direct financial friction between Washington and Baghdad. However, it also highlights the ongoing geopolitical risks in the region and the complex financial oversight challenges Iraq faces in managing its currency flows amid persistent U.S. sanctions against Iran.