Iraq Agrees to Stricter 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 implementing stricter controls to prevent the funds from reaching Iran. The deal allows Baghdad to once again access cash from its oil sales revenue held at the Federal Reserve Bank of New York, according to a report from The Wall Street Journal citing U.S. and Iraqi officials.

Details of the Agreement

Under the new arrangement, the Iraqi government has committed to measures aimed at stopping the diversion of U.S. dollars to Iran and its affiliated militias. The controls specifically target two primary channels for sanctions evasion:

• Currency-exchange businesses: Enhanced oversight will be applied to prevent these businesses from funneling hard currency to Iranian entities.
• Militia payments: The government will work to stop salary payments made in U.S. dollars to members of Iran-aligned militias.

According to Iraqi officials cited in the report, the dollar shipments, which are flown in on chartered cargo aircraft, resumed late last month.

Background on the Suspension

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The U.S. Treasury Department ordered a halt to the banknote deliveries in late February. The move was intended to pressure Baghdad to curtail its financial ties with Tehran, which the U.S. accuses of using Iraq's financial system to circumvent international sanctions.

The suspension cut off the Iraqi government from a critical source of physical cash needed for state operations. 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 the officials.

Market and Geopolitical Context

The resumption of dollar shipments provides essential liquidity for Iraq's economy, which relies heavily on oil revenues denominated in U.S. dollars. For the United States, the agreement represents a tactical move to tighten its financial sanctions against Iran while using its control over dollar access to align Iraq more closely with Washington's regional policy.

The ability to regulate physical dollar flows remains a powerful tool for the U.S. Treasury in enforcing sanctions and influencing the policies of nations that depend on the U.S. financial system.