US Resumes Dollar Shipments to Iraq Following Deal to Block Funds to Iran

The United States has resumed physical cash shipments of U.S. dollars to Iraq, ending a four-month suspension after Baghdad reportedly agreed to implement new financial controls. The measures are designed to prevent the currency from being illicitly funneled to Iran and its allied 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 tightening its oversight of currency-exchange businesses, a common channel for illicit fund transfers. The agreement also reportedly includes provisions to stop U.S. dollars from being used for salary payments to members of Iran-aligned militias.

Iraqi officials confirmed that the deliveries, which are transported via chartered cargo aircraft, resumed in late June. The deal is seen as part of a broader U.S. administration effort to more closely align Baghdad's policies with Washington's interests in the region.

Background on the Suspension

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The U.S. Treasury Department ordered a halt to the banknote deliveries in late February. This action effectively cut off the government of Prime Minister Ali Al Zaidi from physical access to cash generated by its oil sales, which are held in an account at the Federal Reserve Bank of New York.

The suspension was a strategic move to pressure Baghdad to curtail its financial ties with Tehran, which the U.S. accuses of using Iraq to circumvent American sanctions. During the halt, the Federal Reserve, acting on Treasury orders, canceled at least two planned cash shipments, including one valued at approximately $500 million.

Financial Implications

The resumption of dollar shipments is critical for Iraq's economic stability, as the government relies on these funds to pay salaries, fund operations, and maintain liquidity in its financial system. The reliance on the U.S. financial system for its oil revenue gives Washington significant leverage over Baghdad's monetary policy and foreign relations. The new controls aim to ensure this access does not inadvertently undermine U.S. sanctions against Iran.