U.S. Resumes Dollar Shipments to Iraq Following New Anti-Iran Controls

The United States has resumed physical shipments of U.S. dollars to Iraq, ending a four-month suspension after Baghdad reportedly agreed to new financial controls designed to prevent the currency from reaching Iran and its allied militias. The agreement was detailed in a Wall Street Journal report citing U.S. and Iraqi officials.

Cash deliveries, which are crucial for the Iraqi government to access its oil revenues, resumed late last month, according to the report.

Details of the Agreement

Under the new arrangement, the Iraqi government has committed to blocking the flow of U.S. dollars to Iran. The controls specifically target two primary channels used to circumvent U.S. sanctions:

• Iraq's network of currency-exchange businesses.
• Salary payments made to members of Iran-aligned militias.

This agreement was a precondition for restarting the cash shipments, which are physically transported on cargo aircraft chartered by the Iraqi government.

Background and Context

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The U.S. Treasury Department ordered the Federal Reserve Bank of New York, where Iraq's oil revenues are deposited, to halt the banknote deliveries in late February. The move was part of a broader U.S. administration effort to pressure Baghdad to reduce its financial ties with Tehran amid a conflict with Iran, according to the report.

The suspension cut off the Iraqi government from physical access to its own funds. During the halt, the Fed, acting on Treasury orders, canceled at least two planned shipments, including one valued at approximately $500 million.

Implications for Iraq's Economy

The resumption of dollar shipments is a critical development for Iraq's economic stability. Access to physical cash is essential for the government to meet its obligations, including paying public sector salaries and funding state operations, particularly as the country's oil exports were also disrupted by regional conflict.

For investors and market observers, the deal signals a step by Washington to stabilize its relationship with Baghdad while continuing to use the dollar's global dominance as a tool to enforce its sanctions regime against Iran.