US tightens grip on Iraq over Iran-linked groups, halt dollar flows over militia activity

Wall Street Journal (gated) report. The U.S. halted dollar shipments to Iraq and paused security support, increasing pressure on Baghdad to curb Iran-backed militias and highlighting Washington’s financial leverage over Iraqi oil revenues.Summary:U.S. halts dollar shipments to Iraq

~$500M delivery blocked, second since war began

Security cooperation and training programs paused

Pressure tied to Iran-backed militia attacks

U.S. retains leverage via Iraq oil revenue flows

Militias hold strong influence in Iraqi politics

Move signals escalation of financial pressureThe United States has escalated pressure by halting dollar shipments and suspending parts of its security cooperation, signalling a more forceful push for Baghdad to rein in Iranian-aligned militias.U.S. officials recently blocked a shipment of roughly $500 million in cash destined for Iraq’s central bank, marking the second such delay since the outbreak of the Iran war. The funds, derived from Iraq’s oil revenues held at the Federal Reserve Bank of New York, are typically flown into Baghdad to support the country’s cash-based financial system.The move comes amid a surge in militia activity targeting U.S. interests in Iraq and the region, with Washington linking the delays directly to Baghdad’s failure to curb attacks by Iran-backed groups. In parallel, the U.S. has also paused certain counterterrorism funding and military training programs, increasing the pressure on Iraqi authorities to take concrete action against these militias.The measures underscore Washington’s leverage over Iraq’s financial system. Since 2003, the U.S. has overseen the flow of oil revenues back into Iraq via dollar shipments, at times delivering up to $13 billion annually. While Iraq has reduced its dependence on physical cash over time, these shipments remain a critical channel for liquidity, giving the U.S. a powerful tool to influence policy.Officials say the current suspension is temporary, though no clear conditions have been outlined for resuming deliveries. The broader message is that continued militia activity, particularly attacks on U.S. personnel and facilities, will carry tangible financial consequences.The situation also highlights the complex political landscape in Iraq. Iranian-backed militias wield significant influence across both government and financial institutions, making it difficult for leadership to fully align with Washington. With Iraq in the process of selecting a new prime minister, these groups, and Tehran, are pushing for candidates who maintain close ties to Iran.Compounding concerns, U.S. authorities have previously accused militia-linked networks of exploiting Iraq’s access to dollars, including through fraudulent banking activity and currency arbitrage schemes.Taken together, the latest moves represent a clear escalation in U.S. efforts to use financial and military levers to reshape Iraq’s alignment, as the broader regional conflict with Iran continues to spill across borders.
This article was written by Eamonn Sheridan at investinglive.com.

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