U.S. Freezes Dollar Shipments to Iraq, Pressuring Crackdown on Iran-Backed Militias

by Emmitt Barry, Worthy News Washington D.C. Bureau Chief

(Worthy News) – The Trump administration has halted shipments of U.S. dollars to Iraq and suspended portions of its security cooperation with Baghdad, escalating pressure on Iraqi leaders to confront powerful Iran-backed militias, according to a Wall Street Journal exclusive citing U.S. and Iraqi officials.

A planned delivery of nearly $500 million in U.S. currency—derived from Iraqi oil revenues held at the Federal Reserve Bank of New York—was recently blocked by the Treasury Department. The move marks the second delay of dollar transfers to Iraq’s central bank since the outbreak of the U.S.-Israel war with Iran in late February, the Wall Street Journal reported.

The financial pressure comes amid a surge in militia attacks targeting U.S. personnel and facilities in Iraq and across the region. Officials say Washington has also paused funding for certain counterterrorism and military training programs until Baghdad takes concrete steps to dismantle armed groups aligned with Tehran.

Despite the suspension, Iraq’s central bank insisted it is not facing a shortage of U.S. currency, stating it has met demand from financial institutions. Still, the U.S. retains significant leverage: since the 2003 invasion, Iraqi oil revenues have been held in U.S. accounts, with billions of dollars in cash regularly flown into Baghdad to support its largely cash-based economy.

State Department spokesperson Tommy Pigott warned that Iraq’s failure to prevent militia attacks is straining bilateral ties. “The United States will not tolerate attacks on U.S. interests,” he said, calling on Iraqi authorities to take immediate action against Iran-aligned groups.

Iran-backed militias—including Kataib Hezbollah and Asaib Ahl al-Haq—have launched hundreds of drone and rocket attacks since the conflict with Iran began, according to officials cited by the Wall Street Journal. Many of these groups wield significant political and economic influence inside Iraq, complicating efforts by Prime Minister Mohammed Shia al-Sudani to curb their power as the country navigates a sensitive leadership transition.

Analysts say the U.S. actions signal growing frustration in Washington, but also highlight the limits of American influence. “The decision to halt dollar shipments and security cooperation is a strong sign of U.S. displeasure,” one former U.S. official told the Wall Street Journal, while cautioning that Iraq’s deeply entrenched militia networks may prove difficult to dismantle quickly.

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