US Resumes Dollar Shipments to Iraq to Curb Iranian Influence and Militia Funding

The Trump administration has resumed sending US dollars to Iraq after a four-month suspension that began during the conflict with Iran. The move, reported by the Wall Street Journal on July 9, 2026, came with conditions requiring the Iraqi government to limit Iranian access to funds and restrict pro-Iranian militias from obtaining dollars through currency exchange businesses and militia salary payments.

The US Treasury halted dollar shipments to Iraq in late February 2026, cutting off a vital cash source for Baghdad, which depends heavily on revenues from oil sales deposited in the Federal Reserve Bank of New York. The suspension coincided with a near halt in Iraqi oil exports due to the war with Iran, increasing pressure on Iraq to reduce ties with Tehran. The Federal Reserve canceled at least two shipments, including one worth approximately $500 million, before resuming transfers in late June.

The Iraqi government, led by Prime Minister Ali Al-Zaidi, confirmed the resumption of funds but declined to specify the protective measures agreed upon. The US Treasury stated that Iraq committed to implementing safeguards to prevent militias from exploiting the financial system. Since the 2003 US invasion, Iraq’s oil revenues have been deposited in New York, with billions of dollars in cash sent annually to support the local economy. Despite efforts to reduce dollar dependence, cash shipments remain critical.

The US has also sanctioned over a dozen Iraqi banks suspected of facilitating militia-related dollar transactions, including fraudulent transfers and large purchases of Mastercard and Visa credit cards used to funnel money through the UAE and other countries. This scheme reportedly benefited Iran financially.

Despite Baghdad’s efforts, Iran continues to exert influence in Iraq. Recent events, including the funeral of Iran’s Supreme Leader Ali Khamenei, saw high-profile Iranian figures such as Quds Force commander Esmail Qaani visiting Iraq and meeting with militia leaders like Abu Ala Al-Walaei of the extremist Sayyid al-Shuhada militia. These visits underscore Tehran’s ongoing involvement in Iraq’s security and political affairs despite US and Iraqi attempts to curb it.