The Trump administration blocked the delivery of nearly $500 million in cash to Iraq, hoping to force Baghdad to dismantle Iranian-backed militias. A decision which, according to analysts, could weaken an already precarious economy.

Published on: 04/24/2026 - 3:40 p.m.

Nearly half a billion dollars blocked. The US government has suspended the flow of foreign currency to Baghdad, the Wall Street Journal reported on April 21, citing US and Iraqi officials.

This is the second time since the start of the war between the United States and Israel against Iran at the end of February that a delivery of this type has been delayed, according to official sources interviewed by the newspaper.

These measures come after a series of attacks targeting American installations in Iraq and several neighboring countries. Washington accuses pro-Iranian militias of being behind it, saying they have been acting in support of Tehran since the start of the conflict.

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“Iran is financing militias in Iraq, which have been carrying out raids against some of its neighbors since the start of the war,” explains Philip Turle, journalist and international columnist at France 24.

Very numerous attacks: nearly a thousand drone strikes targeted Saudi Arabia, but also Kuwait, Bahrain and even the American embassy in Baghdad, evacuated on several occasions, he recalls.

According to Philip Turle, this escalation can be explained by a change of state of mind within the militias themselves. “Faced with the attacks carried out against the Iranian regime by the United States and Israel, they now feel directly threatened, which is why they suddenly decided to take it up a notch,” he analyzes.

Washington turns off the tap

For twenty years, Iraq's revenues from its oil exports – which amount to several billion dollars each year – have been deposited in the New York Federal Reserve. “Since the fall of Saddam Hussein in 2003, Iraq no longer has total control of its own economy or its own currency,” underlines Adel Bakawan, director of the European Institute for Middle East and North Africa Studies.

This system was established after the American invasion, when Iraq was crumbling under the weight of a colossal debt. The United States then agreed to place these funds in New York to protect them from creditors.

“If this money arrived directly in Iraq, at the Central Bank, all the countries or companies that had won their case against Iraq would have the right to claim this money,” explains Adel Bakawan. “Under American protection, on the other hand, these funds remain untouchable.”

Since then, the Federal Reserve has funneled up to $13 billion in cash each year to Baghdad, a vital flow that allows the Iraqi state to pay its six million civil servants and keep it running.

Washington had already suspended this mechanism in 2015 amid concerns about possible misuse by the Islamic State organization.

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Today, the American authorities want to be more cautious in their communication. According to officials cited by the Wall Street Journal, the current suspension would be temporary, without any precise timetable or modalities for resuming dollar deliveries having been put forward.

The New York Federal Reserve and the US Treasury have not commented on the situation.

Baghdad in an impasse

Faced with this drying up of oil revenues, the Iraqi Central Bank remains cautious. Without commenting directly on the cessation of deliveries, it ensures in a press release that it does not run out of dollars and indicates that it has "satisfied all requests from banks and exchange offices", in particular "intended for pilgrims, travelers and transfers abroad".

Behind the scenes, an Iraqi official confirmed to the Emirati media The National the suspension of shipments. "The Americans informed key political leaders that deliveries of currency, usually flown to Iraq, would be halted until the next government was formed and militia members involved in attacks on the embassy and American troops in Iraq were arrested," he said.

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According to this same source, Washington has also “suspended its participation in security meetings, crucial for cooperation and intelligence sharing”.

For Adel Bakawan, this suspension could have disastrous consequences for the Iraqi population, in an economy largely dependent on cash. “The only source of income is oil,” he recalls. “If this money no longer arrives, salaries are not paid, and the government finds itself short of resources.”

“Make Iraq great again”

In Iraq, the most influential armed groups close to Tehran - such as the Badr organization, Asaib Ahl al-Haq or Kataeb Hezbollah - carry weight, both in the financial and political sectors. Some of their units are even officially integrated into the Iraqi armed forces.

In this context, the appointment of a new Prime Minister takes on a highly strategic dimension. Supported by these groups, Iran is pushing for a candidate with close ties to Iran to be nominated.

For its part, Washington has toughened its tone. In January, US President Donald Trump threatened to withdraw all aid to Iraq if former Prime Minister Nouri al-Maliki, head of the Islamic Dawa Party, seen as close to Iran, returned to power.

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“This must never happen again,” he wrote on Truth Social, warning that without American support, Iraq would have “no chance of success, prosperity or freedom,” before concluding: “Make Iraq great again!”

First denounced as "blatant interference" by Nouri al-Maliki who vowed to "continue the work to the end", this pressure however seems to weigh on the political game. Speculation surrounding a possible withdrawal of his candidacy has intensified in recent weeks.

For several years, Iraq has tried to maintain a balance between its ties with the United States and its proximity to Tehran. For Adel Bakawan, the country remains more than ever torn between these two enemy powers. “The Iraqi government has never managed to choose between the United States and Iran,” he analyzes, describing the country as being governed by a “system of American-Iranian co-management”. “The day this co-management collapses, all of Iraq collapses with it,” he warns.

This article was adapted from English by Barbara Gabel. The original can be found here.

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