U.S. Freezes Dollar Transfers to Iraq, Pressures Government Over Iran-Backed Militias

The United States has reportedly halted U.S. dollar shipments to Iraq and paused key security cooperation programs as part of a broader effort to pressure Baghdad into addressing the influence of Iran-backed militias within its borders. According to a report by the Wall Street Journal, citing both U.S. and Iraqi officials, the move signals escalating tensions between Washington and Baghdad over security and regional stability concerns.

Officials from the U.S. Treasury Department recently blocked a transfer of nearly $500 million in U.S. currency. The funds, derived from Iraq’s oil revenues and held in accounts at the Federal Reserve Bank of New York, were intended for shipment to Iraq. This decision highlights growing scrutiny over how Iraqi financial resources are managed, particularly amid concerns about potential misuse or diversion linked to armed groups aligned with Iran.

In addition to restricting dollar transfers, Washington has also informed Iraqi authorities that it is suspending funding for certain counter-terrorism initiatives and military training programs. These programs are considered vital to strengthening Iraq’s defense capabilities, but U.S. officials have made it clear that continued support depends on concrete action from Baghdad to curb militia activity and improve national security control.

The development comes shortly after a drone attack targeted a major U.S. diplomatic facility in Baghdad. The United States has attributed a series of such attacks to Iran-aligned militias, further intensifying diplomatic strain. Earlier this month, Washington summoned Iraq’s ambassador to address these incidents and demand stronger measures against armed groups operating within Iraqi territory.

While Reuters has not independently verified the report, the situation underscores a critical moment in U.S.-Iraq relations. The combination of financial restrictions and reduced military cooperation reflects Washington’s strategic push to limit Iran’s regional influence and ensure greater accountability from the Iraqi government. As tensions continue, the outcome may significantly impact Iraq’s economy, security framework, and diplomatic standing in the Middle East.