Exclusive: US sends dollar shipment to Iraq but threatens sanctions over pro-Iran militias
Two dollar shipments arrived in Baghdad during the visit of US envoy Tom Barrack but Washington has indicated it could impose sanctions on Iraq
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Sources close to the Iraqi government, headed by Ali al-Zaidi, told Al-Araby Al-Jadeed on Wednesday that two shipments of dollars arrived in Baghdad coinciding with the visit of US envoy Tom Barrack to Iraq, as part of efforts to preserve the value of the Iraqi dinar, boost import operations, and secure employee salaries that were threatened during the past period due to the inability to export oil .
The sources, who preferred not to be named, said that "the two shipments arrived in Baghdad, coming from Washington after the dollar shipments stopped, which lasted for about four months as part of American pressure on Baghdad to implement a program and project to restrict weapons to the state and dismantle the Iranian-backed armed factions that are active in the country."
According to the same sources, the funds arriving in Baghdad are from Iraq's oil revenues deposited in the United States. Under a previous decision made during the 2003 US invasion of Iraq, Iraq's oil export revenues are deposited in the US Federal Reserve Bank as a safeguard against debts incurred during Saddam Hussein's regime, thus granting the funds immunity from prosecution. The United States regularly airlifted these funds to Iraq for the past two decades, but this practice ceased in recent months. This halt coincided with accusations that Tehran was exploiting the Iraqi financial system to evade sanctions, leading to a decline in the value of the Iraqi dinar on the parallel market, as well as problems in the private sector, disrupting import operations for traders and companies.
While the sources did not disclose the figures for the last two installments, they confirmed that they "will suffice Iraq for months." Last April, US State Department spokesman Tommy Pigott stated that the Iraqi government's failure to prevent attacks by militias and its provision of political, financial, and operational cover for them was negatively impacting US-Iraqi relations. He indicated that Washington expected the Iraqi government to take all necessary measures to immediately dismantle pro-Iranian militias in Iraq. This comment signaled a further deterioration in relations between Baghdad and Washington, prompting the latter to refrain from sending any dollar shipments to Baghdad.
US envoy to Iraq and Syria, Tom Barrack, arrived in Baghdad last Monday and held a series of meetings with Prime Minister Ali al-Zaidi and other Iraqi political leaders and government officials. He explicitly stated that his visit included conveying US President Donald Trump's support for al-Zaidi's government, which won a vote of confidence in parliament in mid-May but has yet to complete its cabinet due to political disagreements and the allocation of ministerial positions to armed factions.
Upon his arrival in Baghdad, Barrack wrote in a post on the X platform: “It is a pleasure and an honor to return to Baghdad, where I met with the outstanding team at the U.S. Embassy, led by Chargé d'Affaires Joshua Harris.” He added, “Today, I will meet with Prime Minister al-Zaidi to convey President Trump’s support for his government and to discuss our partnership in order to forge a new path for a strong U.S.-Iraqi relationship that is mutually beneficial.” According to sources close to the Iraqi government, the two dollar payments represent the economic backing for Iraq during the period of U.S. support for al-Zaidi’s government, which is contingent upon U.S. conditions. The envoy, Tom Barrack, told al-Zaidi that he must capitalize on Washington’s support and the international openness toward his government during this phase to resolve internal crises, including disarming the armed factions.
Following Barak's meeting with al-Zaidi, the statement issued by the US State Department appeared to be more of a set of political, economic, and security conditions that the Iraqi government must meet in exchange for US support and to avoid what one official described as "massive" sanctions, than a genuine agreement between the two countries. The statement was laden with broad demands, beginning with the disarmament of factions and employing, for the first time, terms like "dissolving armed groups and formations," along with a call to prevent threats to regional states emanating from Iraqi territory, and concluding with what resembled directives regarding the entry of US companies into Iraq.
Following the American statement, the office of Iraqi Prime Minister Ali al-Zaidi republished its contents identically to the American version, which included three parts in direct and explicit wording. The first part demanded that the government "implement plans for complete disarmament, dissolve all armed groups and formations operating outside the authority and control of the Iraqi state, confine weapons to the hands of the Iraqi state, and impose full sovereignty in a way that ensures Iraq is kept away from conflicts and that its territory is not used by any party to threaten regional peace."
According to official US and Iraqi announcements, Iraqi Prime Minister Ali al-Zaidi is scheduled to visit the White House in mid-July to discuss the future of this important relationship. However, sources who spoke to Al-Araby Al-Jadeed indicated that "al-Zaidi must continue working on the files agreed upon with Barak in the coming weeks leading up to his visit to Washington, in order to convey the latest developments regarding anti-corruption projects, in addition to the most prominent issue, which is restricting weapons to the state. Consequently, the coming weeks will witness many developments."
Al-Mustaqilla reveals: Washington demands the suspension of 8 Iraqi banks, and Barak hands over secret names to al-Zaidi.
Al-Mustaqilla News Agency – An informed source revealed to Al-Mustaqilla that US Special Envoy to Syria and Iraq, Tom Barrack, conveyed during his visit to Baghdad an explicit US request to Prime Minister Ali al-Zaidi to suspend at least eight Iraqi banks and take them out of service, following reports indicating their involvement in illegal activities in the foreign exchange market. The same source stated that the US side provided the Iraqi government with specific names, without disclosing them publicly.
Context: File open since 2023
This is not the first time Washington has pressured Baghdad on the banking sector. In July 2023, the US Treasury Department imposed sanctions on fourteen Iraqi banks for allegedly facilitating Iranian dollar transactions. The list was later expanded to include eight additional banks, among them Al-Huda Bank. Specialized reports indicate that 35 out of 72 banks operating in Iraq are now subject to varying degrees of US sanctions.
The Zaidi dilemma
Responding to the American request would mean a decision with direct economic and social repercussions: these banks serve depositors and finance commercial transactions. Ignoring it would complicate relations with Washington at a time when al-Zaidi is preparing to visit the country in July. Currently, al-Zaidi does not have the authority to shut down a bank without legal procedures determined by the Central Bank.
Frequently Asked Questions
Why is Washington demanding the closure of Iraqi banks?
Because of suspicions that they facilitate illegal dollar transfers that ultimately benefit Iran, which is subject to US sanctions.
Have the names of the eight banks been announced?
No. The names were handed over to the Iraqi government confidentially and have not been officially announced yet.
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