“The Iraqi government has received signals it had hoped not to receive from Washington,” an Iraqi government source told Alhurra. The source works within a special team that liaises with diplomatic missions and international institutions. A U.S. State Department official also confirmed to Alhurra that a set of economic and security measures concerning Iraq has been taken.
The Iraqi government source also spoke of “U.S. frustration with Iraq over the attacks targeting its embassy in Baghdad in recent weeks.”
He said Washington informed the Iraqi government that “the dollar will not flow to Iraq until the shape of the next government is clarified,” adding that, in summary, the U.S. messages stress that “Washington wants an Iraq that is not beholden to Iranian will.”
Two government sources working in the Iraqi Council of Ministers confirmed to Alhurra that “the United States has halted dollar shipments to Iraq.” The U.S. side is linking the resumption of these cash shipments to the formation of a new government that adopts a clear program for financial reform and combating the smuggling of hard currency abroad, specifically to Iran.
Despite more than five months having passed since Iraq held its general elections, the country is still being run by a caretaker government due to disagreements within the ruling Shiite coalition over naming a candidate for prime minister.
These dollar shipments are considered the primary source on which the Central Bank of Iraq relies to supply the local market with liquidity. Iraq, which suffers from a weak productive base, depends almost entirely on importing goods from abroad. This requires providing dollars to traders and citizens through the “currency sale window.” Without the arrival of these physical cash shipments of dollars, the Iraqi market could face severe crises in purchasing power and rising prices of essential goods.
Under international decisions issued after 2003, when the United States invaded Iraq, an account known as the “Iraqi oil revenue account” was established. Currently, all revenues from Iraqi crude oil sales (which are sold exclusively in dollars) flow directly into this account at the U.S. Federal Reserve Bank and are then sent to Iraq by aircraft.
One of the main reasons for depositing Iraqi funds in the U.S. Federal Reserve is protection from debts and compensation claims. After 2003, Iraq was burdened with massive debts and compensation cases dating back to Saddam Hussein’s era. Depositing the funds in the U.S. Federal Reserve provides legal immunity by presidential order, preventing creditors or international companies from seizing Iraqi oil revenues in international courts.
A U.S. State Department official confirmed to Alhurra’s Washington bureau the accuracy of information regarding the halt of dollar shipments to Iraq. He added: “They will not resume until the contours of the new government are clear and there is a verified commitment to stopping the use of U.S. currency in financing attacks against Americans.”
The U.S. official noted that “this is not a rupture, but a consequence, and it will remain so until Baghdad chooses a different path.” He added that “halting dollar shipments to the central bank is not because we want to punish the Iraqi people, but because we cannot allow U.S. currency to flow into a system that funds militias firing at our embassy.”
The new U.S. pressure is not limited to the dollar issue but extends to security matters as well.
Earlier on Monday, the U.S. Embassy in Baghdad renewed its warning to American citizens in Iraq, stating: “Some entities linked to the Iraqi government continue to actively provide political, financial, and operational cover for these terrorist militias,” referring to Iran-aligned factions.
Information obtained by Alhurra from an Iraqi diplomat indicates that Washington is no longer willing to deal with an executive authority that provides political or financial cover to armed factions aligned with Iran, which Washington considers “terrorist groups” undermining Iraq’s sovereignty.
Among the most prominent U.S. demands is the “accountability” of factions that targeted the U.S. Embassy in Baghdad, according to the government source.
Relations between Baghdad and Washington are going through a turning point that may reshape the “Strategic Framework Agreement” signed between the two countries in 2008. Baghdad has not been able to protect the U.S. Embassy and other American interests from attacks carried out by Iran-aligned armed factions during the U.S.-Israeli war against Iran.
On the security level, the U.S. position has been no less strict. A member of Iraq’s Ministerial Council for National Security told Alhurra that the U.S. side has suspended all security coordination meetings with Baghdad.
The council member, who holds ministerial rank and requested anonymity because he is not authorized to speak on the matter, said: “If these meetings are not held, it will harm Iraq. We benefit from them in intelligence coordination and information exchange and not holding them undermines some of our security efforts.”
This decision is not tied only to government formation but also includes an additional condition: “revealing those involved in the shelling of the U.S. Embassy and the logistical support base at Baghdad International Airport,” he added.
The escalation did not stop at suspending meetings but extended to freezing U.S. funding directed to a number of Iraqi security institutions, according to the council member, who did not specify which institutions receive U.S. support.
He said Washington has expressed readiness to hand over Victory Base (the Diplomatic Support Center in Baghdad) to the Iraqi government, without clarifying the objective behind this move.
The Diplomatic Support Center has been subjected to near-daily attacks since the outbreak of the war against Iran on February 28, prompting Washington in early April to withdraw all its personnel from the facility near Baghdad International Airport.
The U.S. State Department official confirmed to Alhurra’s Washington bureau the information regarding security coordination meetings, noting that they are currently “suspended.”
Security expert Fadel Abu Raghif told Alhurra that “this step reflects a state of lost trust between Baghdad and Washington due to the recent attacks on the U.S. Embassy and the logistical support base in Baghdad.”
The article is a translation of the original Arabic.
Mustafa Saadoon
Mustafa Saadoon is an Iraqi journalist who has worked for several international and Arab media organizations. He covers politics and human rights.
