Trump Administration Blocks $500 Million to Iraq, Freezes Security Cooperation to Rein in Iran-Backed Militias
Published on Reflecto News | World News | Diplomacy & Geopolitics
The Trump administration has escalated pressure on Baghdad, blocking a $500 million shipment of US dollars to Iraq and suspending key security cooperation programs in a bid to force the Iraqi government to dismantle Iran-backed militias operating within its borders . The move, reported by The Wall Street Journal on Tuesday, represents a significant escalation of Washington’s campaign to curb Tehran’s influence in the region following a series of drone attacks on US assets in Iraq.
The financial and military pressure campaign comes as the United States and Iran remain locked in a tense ceasefire, with Washington demanding that Iraq choose a side between the two warring nations .
Financial and Military Leverage
The United States Treasury Department recently blocked a cargo plane shipment carrying nearly $500 million in US banknotes destined for Iraq’s central bank . The funds are proceeds from Iraqi oil sales held in accounts at the Federal Reserve Bank of New York—a financial arrangement established after the 2003 US-led invasion that effectively gives Washington enormous control over Baghdad’s access to its own oil wealth .
Simultaneously, Washington informed Baghdad it is suspending funding for some counter-terrorism and military training programs . This includes the suspension of joint counterterrorism operations against groups like ISIS, as well as training and other support for Iraq’s military forces .
“The United States will not tolerate attacks on U.S. interests and expects the Iraqi government to immediately take all measures to dismantle the Iran-aligned militia groups in Iraq,” State Department Deputy Spokesman Tommy Pigott said in a statement .
Escalating Militia Attacks
The pressure campaign follows a series of drone attacks targeting US assets in Iraq. Earlier this month, a drone struck a major US diplomatic facility in Baghdad, and attacks have also targeted the US consulate in the Kurdistan Region and a diplomatic logistic centre at Baghdad International Airport .
Pro-Iran militias have claimed responsibility for some of these attacks, which Washington says are directed by Tehran. The militias have also claimed attacks against US troops in several Gulf states and Jordan .
Iraq’s Popular Mobilisation Forces (PMF), an umbrella body of factions formally incorporated into Iraq’s state security apparatus, includes Iran-backed groups that have been implicated in the attacks . The US has carried out air strikes against armed factions in Iraq aligned with Iran in response .
A Demanding Choice Between Allies
The move places Iraqi Prime Minister Mohammed Shia al-Sudani in an increasingly difficult position. Since the outbreak of the US-Israeli war on Iran on February 28, Iraq has sought to maintain a neutral stance, balancing ties with both Washington and Tehran .
However, with its two primary partners at war, Baghdad is now facing intense pressure to choose a side .
Iraq’s political paralysis complicates any immediate response. Despite more than five months having passed since national elections, political parties have failed to form a new government because of disagreements within the ruling Shiite coalition over the nomination of a candidate for prime minister . The Shiite Coordination Framework, a coalition of Iran-aligned parties that forms the largest bloc in Parliament, continues to negotiate over candidates, including former prime minister Nouri al-Maliki, who has been rejected by Washington due to his ties to Tehran .
“We need more time,” Amir al-Amiri, secretary general of the Coordination Framework, said following a late-night meeting on Monday, as the group failed to select a candidate .
Historical Context
Since the 2003 invasion, the US has exercised de facto control over Iraq’s oil revenue . Every dollar Iraq earns from crude oil sales enters an account at the Federal Reserve Bank of New York, from which Baghdad makes withdrawals to pay government salaries and imports.
Oil revenue makes up nearly 95 percent of the federal budget, and Iraq depends heavily on imports to meet the demand for food and goods for key sectors of the economy . This dependency gives Washington significant leverage over Baghdad’s economic stability.
This is the second dollar shipment to Iraq’s central bank delayed by Washington since the war began in late February .
What Comes Next
US officials told the Wall Street Journal that the suspension of shipments is temporary but did not specify what steps Iraq would need to take for deliveries to resume . The Iraqi central bank said on Tuesday it had sufficient US currency reserves but did not refer directly to the halted deliveries .
| Factor | Current Status |
|---|---|
| Financial Blockade | $500 million shipment blocked |
| Security Cooperation | Counter-terrorism & training programs suspended |
| Political Crisis | No new government formed; Shiite coalition deadlocked |
| Militia Attacks | Continuing; targeting US assets in Iraq |
| US Demand | Dismantle Iran-backed militias and arrest members |
The Iraqi government must now decide whether to capitulate to US demands to rein in Iran-backed militias or risk a prolonged freeze on financial and military aid—a decision with profound implications for Iraq’s security and economic stability.
Frequently Asked Questions (FAQs)
1. What did the Trump administration block from Iraq?
The administration blocked a shipment of nearly $500 million in US banknotes derived from Iraqi oil sales. The money was being held at the Federal Reserve Bank of New York and was destined for Iraq’s central bank .
2. Why is the US pressuring Iraq?
Washington is demanding that Baghdad dismantle Iran-backed militias operating in Iraq that have been launching drone attacks on US assets, including the US embassy in Baghdad and other diplomatic facilities .
3. What security programs were suspended?
The US has suspended funding for some counter-terrorism and military training programs, including joint operations against ISIS, as well as training and other support for the Iraqi military .
4. Has Iraq formed a new government?
No. Despite elections held more than five months ago, political parties have failed to agree on a prime minister due to disagreements within the ruling Shiite coalition .
5. How does the US control Iraq’s oil revenue?
Since the 2003 invasion, Iraq’s oil revenue is deposited into an account at the Federal Reserve Bank of New York. Iraq then requests withdrawals to pay for government salaries and imports .
6. Is the suspension of shipments permanent?
US officials told the Wall Street Journal the suspension is temporary, but they did not specify what steps Iraq would need to take for deliveries to resume .
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