The United States has resumed some air shipments of U.S. dollars to Iraq, several months after it suspended them in a bid to pressure the government to distance itself from Iran, according to two aides to Iraq’s prime minister.
The Trump administration stopped the flow of dollars to Iraq’s cash-based economy in April, withholding the country’s own money earned from oil sales. It was an extraordinary measure in light of the longstanding alliance between the two countries.
At the time, Iraqi officials said Washington had also suspended cooperation with and funding for Iraq’s security services. These measures remain in place, according to another Iraqi official, who spoke on condition of anonymity because he was not authorized to discuss the matter publicly.
The punitive measures were taken at a moment when Iraq was in the process of selecting a new prime minister and the United States was trying to block candidates viewed as sympathetic to Iran. Washington was also demanding that Iraq’s government rein in an array of Iran-linked militias that operate largely outside of government control and have periodically attacked U.S. targets in the country.
“The dollar shipments to Iraq have resumed,” said Haider al-Aboudi, a spokesman for Iraq’s new prime minister, Ali al-Zaidi, adding that “the problem has been resolved.” Mudhar Muhammad Salih, a financial adviser to the prime minister, confirmed resumption of the transfer.
The U.S. State Department referred a request for comment to the Treasury Department, which did not immediately respond.
A few years ago, new international banking rules worked out in an agreement between the United States and Iraq required greater transparency surrounding the wire transfers of dollars held as foreign currency reserves for Iraq in an account at the Federal Reserve Bank of New York.
The intent was to stem the illicit flow of dollars to criminal actors and money launderers, and to those helping militant groups in neighboring countries, including Iran.
The Iraqi central bank facilitates wire transfers daily from its account at the New York Fed on behalf of Iraqi businesses and individuals to pay for goods from outside Iraq. The transfers are critical because few businesses have international bank accounts.
One of the motivations behind the U.S. suspension in April was to stem the smuggling of dollars by Iran-backed militias, an official from Iraq’s semiautonomous Kurdistan region said at the time.
Mr. al-Zaidi, the prime minister, is a political newcomer who took power in late April, soon after the U.S. suspension of the dollar shipments. The United States did not oppose his appointment, and he quickly took steps to try to clamp down on Iran-linked militias in his country. One of his first actions was to order all the country’s militias to come under direct state authority.
Iraq has long been caught in a tug of war between its two biggest allies — the United States and Iran — and at times the country has turned into a proxy battlefield for the two foes.
Previous attempts to bring the militias under tighter government control have failed. And some of the most powerful Iran-linked militias in Iraq have already rejected the prime minister’s latest attempts to take control over them.
Chief among them is Kataib Hezbollah, a group that has attacked U.S. targets in Iraq in recent months and has claimed responsibility for high-profile kidnappings, including that of a U.S. journalist in Baghdad this year.
The resumption of dollar shipments also comes as Mr. al-Zaidi began an anticorruption campaign, arresting dozens of current and former officials, including members of Parliament, on corruption charges, according to the state-run Iraqi News Agency.
On Sunday, the authorities arrested 47 people, according to the report, and operations were ongoing to pursue others suspected of corruption.
