The Trump administration has suspended some deliveries of U.S. currency to the Iraqi government amid Washington’s growing anger at the actions of Iranian-aligned militias in the country and its corresponding campaign to influence the selection of Iraq’s next prime minister, according to people familiar with the matter.
The move affects roughly $500 million in proceeds from Iraqi oil sales, two people said. Like some others, they spoke on the condition of anonymity to discuss a worsening diplomatic fracture between Washington and Baghdad amid the U.S. war in Iran. The cash deliveries are part of a years-long arrangement set up during the U.S. occupation of Iraq that sees revenue from international sales of Iraqi oil sent first to the Federal Reserve Bank of New York.
The halt in deliveries affects only a portion of the funds regularly transferred from the United States, several Iraqi officials said. One senior official estimated that physical cash deliveries, which are flown into the country every few months, represent about 5 percent of the total.
Still, the pause has roiled the government in Baghdad, with officials there increasingly worried about the extent of leverage that the Trump administration has over the country’s oil revenue, which accounts for the vast majority of the country’s income.
The regular infusions of U.S. cash are used to prop up Iraq’s currency, the dinar. Some Iraqi officials fear there will be disastrous implications for their country’s already fragile economy if the standoff is not resolved soon.
“They know that dollar shipments are Iraq’s only gateway to foreign currency,” said one Iraqi diplomat. “If they stop, the Iraqi government will collapse.”
Spokespeople for the White House and the Treasury Department declined to comment.
The Wall Street Journal first reported on the pause on U.S. dollar shipments.
Mazhar Mohammed Salih, an economic adviser to the Iraqi prime minister, downplayed the severity of the situation, adding that vast majority of U.S. dollar inflows continue through official banking channels. Iraq has no shortage of foreign currency, Salih said.
Iraq’s Shiite militias first gained prominence during the early days of the U.S. occupation, targeting American soldiers in deadly attacks with the backing of Tehran. Many were later absorbed into the Popular Mobilization Forces, an official network, after the country’s top Shiite religious authority in 2014 called on them to join the fight against Islamic State militants alongside Iraqi troops and their U.S. backers.
What were once ragtag groups of fighters have, in recent years, become central figures in Iraq’s politics. In a 2025 election, a coalition of Shiite parties linked to the militias secured a dominant parliamentary position that effectively allows them to pick Iran’s next prime minister. The growing political power of the militias left the Iraqi state torn between Tehran and Washington.
Though there have long been concerns in Washington about U.S. dollars sent to Iraq being used by Iran and its proxies, the deliveries have only been paused once before, during 2015 at the peak of fighting against the Islamic State, according to Victoria Taylor, a former deputy assistant secretary of state for Iraq and Iran.
A spokesman for the State Department, Tommy Pigott, said that “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.”
The impasse coincides with efforts by Iraq’s ruling Shiite coalition to select a new nominee for prime minister. President Donald Trump has expressed his opposition to one candidate, former leader Nouri al-Maliki, stating in January that the U.S. would “no longer help Iraq” if Maliki returned to office.
This month, the U.S. Mission to Iraq said that it was using “sustained pressure” on Iraqi leaders to influence the selection of a new government that would “adopt a fundamentally different approach” to the Iranian-backed militias, according to a State Department cable reviewed by The Washington Post. The cable said Iraqi leaders had confirmed, publicly and privately, that Maliki would not be leader.
It is not clear who the Trump administration favors instead. Two people with knowledge of the discussions between the U.S. and Iraq said that the Trump administration had been supportive of Mohammed Shia al-Sudani, the current prime minister, but that U.S. officials have since warned against a second term for Sudani.
It is unclear, too, whether a third candidate, Bassem al-Badry, could receive enough votes to secure the position. Badry is a member of Maliki’s party but has strong ties to Faiq Zidan, president of the Supreme Judicial Council of Iraq.
The alliance of pro-Iran Shiite blocs, which includes the parliamentary representatives of several militias, is expected to select its nominee for prime minister.
The Trump administration’s moves underscore how relations with the government in Iraq have reached new lows during the U.S. war with Iran. Suspected militia attacks on U.S. facilities have led the State Department to close its diplomatic outposts in the country, leaving only a skeletal crew of American diplomats.
This month, the State Department took the rare step of summoning Iraq’s ambassador to the U.S. to express the administration’s “strong condemnation” of the attacks, which, officials alleged, included an “ambush of U.S. diplomats in Baghdad.” A number of neighboring governments also summoned diplomatic representatives from Iraq in recent weeks because of militia attacks carried out against those countries as well.
In March the Iraqi government accused U.S. forces of attacking a clinic on a military base in western Anbar province, killing seven members of the Iraqi military and wounding more than a dozen others in an apparent attempt to target militia leadership. U.S. military officials denied the Iraqis’ assertions.
Most of the pro-Iranian militias that have struck at U.S. interests since the start of the war with Iran are part of the Popular Mobilization Forces, an official body that was created to aid the fight against the Islamic State more than a decade ago, when they were allied with the United States against the Sunni extremist group.
Though the Trump administration has pushed for Iraq to dismantle the militias, some Iraqi officials fear that such a move could push the country toward civil war.
“The Iraqi militias have continued to entrench themselves into the state apparatus over the preceding decades,” said Taylor, the former deputy assistant secretary of state. “As we’ve seen during this war, it’s very difficult for the Iraqi government and the legitimate security forces to take steps against them.”
Salim reported from Baghdad.
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