The U.S. Treasury Department has halted a shipment of nearly $500 million in cash destined for Iraq, a move aimed at preventing funds from reaching Iran-linked militant groups, according to a report by The Wall Street Journal.
This significant intervention comes as part of ongoing efforts to curb the financial influence of Iranian-backed factions operating within Iraq. The blocked funds, which were being transported via aircraft, represent a substantial portion of Iraq's oil revenue that flows through the U.S. banking system.
"The decision reflects growing concerns about the potential diversion of funds to groups that could undermine stability in the region," sources familiar with the matter told the Journal.
Iraq relies heavily on oil exports for government revenue, with much of that money processed through the Federal Reserve Bank of New York before being transferred back to Baghdad. This system, established after the 2003 invasion, gives U.S. authorities oversight of Iraq's central bank transactions.
The Treasury's action highlights the delicate balance Washington maintains in its relationship with Baghdad—supporting the Iraqi government while attempting to limit Tehran's influence through proxy militias. These groups have gained considerable power since helping defeat the Islamic State, and their financial networks have become a persistent concern for U.S. policymakers.
This is not the first time the U.S. has intervened in Iraq's financial flows. Previous measures have included temporary freezes and enhanced scrutiny of transactions, particularly those involving Iranian entities or individuals on sanctions lists.
The blocked shipment will likely prompt discussions between U.S. and Iraqi officials about alternative arrangements that ensure funds reach legitimate government accounts while preventing diversion to unauthorized groups. The outcome could have significant implications for Iraq's economy and the broader geopolitical dynamics in the Middle East.