WHAT AWAITS IRAQIS IS “WORSE THAN OCCUPATION”… A SUMMARY OF WASHINGTON’S MESSAGES AND ACTIONS TOWARDS BAGHDAD – URGENT
Deadly weapon….
WHAT AWAITS IRAQIS IS “WORSE THAN OCCUPATION”… A SUMMARY OF WASHINGTON’S MESSAGES AND ACTIONS TOWARDS BAGHDAD – URGENT
While political forces in Baghdad are preoccupied with negotiations to form a new government and address post-election obligations, an Iraqi voice from Washington, privy to the inner workings of American decision-making, paints a harsher picture. Intifadh Qanbar , a resident of the US capital and privy to the behind-the-scenes workings of the Iraqi situation, succinctly summarizes these fears with a shocking statement: what awaits Iraq could be “worse than occupation,”
because the next battle may not be fought with tanks on the ground, but rather with a financial weapon: cutting off the dollar supply to Baghdad if the political class fails to meet the conditions presented by US President Donald Trump’s envoy, Mark Savaya. This assessment raises a weighty question: what does it mean for the flow of dollars from the US Federal Reserve to become a central bargaining chip in Washington’s relationship with Baghdad under the current Trump administration, and how might such a battle impact a fragile economy that is almost entirely dependent on the US currency?
From America to Baghdad… a warning about a “deadly weapon”
In numerous media appearances and commentaries, Intifadh Qanbar emphasized that Iraq faces not so much the threat of a new military invasion as it does a financial one that could paralyze the state from within. His warning is not about a theoretical possibility, but rather an escalating trajectory whose signs began to appear years ago when the US Treasury and the Federal Reserve tightened restrictions on the currency auction and excluded several Iraqi banks from dollar transactions under the pretext of their involvement in currency smuggling and financing networks linked to Iran.
From this perspective, Qanbar’s talk of “something worse than occupation” becomes an attempt to describe a scenario that requires no soldiers on the ground: it would suffice for Washington to gradually or suddenly tighten the flow of dollars, and for employee salaries, food and medicine imports, the value of the dinar, and the daily lives of citizens to become hostage to a political-financial decision made in New York and Washington.
The Iraqi dollar dilemma… when oil revenues pass through the Federal Reserve gate
Since 2003, a special mechanism has been in place for managing Iraqi oil revenues.
The funds are deposited in accounts at the Federal Reserve Bank of New York before being used to finance Iraq’s imports and meet the budget’s dollar needs. This arrangement has made the United States an involuntary partner in Iraq’s financial cycle, and the Fed accounts a mandatory gateway for every dollar entering Baghdad.
Simultaneously, the Central Bank of Iraq continued to operate a currency auction to cover imports and private sector transfers, which opened the door to smuggling, corruption, and exploitation of the gap between the official and parallel exchange rates. With mounting suspicions that billions of dollars were leaving Iraq for neighboring countries through money laundering and the financing of sanctioned networks, Washington began to view this as a vulnerability that could be used as both a tool for punishment and control.
In recent years, the US Treasury has translated this vision into concrete steps:
Tightening controls on the electronic platform for foreign transfers, barring several banks from accessing dollars, imposing rigorous scrutiny on every transfer transaction, and even rejecting requests suspected of being linked to sanctioned entities or smuggling networks. This experience has shown Iraqis, in practice, what it means for the life of the economy to hang by a single thread called “Federal Authority approval,”
and it has given Qanbar’s words today added weight, because Iraqis have seen firsthand how a series of US measures can drive up the dollar on the parallel market, disrupt markets, and put pressure on the government within weeks.
Savaya’s conditions… from factions to the dollar
At this critical juncture, Trump’s envoy to Iraq, Mark Savaya, arrived with a list of demands that reportedly represent the new administration’s core thinking toward Baghdad: a unified state and a single armed force; a halt to the funding of armed factions with public funds; control over the smuggling of dollars to Iran, Syria, and Lebanon; and a clearer definition of Iraq’s role in the equation of the conflict between Washington and Tehran. While these conditions have not been officially announced in full, they are being circulated behind the scenes as the “ceiling” of the American position in the coming phase, with the Federal Reserve’s leverage and the dollar’s influence being the most effective tools to push Baghdad toward this ceiling.
From this perspective, Qanbar interprets the situation as a shift from a phase of “advising and warning” to one of “dictating through financial instruments.” If the dominant forces in Baghdad—politically and militarily—accept the American conditions, the dollar can continue to flow with some restrictions and controls. However, if they decide to persist in their duplicitous stance, Qanbar believes that the American response this time will not take the form of statements and protest notes, but rather a gradual tightening of dollar channels, which could, at its most extreme, lead to a severe restriction or near-freezing of the use of Iraqi dollar reserves.
What does “cutting the dollar” mean in practice?
When Qanbar warns against “cutting off dollars to Iraq,” he is not necessarily referring to a complete and immediate halt to all transfers, as this would be a costly scenario for everyone and would unleash global financial chaos, something Washington does not want. What he is talking about is closer to a gradual punitive approach, which could include:
A wider crackdown on Iraqi banks and the denial of more of their ability to deal in dollars, which turns them into local institutions unable to finance foreign trade; tightening the ceilings on transfers allowed through the platform, which pushes traders to the black market, raises the exchange rate and weakens the dinar; and perhaps at an advanced stage, using the reserves card itself, by imposing certain formulas for their use or threatening to freeze part of them if it is considered that the Iraqi government is proceeding with policies that contradict American demands.
In such a scenario, the difference between military occupation and financial pressure becomes clear: the former destroys infrastructure and leads to direct armed clashes, while the latter gradually strangles the state from within, turning every issue—from salaries to electricity to food—into a bargaining chip on the political table. It is precisely here that Qanbar’s talk of “something worse than occupation” seems more like a warning of a silent collapse, one where tanks aren’t visible in the streets, but citizens witness it daily in a soaring exchange rate, stalled projects, and a government unable to fulfill its obligations without federal approval.
Does Iraq have any real options for escaping the grip of the federal government?
Faced with this scenario, there is much talk in Baghdad about “diversifying partners” and turning towards China and Russia, settling transactions in currencies other than the dollar, or even building reserves in other currencies. However, these ideas clash with a number of hard realities: Iraqi oil is still priced in dollars, global markets still use the dollar as the benchmark currency, and the Iraqi banking system is structurally weak and, in its current state, incapable of managing the shock of a sudden transition to a new settlement system. Furthermore, any significant shift away from the dollar requires a different international political framework and a considerable amount of time to build the confidence of markets and financial institutions—a luxury that seems unattainable given the fragile economic and social situation and mounting internal pressures.
In this sense, talk of “escaping the grip of the Federal Reserve” may be a long-term strategic goal, but it is not a realistic shield against the rapid pressure scenarios that Qanbar warns of. In the short term, Iraq remains largely exposed to American leverage, making the real arena for maneuver not only economic but also political: Where does Iraq stand in the struggle between the axes, how does it distribute the cost of its relations with Washington and Tehran, and what discourse does it use to manage the issues of factions, weapons, and the state?
The question of the moment: Will Baghdad learn before it’s too late?
Qanbar’s warning is based on the conviction that Washington, in its new iteration, does not intend to maintain the status quo; and that Savaya’s visit to Baghdad is not a courtesy call but rather the beginning of a serious pressure campaign whose objective is “either a genuine change in the behavior of the Iraqi state, or facing a system of harsh pressure, foremost among which is the weapon of the dollar.” In contrast, Savaya presents himself, in his statement, as a “partner ready to support,” affirming that the United States, “under the leadership of President Trump, stands fully prepared to support Iraq during this critical phase,” and that he and his team are “committed to working closely with Iraqi leaders to establish a strong state, a stable future, and a sovereign Iraq capable of shaping its own destiny in the new Middle East.”
Between Qanbar’s warning of “something worse than occupation” if the federal system is used as a punitive weapon, and Savaya’s talk of a “unified and rational option” that opens the door to American support, a new framework of pressure on Baghdad is taking shape: the stick of the dollar on one hand, and the carrot of “support and partnership” on the other. In this narrow space, the Iraqi state faces a new test: Does it possess the ability to formulate a unified and balanced position that spares the country a scenario of financial strangulation and prevents its reserves and oil revenues from becoming a tool for reshaping its political decision-making? Or will continued hesitation and internal conflict give Washington the pretext to use its harshest tools, leaving Iraqis suddenly at the heart of a suffocating financial crisis, unlike occupation in its outward appearance, but potentially surpassing it in its profound impact and its ability to shatter what remains of the state’s capacity to control its economic and political destiny?