US, IN CONTROL OF OIL DOLLARS, HEAPS PRESSURE ON IRAQ OVER IRANIAN INFLUENCE
Washington has threatened senior Iraqi politicians with sanctions targeting the Iraqi state — including potentially its critical supply of oil revenue sourced via the Federal Reserve Bank of New York — should Iran-backed armed groups be included in the next government, four sources told Reuters.
The warning is the starkest example yet of US President Donald Trump’s campaign to curb Iran-linked groups’ influence in Iraq, which has long walked a tightrope between its two closest allies, Washington and Tehran.
The US warning was delivered repeatedly over the past two months by the US Charges d’Affaires in Baghdad, Joshua Harris, in conversations with Iraqi officials and influential Shi’ite leaders, including some heads of Iran-linked groups via intermediaries, according to three Iraqi officials and one source familiar with the matter who spoke to Reuters for this story.
Harris and the embassy did not respond to requests for comment. The sources requested anonymity to discuss private discussions. Since taking office a year ago, Trump has acted to weaken the Iranian government, including via its neighbor Iraq.
Iran views Iraq as vital for keeping its economy afloat amid sanctions and long used Baghdad’s banking system to skirt the restrictions, US and Iraqi officials have said. Successive US administrations have sought to choke that dollar stream, placingsanctions on more than a dozen Iraqi banks in recent years in an effort to do so.
But Washington has never curtailed the flow of dollars from the oil revenues of Iraq, a top OPEC producer, sent via the Federal Reserve Bank of New York to the Central Bank of Iraq.
The US has had de facto control over Iraq’s oil revenue since it invaded the country in 2003. Iraqi Prime Minister Mohammed Shia al-Sudani’s office, the Central Bank of Iraq and Iran’s mission at the United Nations did not respond to requests for comment.
“The United States supports Iraqi sovereignty, and the sovereignty of every country in the region. That leaves absolutely no role for Iran-backed militias that pursue malign interests, cause sectarian division, and spread terrorism across the region,” a US State Department spokesperson told Reuters, in response to a request for comment.
The spokesperson did not answer Reuters questions about the sanction threats.
Trump, who bombed Iran’s nuclear facilities in June, threatened to again intervene militarily in the country during protests last week.
No armed groups in new government
Among the senior politicians to whom Harris’ message was passed were Prime Minister al-Sudani, Shia politicians Ammar Hakim and Hadi Al Ameri, and Kurdish leader Masrour Barzani, three of the sources said.
The conversations with Harris started after Iraq held elections in November in which al-Sudani’s political bloc won the single-largest bloc of seats but in which Iran-backed militias also made gains, the sources said.
The message centered on 58 members of parliament views by the US views as linked to Iran, all the sources said.
“The American line was basically that they would suspend engagement with the new government should any of those 58 MPs be represented in cabinet,” one of the Iraqi officials said. The formation of a new cabinet could still be months away due to wrangling to build a majority.
When asked to elaborate “they said it meant they wouldn’t deal with that government and would suspend dollar transfers,” the official said.
The US has had de facto control over oil revenue dollars from Iraq, a top OPEC producer, since it invaded the country in 2003. Iran has long supported an array of armed factions in Iraq. In recent years, several have entered the political arena, standing for election and winning seats as they seek a slice of Iraq’s oil wealth.