The Trump administration dramatically increased the pressure upon Iraq to curtail Iranian influence in the country.
Since Trump returned to the presidency members of his national security team have been pushing Iraq to disarm the pro-Iran Resistance and threatened various forms of sanctions if it didn’t.
On April 21 Washington dropped the hammer by suspending sending Iraq’s oil revenues to Baghdad which are deposited within the Federal Reserve Bank in New York. The U.S. demanded that Iraq form a new government without Iranian influence and arrest Resistance members who attacked Americans during the Iran War.
State Department officials told the Wall Street Journal that the U.S. was blocking $500 million in petroleum money being sent to Iraq. The Central Bank of Iraq denied this. Later an advisor to Prime Minister Mohammed Sudani told the press that U.S. dollars are still being used to conduct trade transactions but didn’t mention oil funds.
This is a monumental move because Iraq is the most oil dependent country in the world with over 90% of its budget being funded by petroleum exports.
Baghdad was already struggling to meet its bills because its oil exports were drastically cut due to the Iran war that shut down its main export route through the Strait of Hormuz.
In March for instance the state only earned $1.957 billion in oil sales when it needs around $6.5 billion just to pay its government salaries, pensions and welfare programs.
The problem for the Iraqi government is that it can’t fulfill all of Washington’s demands. On the one hand, Trump said he did not want Nuri al-Maliki to become prime minister again because of his ties with Iran and that doesn’t appear likely right now because he has too many opponents within the ruling Coordination Framework to return. If that’s all Trump’s national security team wants out of the government formation process than Iraq can agree with U.S. demands. However the new administration will still have members of the Resistance since groups like Asaib Ahl Al-Haq, Kataib Hezbollah and others are part of the Framework and will get new positions.
The bigger issue is that the Iraqi state will not move against the Resistance because it is part of the government. Having any leaders arrested would disrupt the Iraqi elite and could lead to violence as these groups have not shied away from attacking the Iraqi Security Forces in the past. Low levels officers could be arrested as sacrificial lambs but in the past when that has happened they have never gone on trial because of the power of their parties.
Finally, Iran is Iraq’s neighbor. It is Iraq’s largest trade partner. Baghdad depends upon Iranian natural gas and electricity to fuel its power grid. Many of Iraq’s ruling parties are funded by Iran. On the U.S. side, Iraq isn’t even a priority for Trump just members of his team while Tehran sees Iraq as a crucial part of its regional policy and defense.
This puts Iraq in between a rock and a hard place. It must have access to its oil revenues to fund the state but it can only superficially meet Washington’s desire to end Iranian influence. Baghdad can try to appease the U.S. but ultimately it’s only hope is that America loses interest and ends the sanctions.
SOURCES
Bas News, “US Blocks $500M Iraq Oil Funds, Presses Baghdad to Dissolve Iran-Backed Militias,” 4/22/26
Al Mada, “Government Advisor Explains Halt in Dollar Shipments,” 4/23/26
Mahmoud, Sinan, “US suspends Iraq’s dollar access as pressure tactic to curb Iranian influence and militias,” The National, 4/21/26
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