Washington has resumed physical dollar shipments to Iraq, but extracted a politically dangerous promise from Baghdad: to restrict the access of armed Shiite networks to the American currency. The main question now is not whether banknotes will arrive from New York, but whether the Iraqi prime minister can control Badr, Kataib Hezbollah, Asaib Ahl al-Haq, Nujaba, and other entities long embedded in the state.
The resumption of US cash dollar shipments to Iraq looks like technical financial news only on the surface. In reality, it is one of the most accurate indicators of a new phase in the struggle for the Iraqi state. The US did not simply unfreeze the banknote supply channel. They demonstrated that they can use Baghdad's access to its own oil revenues as leverage over the government, the Central Bank, and armed political networks linked to Iran.
In the spring of 2026, Washington suspended part of its physical dollar shipments to Iraq, including a shipment of approximately $500 million. Electronic transfers for foreign trade, according to reports, were not completely halted, which is important: this was not a financial blockade of Iraq as a state, but targeted pressure on the cash circuit, the exchange market, and gray channels of dollar liquidity. In early July, reports emerged that limited airborne dollar deliveries had resumed after Baghdad agreed to tighten control over the flows of American currency, which could reach Iran and its affiliated armed groups.
There is nothing accidental in this scenario. Iraq sells oil and receives dollars, but a significant portion of its currency infrastructure remains tied to the American system, including an account at the Federal Reserve Bank of New York. For Baghdad, this is a legacy of the post-war financial architecture established after 2003. For Washington, it is a tool of control. For Iraqi armed factions, it is an object of struggle. For Iran, it is one of the channels to bypass sanctions pressure.
The Main Intrigue: Iraq Promised What It Cannot Easily Deliver
The formula of the deal is simple only on the surface. The US resumes physical dollar shipments. Iraq pledges to limit the access of pro-Iranian groups to dollar channels, strengthen control over exchange networks, banking operations, and, reportedly, payout schemes to armed structures. But in Iraq, such promises cannot be fulfilled by administrative order. Here, a financial channel is almost always linked to a political party, ministerial influence, an armed brigade, a parliamentary bloc, a business network, and an external patron.
This is precisely why the current deal is far more important than a routine dispute between the US Department of the Treasury and the Central Bank of Iraq. Washington is demanding more than just banking transparency. It is demanding that Baghdad begin separating the state budget from the armed Shiite networks that gained status, money, legality, and political power after the war against ISIS. This is no longer financial reform. This is intervention in the architecture of power.
Since 2023, the US has consistently tightened control over Iraqi dollar operations. In July 2023, Iraq banned 14 local banks from conducting dollar transactions; in February 2024, another 8 banks fell under similar restrictions. These measures were part of a broader campaign against the dollar smuggling circuit, which American and Iraqi officials estimate was used to funnel funds to Iran through the Iraqi banking system.
The new measure is harsher than previous ones. Restricting bank transfers hits specific institutions. Suspending cash shipments hits the entire market. In the Iraqi economy, the cash dollar remains not only a store of value but also a tool for imports, medical expenses, travel, commercial insurance against the weakness of the dinar, and daily trade. Therefore, even a partial halt in shipments quickly becomes a political signal: the US can create tension in the street currency market without directly striking oil exports.
The PMF: Not a Militia, but a Parallel Security Circuit
To understand why Washington chose the dollar lever specifically, one needs to look not at the Central Bank, but at the Popular Mobilization Forces-also known as Hashd al-Shaabi. This is an umbrella structure created after the ISIS offensive in 2014 and later legalized by the Iraqi state. Formally, the PMF is part of the state security system and answers to the commander-in-chief. In practice, it is a conglomerate of dozens of armed formations with different ideologies, degrees of loyalty to the state, relationships with Iran, sources of funding, and political ambitions.
This distinction is precisely what is often lost in superficial commentary. The PMF cannot be described in a single phrase as "pro-Iranian militias." Within this system, there are old Iranian allies, Sadrist structures, detachments linked to the Shiite shrines of Najaf and Karbala, and local Sunni, Turkmen, Christian, and Yazidi units. However, the most influential core causing US anxiety consists precisely of the Shiite factions linked to Iran, the Islamic Revolutionary Guard Corps, and the ideology of the "axis of resistance."
According to official and expert estimates, the number of registered PMF personnel in recent years has ranged approximately from 204,000 to 238,000 people. In 2023, an Iraqi parliamentary financial report indicated a sharp increase in the approved strength of the PMF from 122,000 to 238,000 people. This is not just a security issue. It is a matter of salaries, social benefits, contracts, land, departmental budgets, and political patronage.
The US sees the problem not in the mere existence of the PMF, but in the fact that within the official structure, there are groups that simultaneously receive state resources and maintain autonomous chains of command. Some of these groups participate in parliamentary politics, some control economic assets, some run media campaigns, some retain missile and drone capabilities, and some operate under the brand of the Islamic Resistance in Iraq. This brand emerged as an umbrella designation for the operations of pro-Iranian Iraqi groups after the start of the war in Gaza, allowing attackers to obscure individual responsibility for specific strikes.
Badr Organization: The Old Guard of Iranian Influence Inside the Iraqi State
The Badr Organization is not just an armed group. It is historically the deepest and most institutionally rooted structure of Iranian influence in Iraqi Shiite politics. Its roots go back to the Iran-Iraq War period, when the Badr Brigade was linked to the Supreme Council for the Islamic Revolution in Iraq and operated with Iranian support against Saddam Hussein's regime. After 2003, Badr managed to do what many more radical groups failed to achieve: transition from an expatriate military structure into a fully fledged Iraqi political and security machine.
Badr leader Hadi al-Amiri is one of the key figures of post-Saddam Iraq. He has served as minister of transportation, a member of parliament, the head of a major Shiite political bloc, and one of the main commanders within the PMF environment. The importance of Badr is not just in weapons. Its strength lies in personnel, ministerial connections, provincial networks, access to security agencies, and the ability to speak simultaneously with Tehran, Baghdad, and other Shiite elites.
Unlike more demonstrative factions, Badr rarely needs constant public escalation. It has long been embedded in the state. This is precisely why it is more difficult to restrict through sanctions or a disarmament order. While Kataib Hezbollah can be envisioned as an autonomous strike structure, Badr is part of the political skeleton of Shiite power after 2003. Experts from the Washington Institute described Badr as a large and complex organization with military and political wings, deeply embedded in the Iraqi state through electoral success, armed force, and patronage networks.
For Washington, Badr is inconvenient precisely because of its legality. It cannot simply be dismissed as an "out-of-system militia." It is inside the system, participates in politics, influences appointments, and is capable of blocking decisions. For any Iraqi prime minister, an attempt to sharply strike at Badr would mean a conflict not only with an armed structure but also with a segment of the Shiite political order.
Kataib Hezbollah: Small in Numbers, but Disproportionately Dangerous
Kataib Hezbollah is a qualitatively different type of player. It is not the largest structure in terms of numbers, but it is one of the most sensitive for the US. It emerged after the 2003 US invasion, was linked to the Iranian network of special groups, and earned a reputation as a highly disciplined, secretive, and technologically more advanced faction. The US designated Kataib Hezbollah as a Foreign Terrorist Organization back in 2009.
Within the PMF, Kataib Hezbollah is associated with the 45th, 46th, and 47th brigades. Its historical architect, Abu Mahdi al-Muhandis, was killed alongside Qasem Soleimani in a US strike in January 2020. After this, the organization did not disappear but became more cautious, fragmented, and secretive. In open reports, Abu Hussein al-Hamidawi is named as the current secretary-general.
For the US, Kataib Hezbollah is not just an Iraqi problem. It is part of a regional network capable of operating in Iraq and Syria against American facilities, against US partners, and within the logic of a broader confrontation with Israel. In June 2025, the group warned the US of a possible resumption of attacks in the event of American intervention in the conflict between Israel and Iran. In 2023-2024, structures operating under the Islamic Resistance in Iraq brand participated in a series of attacks on US forces in Iraq, Syria, and Jordan.
Kataib Hezbollah is also important in another sense: it demonstrates why formal integration into the PMF does not equate to state control. In 2025, following a clash with the federal police in Baghdad, Prime Minister Mohammed Shia al-Sudani approved disciplinary measures against the commanders of the PMF's 45th and 46th brigades, which are linked to Kataib Hezbollah. This episode highlighted a structural problem: formally, the brigades are part of the state system, but practically, they can act according to the logic of their own command and the protection of economic interests.
If Baghdad truly begins cutting off dollar and salary channels, Kataib Hezbollah will be one of the primary structures for which this becomes a matter of survival. It may not possess the largest parliamentary base, but it holds a high potential for pressure, sabotage, and asymmetric escalation.
Asaib Ahl al-Haq: An Armed Party That Wants to Be the State
Asaib Ahl al-Haq is another key structure without which it is impossible to understand Iraqi Shiite politics. The group grew out of the Sadrist environment, split from Muqtada al-Sadr's movement, and became a separate political-military project under the leadership of Qais al-Khazali. During the US presence in Iraq, AAH was one of the most active "special groups" participating in armed resistance against coalition forces. It later joined the PMF, gained state legality, and developed its political wing, Sadiqoun.
The strength of AAH lies in the fact that it long ago ceased to be just an armed network. It is a party, a media machine, a social structure, a security organization, and a parliamentary player. It knows how to speak the language of resistance while simultaneously participating in elections, cabinet formation, and the distribution of posts. According to Washington Institute estimates, AAH identifies itself as part of the Iranian "axis of resistance" but maintains a notable degree of autonomy and conducts its own political, media, and social operations, some of which are funded through state channels.
In recent years, Qais al-Khazali has actively tried to convert his reputation as a combat commander into the image of a national politician. Ahead of the 2025 elections, Reuters described his attempt at a political rebranding: from the leader of an Iranian-oriented militia to a legitimate participant in Shiite power. This does not erase AAH's past, including allegations of violence, attacks, and participation in suppressing protests. However, it demonstrates a trend: major factions no longer want to be just "Iran's weapon." They want to be the owners of Iraqi politics.
For the US, AAH is dangerous precisely because of this duality. While Kataib Hezbollah is a more secretive strike tool, Asaib Ahl al-Haq is a structure capable of legalizing armed influence through elections, parliament, social funds, and budget channels. A blow to its finances automatically becomes a blow to a portion of Shiite political representation.
Harakat Hezbollah al-Nujaba: The Ideological Vanguard of the "Axis of Resistance"
Harakat Hezbollah al-Nujaba, led by Akram al-Kaabi, belongs to the most ideological and hardline flank of pro-Iranian Iraqi formations. The group was established in 2013, operated actively in Syria, and openly positioned itself as part of the regional camp linked to Iran. In 2025, the US Department of State designated Harakat al-Nujaba as a Foreign Terrorist Organization alongside several other Iraqi formations. The American designation of Nujaba underscores its overt loyalty to Iran and Iran's supreme leader.
Nujaba is significant not due to its numbers, but because of its role. This is not merely an Iraqi militia. It is the bearer of a transnational ideology of resistance, where Iraq is just one sector of the front. Syria, the American presence, Israel, the Persian Gulf, and Iranian security-all these directions are interconnected for such groups. Therefore, Baghdad's demand to "surrender weapons to the state" sounds to Nujaba not like an administrative reform, but like political capitulation.
It is no coincidence that in 2026 reports, it was precisely Nujaba and Kataib Hezbollah that figured among the entities resisting initiatives aimed at disarmament and subordination to the state. While certain factions declared their readiness for integration or to discuss terms, the hardline wing sought to maintain autonomy.
Kataib Sayyid al-Shuhada: The Syrian Experience and Regional Logic
Kataib Sayyid al-Shuhada is another group that cannot be understood solely through Iraqi domestic politics. It emerged within the orbit of Kataib Hezbollah and from the very beginning possessed a distinct transnational profile. Its activities were linked to the Syrian direction, the defense of Bashar al-Assad's regime, the logistics of the "axis of resistance," and military coordination with Iranian structures.
The Washington Institute characterized Kataib Sayyid al-Shuhada as an organization that emerged from the environment of Kataib Hezbollah, working directly with the Islamic Revolutionary Guard Corps and oriented toward the regional agenda of the Iranian "axis of resistance." The US designated it as a Foreign Terrorist Organization in 2025.
Its significance for the dollar topic is as follows: such groups do not subsist solely on the salaries of their fighters. They require cross-border logistical networks, cash, exchange operations, procurement, transport, social structures, media infrastructure, and financial channels for their allies. Therefore, control over the cash dollar is a way for the US to strike not at a single bank account, but at the regional operational environment.
Kataib al-Imam Ali and Ansar Allah al-Awfiya: The Second Tier That Became Crucial
Kataib al-Imam Ali and Harakat Ansar Allah al-Awfiya often remain in the shadow of more prominent names, but it is precisely such structures that demonstrate how diversified the Iraqi armed environment has become. Kataib al-Imam Ali, linked to Shibl al-Zaydi, combines armed, social, and economic activity. The Washington Institute described it as an armed group and a political-social organization that primarily focuses on social and economic operations, but also facilitated military actions against US forces in Iraq.
In 2025, the US designated Kataib al-Imam Ali and Harakat Ansar Allah al-Awfiya as Foreign Terrorist Organizations. This is important: Washington is no longer limiting itself to the most famous structures like Kataib Hezbollah. It is expanding pressure across the entire layer of groups that can function as intermediaries, backup channels, local operators, and financial-logistical hubs.
In the Iraqi system, the second tier is often no less important than the first. Large groups publicly bargain with the prime minister and foreign embassies. Medium and small structures hold land, warehouses, exchange offices, local security connections, municipal contracts, and channels of pressure in the provinces. If Washington demands a halt to dollar flows, the strike must pass precisely through this network. However, the deeper the strike, the higher the risk of internal resistance.
Saraya al-Salam: Why the Sadrists Do Not Equate to the Pro-Iranian Camp
Saraya al-Salam-the Peace Brigades of Muqtada al-Sadr-must be discussed separately. This is a Shiite armed structure, but it cannot be mechanically placed in the same row as Kataib Hezbollah or Nujaba. The Sadrist movement has its own mass base, an Iraqi nationalist language, complex relations with Iran, and long-standing competition with pro-Iranian Shiite factions.
In May-June 2026, Sadr announced the dissolution of Saraya al-Salam as an independent armed formation and its transfer under state authority. It was reported that the integration process had begun in Samarra. This step was important not only in itself, but also as a political signal to other groupings: if the Sadrists can declare a transition to state control, then why are the rest not doing so?
However, the comparison is limited. Sadr makes decisions within the logic of his own struggle for power and moralistic criticism of the corrupt Shiite elite. Pro-Iranian factions view disarmament not as a purification of the state, but as a threat to their status. For them, weapons are not only a means of war, but also a guarantee of their place in the political system.
The Dollar Scheme: Why It Is Not Just About Banks
The main mistake in understanding the current crisis is reducing it to banking compliance. Yes, the US demands transparency of transfers, control over exchange operations, and the termination of dubious dollar channels. But behind this lies a more complex financial construction.
The first level is bank transfers. Iraqi companies buy dollars for imports. If invoices are inflated, companies are fictitious, goods do not arrive, or the route is non-transparent, the dollar can flow to Iran or to intermediaries linked to sanctioned entities.
The second level is the cash market. Physical dollars enter exchange offices, where a gap arises between the official and market rates. Intermediaries, bankers, political patrons, and security groups profit from this gap.
The third level involves salary and budget schemes. The PMF receives state funding. If there are "dead souls," fictitious fighters, inflated rosters, non-transparent payouts, or commander deductions within the system, a portion of the budget money can turn into a resource for factional control.
The fourth level is economic assets. The PMF and related structures gained access to land, construction, logistics, customs routes, and state contracts. In 2022, the Muhandis General Company was established, which experts compared to an economic holding modeled after Iran's Khatam al-Anbia. Brookings pointed out that the PMF received extensive land and budget resources, and the company itself became a symbol of the transformation of an armed system into an economic corporation.
This is precisely why the dollar deal with the US threatens not only commanders, but an entire political economy. If Baghdad seriously begins checking banking channels, exchange offices, fighter rosters, contracts, and companies, it will collide with the interests of people who possess not only money, but also weapons.
Why Prime Minister Ali al-Zaidi Found Himself at the Most Dangerous Point
The new Prime Minister, Ali al-Zaidi, did not just inherit an economic problem. He received a test of his ability to govern a state in which a portion of the security structures answers not so much to the government as to their own commanders and political patrons. According to reports in the American and regional press, the administration of US President Trump did not object to his rise to power, but linked its support to expectations of a tougher line against pro-Iranian groupings. At the same time, the Iranian side, judging by open reports, also did not perceive him as a direct enemy.
Such dual acceptability does not make the prime minister strong. On the contrary, it makes him vulnerable. For Washington, he must be the person who will restrict dollar channels, exclude the most problematic factions from the government, and force armed structures to recognize the monopoly of the state. For Iran, he is acceptable only as long as he does not destroy the infrastructure of influence. For Shiite parties, he is useful as long as he does not break the resource distribution system.
The prime minister can arrest officials, change commanders, set up commissions, demand accountability, and speak of the supremacy of the state. But the question is different: is he ready to touch the financial nerves of major factions? Is he ready to verify the real rosters of the PMF? Is he ready to close exchange networks protected by armed groups? Is he ready to strike at banks that served the political interests of powerful players? Is he ready to bring a portion of the PMF economy out of the shadows?
If not, the deal will remain temporary cosmetics. If yes, he risks triggering an internal crisis.
The US Changes Its Method: Less Occupation, More Financial Coercion
American policy in Iraq has traveled a long path: from military occupation after 2003 to an attempt to manage the balance through sanctions, banks, dollar operations, terrorist lists, and control over the reserve infrastructure. The current episode shows that Washington no longer wants to bear the previous price of directly managing Iraq. It prefers to act upon leverage points of dependency.
These points are well known: the dollar, oil revenues, the Federal Reserve Bank of New York, international banking correspondents, sanctions lists, assistance to security structures, political support for the prime minister, and recognition of the government. This is less noticeable than a military operation, but often more effective.
For Iraq, this is a painful lesson. A state can have a flag, a parliament, a government, an army, and oil revenues, but if its currency, banks, and reserves are tied to an external infrastructure, its sovereignty remains limited. This does not absolve the Iraqi elites themselves of responsibility. For years, they turned oil rent into a system of party feeding, allowed armed groups to enter the budget, and closed their eyes to gray dollar channels. Now, an external player is using precisely this weakness.
The Anti-Corruption Campaign: A Clean-Up or a Redistribution?
Against the backdrop of the dollar deal, the prime minister launched an anti-corruption campaign. According to official Iraqi reports, dozens of current and former officials, including parliamentarians, have been arrested. One episode involves the detention of 47 individuals. The operations, as reported, were ongoing.
At first glance, this looks like a normal state response: if financial channels are used for money laundering, siphoning dollars, and funding armed structures, the participants in the schemes must be arrested. But in Iraq, the word "corruption" is never neutral. It almost always signifies a struggle for access to rent.
Iraqi corruption is not reduced to an official taking a bribe in an office. It is a system of distributing oil rent among parties, factions, ministries, provinces, armed groups, and commercial intermediaries. Positions grant access to contracts. Contracts grant access to cash. Cash provides the ability to buy loyalty. Loyalty keeps political blocs from collapsing. Breaking such a chain is possible only at the cost of conflict with those who have been feeding off it for years.
Therefore, Zaidi's anti-corruption campaign will be judged not by the number of arrests, but by the direction of the strike. If only weak, peripheral, or already discarded figures come under fire, it will be an imitation for Washington. If cases begin against key financial operators, banking connections, and commanders who control real monetary channels, then the prime minister will enter a zone of political danger.
Why the US Struck Precisely Now
The timing was not chosen by chance. Pressure on Baghdad intensified at a moment when Iraq was undergoing a change of government, and the regional war with Iran made any financial leakage toward Tehran politically unacceptable for Washington. Under the administration of US President Trump, the logic became even harsher: an ally that receives access to the American financial system must prove that this system does not feed the adversaries of the US.
Dollar shipments were turned into a lever precisely because other instruments yielded limited results. The US had already introduced restrictions against Iraqi banks. Over recent years, according to available data, more than two dozen banks were blacklisted or restricted due to suspicions of illegal transfers and dollar siphoning schemes. Rules for the transparency of electronic transfers were tightened. The Central Bank of Iraq was forced to restructure its currency transaction procedures. But the shadow economy adapted.
When electronic channels became more difficult, the value of cash, exchange offices, cards, and alternative schemes grew. When banks began falling under American restrictions, intermediaries switched to other structures. When Washington demanded accountability, local networks learned to disguise operations as imports, trade, and domestic demand servicing.
In such an environment, the physical dollar became not just a means of payment, but an object of strategic control. By restricting its supply, the US delivered a blow to the entire gray infrastructure at once, without dissecting each individual scheme in courts.
The New Prime Minister Between Trump and Tehran
The figure of Ali al-Zaidi is particularly indicative. He is described as a political newcomer who came to power after a period of US pressure on the government formation process. Washington, judging by reports, did not oppose his appointment. Moreover, one material asserts that his candidacy received the support of US President Trump, while Iranian representatives also did not publicly oppose him. If this configuration is conveyed accurately, it speaks to the most important point: Zaidi became a compromise figure not because everyone trusts him, but because different sides expect to use him in their own interests.
For the US, he is convenient if he is capable of restricting pro-Iranian groupings and cleaning up financial channels. For Iran, he is acceptable if he does not destroy the entire infrastructure of influence built over two decades. For Iraqi elites, he is needed if he does not begin breaking the rules for distributing the budget, contracts, and positions too quickly.
Such a prime minister always walks through a minefield. If he fulfills American demands too harshly, he will be accused of surrendering sovereignty and subordinating himself to Washington. If he limits himself to cosmetics, the US may close the dollar tap again. If he strikes at certain groups and leaves others untouched, the anti-corruption campaign will be perceived as a tool for the redistribution of power. If he attempts real disarmament, he risks receiving not a parliamentary crisis, but a forceful response.
In this sense, the resumption of dollar shipments is not a victory for Zaidi, but a reprieve. He was given air, but along with the oxygen mask, he was handed a list of conditions.
Iraq's Sovereignty Proves to Be a Currency Fiction
The most unpleasant conclusion for Baghdad is that Iraqi sovereignty remains incomplete. Formally, the country has a government, a parliament, an army, oil revenues, and a Central Bank. Practically, its financial stability depends on decisions made in Washington and New York. This is the result of post-2003 history, the sanctions architecture, oil dependence, the weakness of the banking system, and chronic distrust of domestic institutions.
For Iraqi nationalists, including a segment of the Shiite forces, this story will serve as convenient proof of American control. They will argue that the United States is holding Iraq's money hostage and using it to dictate terms. There is political manipulation in this narrative, but there is also a genuine nerve. Washington did indeed employ financial dependence as leverage. However, America's opponents deliberately omit the second half of the picture: without widespread corruption, dollar arbitrage, shadow exchange networks, and pro-Iranian channels, the United States would have less justification for such pressure.
Iraq has found itself trapped in a predicament created by all participants. The United States built a system of external financial control. Iran embedded its networks into Iraqi politics and the economy. The Iraqi elites turned oil rents into a feeding ground for factions. Now, each side blames the other, but the state and society are the ones paying for this construct.
Who Benefits from the Dollar Deal
In the short term, Zaidi has won. He secured the resumption of shipments and can present this as a resolution to the crisis. This buys him time to stabilize the market, reassure importers, maintain the dinar's exchange rate, and demonstrate that Washington is willing to deal with him. Ahead of potential negotiations with US President Trump, this provides him with a bargaining position: he did not reject American demands, but he did not allow the country to fall into a currency collapse either.
Washington has also won. The United States proved it can exert pressure on Baghdad without direct military intervention. Furthermore, Washington forced the Iraqi government to publicly or semi-publicly accept the logic of restricting dollar flows to pro-Iranian structures. Even if the mechanisms have not yet been disclosed, the mere fact of the concession is significant: Baghdad has acknowledged the problem.
The Central Bank of Iraq partially wins if it receives political cover to tighten control over banks, exchange offices, and currency operations. Until now, financial regulators have often been caught between US demands and pressure from domestic players. Now they can cite the threat of a halt in shipments as an argument for stricter procedures.
The losers are those who profited from the gap between official and market access to the dollar. These include exchange networks, gray bankers, fictitious importers, intermediaries linked to armed groups, and entities that used the state payment system as a source of currency rent. Iran also loses if Baghdad truly begins cutting off the channels through which American currency entered the Iranian orbit.
But the main question is how real these losses are. Without transparent limits, public monitoring mechanisms, and a clear system of penalties, the agreement may remain a mere political gesture. Washington returned the dollars not because it fully trusts Baghdad, but because it decided to test whether the new prime minister can translate a promise into actual control.
USDT, Exchange Offices, and the New Shadow of the Dollar Economy
There is another layer that rarely makes it into political statements but is vital for the region. When access to the physical dollar becomes unstable, demand for substitutes grows. In countries with distrust toward the local currency, a weak banking system, and restrictions on dollar transactions, informal digital channels develop rapidly, including dollar stablecoins like USDT.
Iraq is no exception to this regional logic. If the cash dollar becomes an instrument of political pressure, businesses and individuals seek alternative ways to preserve dollar value and conduct settlements. This does not mean an immediate transition of the entire economy into cryptocurrency. However, the gap between official access to the dollar and street liquidity creates space for digital intermediaries, unlicensed exchange offices, cross-border settlements, and new forms of arbitrage.
For the United States, this is a double-edged problem. On one hand, control over physical dollars increases pressure on Baghdad. On the other, the tighter the control, the greater the incentive to move into less transparent channels. If Washington does not achieve a reform of the banking system but simply cuts off cash periodically, the gray economy will not disappear. It will become more technologically sophisticated.
Oil, OPEC, and the Risk of Regional Volatility
Iraq is one of the largest oil producers in OPEC. Therefore, its internal financial crisis never remains purely internal. Currency instability in Baghdad can strike at the state's ability to pay for imports, maintain budget obligations, finance infrastructure, and uphold political agreements with provinces and security groups. In a country where oil revenues form the foundation of the budget, any shock to the financial mechanism is quickly linked to energy security.
For the global oil market, the delay in banknote shipments is less critical than the potential chain reaction. If the dollar crisis triggers a political conflict between the government and pro-Iranian groups, facilities, logistics, export infrastructure, foreign companies, and regional routes will come under threat. Iraq has already been a battlefield for the US-Iran proxy confrontation. The new phase differs in that the frontline runs through banks and exchange offices, but it could end at oil terminals and military bases.
Three Possible Scenarios
The first scenario is a managed partial reform. Baghdad closes some exchange channels, strengthens Central Bank oversight, audits PMF salaries, removes the most obvious fictitious positions, restricts problematic banks, and demonstrates progress to Washington. Major factions publicly protest but do not escalate to direct confrontation because they do not want to lose their legal budgetary status. This is the most rational scenario for the government.
The second scenario is imitation. The prime minister showcases arrests of low-level officials, replaces a few commanders, and closes some exchange offices, but leaves the main networks untouched. Dollars continue to leak through new routes. After a few months, the United States concludes that Baghdad bought time but did not change the system. Then shipments could become a lever of pressure once again.
The third scenario is confrontation. If the government truly strikes at the financial channels of Kataib Hezbollah, Nujaba, Asaib Ahl al-Haq, or other entities, some of the factions may turn to political sabotage, street mobilization, parliamentary pressure, or forceful signals. This will not necessarily trigger a direct civil war, but a crisis of governability will become real.
A combination of the first two scenarios is most likely: limited reform, demonstrative measures, behind-the-scenes negotiations, and the preservation of a significant part of the old system. Yet even such a halfway model changes the rules of the game. Now all Iraqi players know: the American dollar channel can be weaponized again.
Conclusion: The Dollar Deal Does Not Solve the Iraqi Crisis, It Exposes Its Structure
The United States did not defeat pro-Iranian groups in Iraq by resuming dollar shipments. Iraq did not regain full sovereignty by recovering access to cash currency. Ali al-Zaidi did not become a strong prime minister just because Washington temporarily opened the financial channel. The real outcome is different: the dollar deal exposed the inner workings of Iraqi power.
In Iraq, armed groups long ago ceased to be merely military formations. Badr represents state depth and patronage. Kataib Hezbollah is a secretive strike structure with a regional function. Asaib Ahl al-Haq is an armed party translating a combat biography into parliamentary capital. Nujaba and Kataib Sayyid al-Shuhada represent the transnational ideological flank of the Iranian "axis of resistance." Kataib al-Imam Ali and Ansar Allah al-Awfiya are vital elements of the second tier, where social, military, and economic activities are intertwined. Saraya al-Salam is a distinct Sadrist case, showing that Shiite weaponry in Iraq does not always signify a direct Iranian chain of command.
Washington did not strike at an abstract "Iranian influence." It struck at its financial environment: banks, exchange offices, cash, salary schemes, budget channels, and the shadow economy of the PMF. This constitutes the new precision of American pressure.
However, this precision has a limit. A banking decision cannot dismantle a system that has been built for twenty years on war, sectarian mobilization, oil rents, state weakness, and external patronage. The dollar can force Baghdad to sign commitments. It cannot, on its own, force armed factions to relinquish power.
Therefore, the main test lies ahead. Not in New York, where the banknote delivery schedule is decided. And not in Washington, where the conditions are formulated. The main test will take place in Baghdad, Basra, Diyala, Samarra, Najaf, and along the border routes, where power is measured not by government statements, but by who controls the money, the weapons, and the street.
The Iraqi problem is not that the United States can delay dollars. The problem is that without these dollars, Baghdad quickly perceives its own weakness. And with these dollars, it is forced once again to address a question it has deferred since 2014: who in this country has the right to be a force—the state, or those who have learned to live inside the state but obey it only when it is profitable.