US President Donald Trump's administration has halted US dollar shipments to Iraq and frozen security cooperation programs with its military, as it presses Baghdad to dismantle Iranian-backed militias operating in the country, the Wall Street Journal reported on Tuesday, citing Iraqi and US officials.
US Treasury Department officials recently blocked a delivery of nearly $500 million in US banknotes - the proceeds of Iraqi oil sales - from accounts at the Federal Reserve Bank of New York, the WSJ said.
Reuters could not immediately verify the report. The US Treasury Department and the Federal Reserve did not immediately respond to a request for comment.
Washington has also informed Baghdad it is suspending funding for some counter-terrorism and military training programs until militia attacks end and Iraqi authorities take steps to dismantle armed groups, the report added.
The United States earlier this month summoned Iraq’s ambassador after a drone struck a major US diplomatic facility in Baghdad, following a series of drone attacks that Washington has blamed on Iran‑aligned “terrorist militias."
US operation 'Economic Fury' against militia and terror groups
Since the launch of the US-led military campaign against Iran, known as Operation Epic Fury, in late February, Washington has expanded its strategy beyond the battlefield, ramping up efforts to curb Iran-backed militia activity through a parallel pressure campaign dubbed “Economic Fury.”
Earlier this month, the US State Department’s Office of Foreign Assets Control (OFAC) announced that it had designated seven Iran-backed Iraqi militia commanders as terrorists. These individuals were recognized for planning, directing, and executing attacks against US personnel, facilities, and interests in Iraq.
The OFAC stated, “These militias attack US personnel and innocent civilians across Iraq, siphoning the country’s wealth to finance their terrorist activities and undermining Iraq’s sovereignty and democratic processes.”
In addition to the designated terrorists list, the US State Department’s Rewards for Justice program (RFJ) announced a $10 million reward for information on Ahmad al-Hamidawi, the leader of Kataib Hezbollah.
Hamidawi has been a designated terrorist since 2020, when he took over leadership from Abu Mahdi al-Muhandis. RFJ described Kataib Hezbollah (KH) as an "Iranian-aligned terrorist group responsible for attacks on US diplomatic facilities in Iraq, the kidnapping of US citizens, and the killing of innocent Iraqi civilians."
One notable case involved US citizen Shelly Kittleson, who was kidnapped in Baghdad in March. She was released by KH following the announcement of a ceasefire between the US and Iran.
Seth J. Frantzman and James Genn contributed to this report.