Iraq’s cash crisis meets US pressure over Iran-backed militias
WASHINGTON/BAGHDAD — The United States has linked the release of around $30 billion in Iraqi funds and financial guarantees frozen since the era of former president Saddam Hussein to Baghdad taking steps to place all weapons under state control and dismantle Iran-aligned armed factions, informed sources said.
The move comes as Iraq faces a mounting liquidity crisis that is placing severe pressure on public finances and complicating the payment of salaries to government employees, retirees and social welfare beneficiaries.
According to the sources, the Iraqi government had hoped that Prime Minister Ali al-Zaidi’s visit to Washington would provide an opportunity to reopen discussions over the frozen funds and secure progress on the issue. However, the administration of US President Donald Trump did not submit a recommendation to Congress approving their release, leaving the matter unresolved.
The sources said Baghdad’s renewed efforts are taking place amid growing economic pressure, with the government facing increasing difficulty meeting its financial obligations.
Washington, they added, has tied any movement on the frozen funds to concrete progress on two fronts: tightening control over armed groups and improving the investment environment for US companies operating in Iraq.
The frozen assets include a range of Iraqi financial holdings and guarantees accumulated over decades, with some subject to restrictions linked to the legacy of Saddam Hussein’s rule and international sanctions imposed following Iraq’s invasion of Kuwait in 1990.
Baghdad has been seeking access to the funds to strengthen its financial reserves and ease pressure on the state budget, particularly as Iraq’s economy remains heavily dependent on oil revenues and vulnerable to fluctuations in global crude prices.
The push comes as the Iraqi government confronts a growing cash shortage that has already affected public spending. A lack of available funds has contributed to delays in paying salaries and meeting obligations towards pensioners and recipients of state support programmes.
Finance Minister Falih al-Sari has acknowledged the existence of a significant budget shortfall, saying the government is facing genuine financial constraints that have affected payment schedules. He said monthly salary commitments alone amount to around 7.8 trillion Iraqi dinars, placing considerable strain on public finances.
Government spokesman Haider al-Aboudi has also highlighted the widening gap between monthly expenditure and available revenues, saying Iraq requires around 10.8 trillion dinars each month to cover salaries and general government spending.
By contrast, current oil revenues are estimated at only around 2.5 trillion dinars, underscoring the scale of the financing gap and the difficulty of meeting state obligations without additional sources of funding.
Analysts say the frozen funds issue has become increasingly intertwined with Iraq’s wider political and security landscape. Washington does not view the release of the money as merely a financial transaction, they argue, but as part of a broader effort to reshape Iraq’s security environment and reduce the influence of armed factions that the United States considers a threat to its interests and regional stability.
The Iraqi government, meanwhile, is seeking to avoid allowing the financial issue to become solely a political bargaining tool. Baghdad is attempting to secure international assistance to overcome its economic pressures while maintaining dialogue with Washington over the future of bilateral relations, security cooperation and US investment in the country.
The dispute comes at a sensitive moment for Iraq, as pressure mounts on authorities to find urgent solutions to the liquidity crisis. Officials have warned that continued financial strain could deepen delays in salary payments and increase social tensions, making access to frozen funds an increasingly important option for easing economic pressure.
For Washington, however, the fate of the money appears tied to a broader strategic question: whether Baghdad can demonstrate greater control over the country’s armed landscape and create conditions seen by the US as necessary for long-term stability and investment.