US Warns Iraq: Disarm Militias or Dollar Transfers Halt by Sept 30

The US has warned Iraq that it may halt dollar transfers unless Iran-aligned armed factions disarm by September 30, according to two Iraqi government sources.

The warning was reportedly delivered directly to Prime Minister Ali al-Zaidi during his visit to Washington, where U.S. officials made clear that failure to curb armed groups threatening American and regional interests would carry consequences for bilateral relations and Iraq's access to dollar liquidity.

Economic observers note that Iraq's oil revenues are held through the Central Bank of Iraq's account at the Federal Reserve Bank of New York, with dollar liquidity subsequently made available to Iraq's financial system. Disruptions to that flow can put pressure on the dinar's market exchange rate and complicate the Central Bank's ability to supply foreign currency to an economy heavily dependent on imports.

The US has already demonstrated its ability to exert pressure through the timing of dollar transfers, with a delay in April 2026 affecting the value of the dinar. The prime minister subsequently pushed for armed factions to surrender their weapons by September 30, but several groups have resisted, including Kataib Hezbollah and Harakat al-Nujaba.