US Threatens To Cut Iraq Off From Oil Revenue Over Government Composition

Iraq had a parliamentary election in late 2025, with the results ratified in mid-December. This, as usual, led to a scramble to try to form a majority coalition out of a large number of political parties that gained meaningful seats in a situation where the plurality was only 11.74%, far short of the ability to form a government without a slew of partners.

This is always a challenge, and involves a lot of internal compromise over cabinets and coalition structure. The US, however, is making this dramatically more challenging by threatening to withhold materially all of Iraq’s oil revenue from the Iraqi government if the coalition isn’t to their satisfaction.

The US is able to do this, because in post-occupation Iraq, their oil revenue is held in US dollars at the Federal Reserve Bank of New York, right where the US can easily get at it or restrict its transfer to the Iraqis whenever the mood suits them.