U.S. Grip on Iraq's Oil Money Fuels Sovereignty and Iran Tensions

After the 2003 invasion, the Coalition Provisional Authority created the Development Fund for Iraq, moving oil proceeds to a Central Bank account held at the U.S. Federal Reserve under UN Resolution 1483. Though the UN-backed scheme ended in 2011, the IRAQ2 account in New York remains the main conduit for oil dollars, protecting revenues from legacy debts but also tying Iraq to annual U.S. executive orders for immunity.

In April, Washington halted a $500 million cash shipment to pressure Iraq over Iran-aligned militias, underscoring how the dollar flow can be weaponised. Iraqi officials cite the dollar’s dominance in trade and debt concerns as reasons to keep the New York account, while economists propose diversifying sovereign accounts and modestly selling oil in euros or yuan to gain financial autonomy. The debate reflects broader U.S. efforts to limit Iran’s reach and Iraq’s struggle to balance sovereignty with economic realities.