Even as US military forces have officially withdrawn from Iraq, Washington retains a subtle but profound hold over the country’s future through the Federal Reserve Bank of New York. Since the 2003 invasion, Iraq’s oil proceeds—which account for roughly 90% of its national budget—have been funneled into a central account at the New York Fed. Originally established to protect these funds from legal claims stemming from the Saddam Hussein era, this financial arrangement has been renewed by successive US administrations. Today, it serves as a powerful instrument of foreign policy, granting the US significant leverage to influence Iraq’s political stability and limit the economic reach of Iranian-aligned actors.

While this system has provided a level of financial stability and international legitimacy for Iraq’s state revenues, it has also sparked complex economic consequences. By tightening controls on dollar access to curb money laundering and illicit transfers to sanctioned parties, the US has inadvertently fueled a volatile black market, creating a persistent gap between official and informal exchange rates. With the recent termination of the central bank's daily dollar auctions, Baghdad finds itself in a precarious balancing act: it must navigate the rigorous demands of US financial oversight while striving to assert its own economic sovereignty in a region deeply divided by geopolitical conflict.