President Trump used a July 14 Oval Office meeting with Iraq’s new prime minister to demand the disarming of Iran-backed militias by September 30, coupling the ultimatum with a proposed Chevron-led pipeline and the implicit threat of cutting off Iraq’s access to its own oil revenues, which have been held in a Federal Reserve account in New York since 2003.
Ali al-Zaidi, installed with Trump’s backing two months ago, set the same deadline for armed groups to surrender weapons. But his ability to enforce it depends on Washington’s continued financial support, which remains conditional on progress against Iranian influence.
Since 2003, roughly 90 percent of Iraq’s oil revenues have passed through an account at the Federal Reserve Bank of New York. Washington has always known it could turn the tap. On July 14, it did.
President Trump hosted Prime Minister Ali al-Zaidi in the Oval Office and publicly praised him as “a great fan of America.” The two men, both businessmen and political outsiders, spoke of jobs, investment, and a new chapter. But the meeting’s real architecture was financial. Al-Zaidi’s government cannot pay salaries or import goods without US permission to move its own oil money. That permission, suspended in April amid the Strait of Hormuz conflict, was restored only after al-Zaidi’s selection—and it remains revocable.
The prime minister has now set a September 30 deadline for all non-state armed groups, including the Iran-backed Popular Mobilisation Forces, to disarm. Trump has tied the full withdrawal of remaining US forces to the same date. The sequence is not a coincidence. It is a transaction, and the currency is control over dollars.
The pipeline deal that would bypass Hormuz
According to two Iraqi officials who spoke on condition of anonymity, an agreement is expected to be signed on Friday between Iraq, Chevron, TI Capital and Qatar’s UCC to build a pipeline from Basra through Haditha to Turkey’s Ceyhan port and Syria’s Baniyas, with a capacity of about 2 million barrels per day. The project would offer an export route that avoids the Strait of Hormuz, which was closed for weeks earlier this year during US-Iran military clashes, costing Iraq tens of billions of dollars.
The pipeline is the economic inducement. The disarmament deadline is the condition. Al-Zaidi told reporters, through a translator, that “whoever surrenders his weapons… we will cooperate with them. Factions are a need, not a profession.” But Renad Mansour, director of the Iraq Initiative at Chatham House, said Washington will press hard for militia disarmament while al-Zaidi will demand support in return. “The U.S. will put significant pressure on al-Zaidi… and Zaidi will respond by saying, ‘But I need support — intelligence support, technical support, armed support,'” Mansour said.
Amberin Zaman, senior correspondent at Al-Monitor, noted that security remains the Trump administration’s top priority with Baghdad, “above all the disarming and disbanding of Iran-backed militias.” Ali Al-Mikdam, an Iraqi political analyst, added that Washington sees the visit as a chance to redefine the relationship around reducing Iranian influence, while Iraq seeks a stable strategic partnership.
The chemistry between two businessmen is the story the White House wants told—the story that matters is written in dollar clearing rules.
Al-Zaidi’s own background underscores the financial scrutiny. He previously chaired Al-Janoob Islamic Bank, which Iraq’s central bank banned from dollar transactions in 2024 under US pressure to curb money laundering and funds flowing to Iran. That history makes him a known quantity to US regulators—and a reminder that access to dollars is never guaranteed.
For an Iraqi finance ministry official trying to pay salaries, the difference between a pipeline announcement and a signed contract is the difference between a functioning state and a payroll crisis.
Giorgio Cafiero, CEO of Gulf State Analytics, is sceptical. “I have a rather tough time imagining that,” he said of the state asserting its monopoly on force.
The pipeline’s capacity, set against Iraq’s ambitious production targets, reveals the scale of the bet.
The financial architecture that never went away
Iraq’s oil revenues from exports paid in US dollars are cleared through correspondent accounts and, for government proceeds, through arrangements with the Federal Reserve Bank of New York and US commercial banks. Because these flows use the US financial system, Washington can suspend or delay dollar transfers and cash shipments. That is what happened in April 2026, when the US froze dollar shipments to Iraq and suspended security agreements amid the Hormuz conflict, then unfroze them after al-Zaidi’s selection—a sequence that underscored US financial leverage.
The 2008 Strategic Framework Agreement structures US–Iraq cooperation on security, energy and economics. It now guides the planned complete withdrawal of US forces by late September. But the financial mechanism predates that agreement and has outlasted every Iraqi government since 2003. It is the quiet constant beneath every Oval Office handshake.
European governments have responded cautiously, issuing broad statements on de-escalation and Gulf energy stability without publicly endorsing the disarmament plan. They remain reliant on Iraqi and regional oil flows but wary of being drawn into US–Iran confrontation.
For Western governments and firms, whether al-Zaidi can rein in Iran-backed militias will shape security conditions around key energy infrastructure, including the planned pipeline carrying up to 2 million barrels per day. A successful disarmament drive would lower risks to US and European oil companies, ease pressure on naval deployments in the Gulf, and support more predictable global supply. Failure would keep export routes vulnerable to attacks, complicate sanctions enforcement on Iran, and force continued US and allied military engagement to protect shipping and bases, with direct implications for defence budgets and corporate risk premiums.
The pipeline deal, if signed, would lock in a long-term alternative to Hormuz-dependent exports with major US corporate involvement. But its viability depends on security conditions that the disarmament push is meant to create. The September 30 deadline will test whether financial leverage can force a political outcome that two decades of military presence could not.
Beyond the headline
The Power Behind It
The Oval Office handshake was the visible moment, but the real power sits with the US Treasury and the Federal Reserve, which decide how quickly Iraq can convert oil reserves into budget revenues. That control shapes al-Zaidi’s room to confront militias without collapsing state finances.
The Money Trail
The proposed Basra–Haditha pipeline would redirect transit fees and contract rents away from routes vulnerable to Iranian naval leverage and toward corridors where Western firms and financiers dominate. The pipeline’s routing through Western-controlled corridors represents a shift in regional economic leverage, a factor that may complicate disarmament negotiations with Iran-backed groups.
What Isn’t Being Said
Some analysts note that public statements emphasise chemistry between two businessmen and talk of jobs, but give limited attention to domestic risks for Iraqis who rely on militias for security and patronage. Unclear from public statements is how disarmament will address local governance vacuums or the social and political reintegration of fighters. Including that dimension reveals that success will depend not only on US leverage and Iraqi laws but on building alternative structures of protection and livelihood at neighbourhood level.
The September 30 deadline will separate signal from noise
With the disarmament deadline approaching and the pipeline deal still in negotiation, four groups face immediate decisions.
- US-based energy investor with Middle East exposure
Assess the viability of the Basra–Haditha pipeline by monitoring Chevron’s investor reports and official Iraqi government announcements. Track US government releases at state.gov and congress.gov for any conditions attached to security cooperation or financial access—these will signal how firmly Washington ties militia disarmament to continued economic support. The pipeline’s capacity to de-risk Iraqi exports depends on whether the security environment improves, not just on a signed agreement.
- Western defense contractor with Middle East operations
Evaluate the changing security environment by watching for any escalation or de-escalation around the September 30 deadline. Adjust risk assessments and security protocols for personnel and assets in Iraq, particularly in southern and western regions where the pipeline would run. The disarmament push could reduce threats to US and allied bases, but militia defiance would keep operational risks high.
- US Treasury or State Department policy analyst focused on Iran sanctions
Analyze the efficacy of using financial pressure on Iraq to achieve foreign policy goals regarding Iran. Monitor congressional hearings and Treasury statements for any new conditions on dollar access or sanctions waivers. The April 2026 freeze-and-thaw sequence offers a case study in how quickly financial leverage can be applied and withdrawn—and whether it produces lasting compliance or only temporary alignment.
- European oil and gas procurement manager
Monitor the progress of the pipeline project and the disarmament efforts to anticipate changes in crude oil availability and transit risks. A successful pipeline would diversify supply routes away from Hormuz, potentially stabilising prices. Track Chevron’s risk assessments and any delays in the project timeline, as these will indicate whether corporate actors believe the security environment is genuinely improving.
Explainer
- Popular Mobilisation Forces
- The Popular Mobilisation Forces (PMF) is an umbrella of mostly Shia armed groups formed in 2014 to fight ISIS, now legally part of Iraq’s security apparatus. Many factions receive Iranian support and operate with significant autonomy from the state. The September 30 deadline demands they disarm or integrate fully, a step that would dismantle a parallel power structure built over a decade.
- Strategic Framework Agreement
- The 2008 Strategic Framework Agreement between the US and Iraq outlines long-term cooperation in security, energy, economics, and culture. It replaced the UN mandate for US forces and now provides the legal basis for the planned withdrawal of remaining American troops by late September 2026. The agreement does not cover financial controls, which rest on separate banking arrangements.
- Federal Reserve Bank of New York
- The Federal Reserve Bank of New York holds accounts where Iraq’s oil revenues, paid in US dollars, are deposited. Because these funds move through the US financial system, Washington can delay or block transfers under anti-money laundering and sanctions rules. This arrangement, in place since 2003, gives the US direct leverage over Iraq’s budget.
- Basra–Haditha pipeline
- The proposed Basra–Haditha pipeline would carry Iraqi crude from southern oil fields through western Iraq to Turkey’s Ceyhan port and Syria’s Baniyas, with a capacity of about 2 million barrels per day. It would offer an export route bypassing the Strait of Hormuz. The project involves Chevron and other international partners, but its construction depends on improved security along the route.
- Strait of Hormuz
- The Strait of Hormuz is a narrow waterway between Iran and Oman through which roughly a fifth of the world’s oil passes. Its closure during US-Iran military clashes in early 2026 cost Iraq tens of billions of dollars in lost exports. The new pipeline is designed to reduce Iraq’s vulnerability to any future disruption of this chokepoint.
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