The US has suspended all funding and security coordination with Iraq, and shipments of dollars the Central Bank of Iraq (CBI), until a new Baghdad government acceptable to Washington is formed, Saudi state-owned Al-Hadath reported Monday.
The US is also conditioning continued security cooperation on the disclosure of those involved in the bombing of its embassy, the news channel added.
Nevertheless, on Monday, the CBI released a statement rejecting the Al-Hadath report. Since 2003, a decision issued by Coalition Provisional Authority (CPA) head Paul Bremer has required that all Iraqi oil revenues be paid into an account at the US Federal Reserve Bank of New York, giving the US the ability to control how many US dollars are returned to the CBI.
From that point until today, the Iraqi Ministry of Finance has had to submit funding requests to the US Treasury, which then approves or denies them based on its own criteria.
This monthly transfer of US dollars, flown into Baghdad in pallets of hard cash, determines Iraq's ability to pay for basic needs such as salaries, food, and medicine.
Whenever Washington believes that Iraq is not aligned with US regional goals, including enforcing economic sanctions on Iran, Baghdad's major trading partner and a source of natural gas for electricity production, these fund transfers can be delayed or reduced.
The Coordination Framework (CF), the largest parliamentary bloc of Shia parties, has not yet selected a prime minister nearly five months after securing a plurality in the latest elections.
Former prime minister Nouri al-Maliki, viewed by the US as "close" to Iran, was initially chosen to replace incumbent Prime Minister Mohammed Shia al-Sudani.
However, while Washington wants to replace Sudani, it also opposes Maliki's return to power.
"Last time Maliki was in power, the Country descended into poverty and total chaos. That should not be allowed to happen again," Trump wrote on his Truth Social platform after Maliki emerged as a candidate for prime minister in January.
"Because of his insane policies and ideologies, if elected, the United States of America will no longer help Iraq," he said. If we are not there to help, Iraq has ZERO chance of Success, Prosperity, or Freedom. MAKE IRAQ GREAT AGAIN!"
Maliki was the prime minister in 2014 when ISIS conquered large swathes of Iraq, including the country's second-largest city, Mosul.
Maliki received much of the blame for the loss of nearly one-third of the country's territory to ISIS, which enjoyed covert support from the US military and Iraqi Kurdish leader Masoud Barzani.
The CF, which won 185 of 329 seats in the last election, must nominate a prime minister by April 26.