U.S., in control of oil dollars, heaps pressure on Iraq over Iranian influence

By Maha El Dahan, Timour Azhari and Humeyra Pamuk

DUBAI/WASHINGTON, Jan 23 - Washington has threatened senior Iraqi politicians with sanctions targeting the Iraqi state - including potentially its critical supply of oil revenue sourced via the Federal Reserve Bank of New York - should Iran-backed armed groups be included ?in the next government, four sources told Reuters.

The warning is the starkest?example yet of?U.S. President Donald Trump's campaign ?to curb Iran-linked groups' influence?in Iraq, which has long walked a tightrope between its ?two closest allies, Washington and Tehran.

The U.S. warning was delivered ?repeatedly over the ?past two months by the U.S. Charges d'Affaires in Baghdad, Joshua Harris, in conversations?with Iraqi officials and influential ?Shi'ite leaders, including some heads of Iran-linked ?groups via intermediaries,?according to three Iraqi officials and one source familiar with the matter who spoke to Reuters for this story.

Harris and the ?embassy did not respond to requests ?for comment. The ?sources requested anonymity?to discuss private discussions.?

Since taking office a year ago,?Trump?has acted to weaken the Iranian government, including via its neighbor Iraq.??

Iran views Iraq ?as vital for keeping its economy afloat amidst sanctions, and has long using Baghdad's banking system to skirt the restrictions, U.S. and Iraqi officials have said. Successive U.S. administrations have sought to choke that dollar stream, placing sanctions on more than a dozen Iraqi banks over the past years in an effort to do ?so. It ?has never curtailed the dollar flows from the New York Fed to the Central Bank of Iraq.

"The United States supports Iraqi sovereignty, and the ?sovereignty of every country in the region. That leaves absolutely no role for Iran-backed militias that pursue malign interests, cause sectarian division, and spread terrorism across the region," a U.S. State Department spokesperson told Reuters, in response to a request for comment.

The spokesperson did not answer Reuters questions about the sanction threats.

Trump, who bombed Iran's nuclear?program in June,?threatened to again intervene?militarily?in ?the country during protests?last week.

Iraqi Prime Minister Mohammed Shia al-Sudani's office, the Central Bank of Iraq and Iran's mission at the United Nations did not respond to requests for comment.

(Reporting by Maha El Dahan, Timour ?Azhari and Humeyra Pamuk; Additional reporting by Ahmed Rasheed; Editing by Frank Jack Daniel)