NextFin News - In a move that has sent shockwaves through the Middle East’s diplomatic corridors, U.S. President Trump issued a definitive warning on Tuesday, January 27, 2026, stating that the United States will completely sever ties and withdraw all forms of assistance from Iraq if Nouri al-Maliki is reappointed as Prime Minister. The ultimatum, delivered via the social media platform Truth Social, comes as Iraq’s Coordination Framework—a powerful coalition of Shia parties—formally nominated al-Maliki to lead the next government following the November 2025 elections. U.S. President Trump characterized the potential return of al-Maliki as a catastrophic choice, citing the former leader’s "insane policies and ideologies" which he claims previously led the nation into "poverty and total chaos."
The timing of this intervention is critical. Iraq’s parliament is scheduled to elect a new president today, a procedural milestone that triggers a 15-day window for the largest parliamentary bloc to form a government. By threatening to withhold all support, U.S. President Trump is effectively attempting to exercise a veto over the sovereign political process of Iraq. According to Antiwar.com, this threat is backed by a formidable financial cudgel: the potential cutoff of Iraq’s oil revenue. Since 2003, Iraq’s oil proceeds have been held in dollar-denominated accounts at the Federal Reserve Bank of New York. By leveraging this historical arrangement, the U.S. administration is signaling that it is prepared to bankrupt the Iraqi state to prevent a leadership transition it deems unfavorable to American interests and regional stability.
The primary driver behind this aggressive stance is the perceived resurgence of Iranian influence. During his previous tenure from 2006 to 2014, al-Maliki was frequently criticized by Washington for his close ties to Tehran and for sectarian policies that many analysts believe created the vacuum filled by the Islamic State. For the current U.S. administration, al-Maliki represents a "red line" that connects Baghdad too closely to the Iranian axis. By targeting al-Maliki specifically, U.S. President Trump is attempting to force the Coordination Framework to nominate a more centrist or Western-aligned figure, thereby maintaining the "maximum pressure" campaign against Iranian proxies in the region.
From a financial perspective, the implications of a total severance of ties are staggering. Iraq remains heavily dependent on U.S. technical assistance, military support, and, most importantly, access to the global dollar system. If the U.S. President follows through on the threat to seize or freeze oil revenues, the Iraqi Dinar would likely face an immediate collapse, triggering hyperinflation in a country already struggling with a 20% poverty rate and high youth unemployment. This economic leverage is the ultimate "hard power" tool in the U.S. arsenal, transforming a bilateral relationship into a transactional ultimatum where political compliance is the price of national solvency.
However, this strategy carries significant risks of backfiring. While U.S. President Trump aims to stabilize Iraq by preventing a return to sectarianism, the threat of total abandonment could instead push Iraqi factions closer to alternative power centers, namely China and Russia. Baghdad has already shown increasing interest in diversifying its security and economic partnerships. If the U.S. withdraws, the resulting power vacuum would likely be filled by regional competitors, potentially ending two decades of American strategic primacy in the country. Furthermore, the threat has already unified certain Shia and Kurdish factions who view the move as an unacceptable infringement on Iraqi sovereignty, potentially hardening their resolve to seat al-Maliki as a gesture of defiance.
Looking ahead, the next 15 days will be a period of intense volatility for Middle Eastern markets and geopolitical security. If the Iraqi parliament proceeds with al-Maliki’s nomination, we can expect the U.S. Treasury to move swiftly with sanctions or restrictions on the Central Bank of Iraq. Conversely, if the threat successfully forces a change in nominee, it will establish a new precedent for U.S. foreign policy—one where the U.S. President directly dictates the leadership of allied nations through economic coercion. For now, the stability of the global oil market remains sensitive to these developments, as any disruption to Iraq’s 4 million barrels per day output would trigger a sharp spike in energy prices, complicating the U.S. President’s domestic economic agenda.
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