Patrick Cockburn reports in today’s Independent that the Bush Administration is holding $50 bn in Iraqi reserves hostage in order to force the Iraqi government into signing a long term military agreement with the US:

Iraqi critics of the agreement say that it means Iraq will be a client state in which the US will keep more than 50 military bases. American forces will be able to carry out arrests of Iraqi citizens and conduct military campaigns without consultation with the Iraqi government. American soldiers and contractors will enjoy legal immunity.
…

The fact that Iraq’’s financial reserves, increasing rapidly because of the high price of oil, continue to be held in the Federal Reserve Bank of New York is another legacy of international sanctions against Saddam Hussein. Under the UN mandate, oil revenues must be placed in the Development Fund for Iraq which is in the bank.

Another troubling element in this story is that the Iraqi government wanted to diversify some of their foreign holdings (kept by the US Treasury) to euros from dollars. This was vetoed by the United States, costing the Iraqis some $5bn due to depreciation of the dollar.