U.S. budget plans reduce direct Peshmerga funding from $61 million to zero, ending a 2016 memorandum. KRG officials deny formal notification and seek continued Pentagon support while Iranian drones strike Erbil, deepening regional security concerns.
Reported plans to eliminate direct U.S. military funding for Kurdish Peshmerga forces have unsettled security calculations in northern Iraq. The proposed reduction from $61 million to zero in the fiscal year 2027 budget request would end a financing arrangement that began in 2016 and helped integrate Peshmerga units into the broader Iraqi Security Forces.
The US Peshmerga Aid has long been tied to reforms within the KRG’s Ministry of Peshmerga Affairs, and its expected expiration coincides with the U.S. troop withdrawal deadline of September 30. KRG officials have sent mixed signals, with the Peshmerga Ministry saying it was not formally notified of a cut while also confirming the memorandum of understanding ends this month. Other Kurdish officials insist the strategic partnership with Washington continues and that further discussions are underway.
The uncertainty is compounded by a fresh round of Iranian drone strikes on September 1-2, which targeted areas near Erbil and underscored the region’s exposure. In this context, US Peshmerga Aid is not merely a budgetary line item but a measure of how Washington balances its relationship with Erbil and Baghdad under mounting regional pressure.
Reported US Cut Alarms Erbil
On August 29, the BBC reported that the US was planning to end military support to the Kurdistan Regional Government’s (KRG) Peshmerga military force. The report comes as the US is withdrawing forces from Iraq ahead of a September 30 deadline and has led to numerous media reports in northern Iraq’s Kurdistan Region about the implications of a funding cut. Discussions about future US support also took place amid a new round of Iranian attacks on the Kurdistan Region on the night of September 1-2.
US Peshmerga Aid Follows 2016 MOU
US funding and support for the Peshmerga are part of a broader Memorandum of Understanding (MOU) between the US Department of Defense and the Kurdistan Regional Government Ministry of Peshmerga Affairs, first agreed to in 2016. In 2022, when the MOU was renewed, the Pentagon noted that it was focused on “supporting the Peshmerga Forces’ contributions to Defeat-ISIS operations as a component of the Iraqi Security Forces.” The deal also supported reforms within the KRG’s Peshmerga Ministry.
In the spring of 2026, reports first emerged that the new US budget funding request would reduce support for the Peshmerga from $61 million to zero. A small amount of support for medical needs, around $1 million, would continue in 2027. When this was reported in May, the Rudaw Media Network noted a discussion about keeping some of the funding. “The remarks come as the fiscal year 2027 budget proposal seeks to centralize the Counter-ISIS Train and Equip Fund in Baghdad. The request allocates $118.9 million to federal Iraqi defense and counter-terrorism forces while outlining zero direct funding for the Kurdistan Region,” the report noted.
Will the Funding Actually Stop?
The latest report still shows a move to zero funding, but the KRG has sent mixed messages about what comes next. On August 29, the Peshmerga Ministry said it had not been informed about a cut in funding. However, on August 30, the ministry also confirmed to Rudaw that the Memorandum of Understanding would end on September 30.
“Four years ago, at the Kurdistan Region Presidency, we signed a Memorandum of Understanding with the coalition. The four-year term ends in September, and all provisions within the memorandum have been fully implemented,” Minister of Peshmerga Shoresh Ismail told Rudaw. It was not clear from the reports if the MOU was directly tied to the funding.
Washington Calls Support Temporary
“The US Government’s financial support to the Kurdistan Regional Government for the unification of the Peshmerga forces was always intended to be temporary,” US Ambassador Joey Hood, the former US acting assistant secretary of state for Near Eastern Affairs, told The New Region.
Erbil Pushes to Keep Pentagon Ties
There is a push within the KRG to keep US support after September. Channel 8, headquartered in Sulimaniyeh in the Kurdistan Region, quoted a Peshmerga Ministry official as saying that the US and KRG would engage in discussions about continued support. KRG Interior Minister Reber Ahmed also said on August 29 that there were discussions with the Pentagon.
“The expiration of the current agreement should not be interpreted as an end to the strategic partnership or co-operation between the US and the Kurdistan Region,” Noreldin Waisy, spokesman for KRG Prime Minister Masrour Barzani, told The National on August 29.
US Peshmerga Aid Meets Iranian Drones
As the funding debate continues, Iran carried out strikes on the KRG on the evening of September 1-2. The Democratic Party of Iranian Kurdistan, one of the several Kurdish Iranian dissident groups that operate in northern Iraq, said it was targeted by Iranian drones. “Three drones first hit the Balisan mountains. Shortly afterwards, the Jezhnikan camp near Erbil, home to the families of PDKI members, was also targeted,” the group said.
Coalition Downs Drones Near Erbil
The KRG’s Counter Terrorism Directorate said that the anti-Islamic State coalition had downed 10 drones. Rudaw also claimed that the Iranian attacks had “destroyed” a surveillance balloon, though there was no separate confirmation. There have been more than 1,000 drone and missile attacks on the KRG since the US and Israeli strikes on Iran began in February.