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Baghdad - Many people might think oil played its role getting US troops into Iraq, but now that black gold is going to have a major effect in getting them out.

For the Iraqi government's revenues have sky-rocketed to an estimated $80bn this year as a result of the rising oil price, and it is making them increasingly assertive.

The cash is pouring in so fast that the Iraqis do not know how to spend it, and cannot even print banknotes fast enough to service the burgeoning government payroll (soldiers and civil servants in this country are all cash paid).

The United States, with its vast national debt and tottering economy continues to sacrifice its soldiers meanwhile, to gain what General David Petraeus, the outgoing commander here, calls "irreversible momentum" towards stability.

It is true, of course, that foreign oil companies, including American and British ones, have been granted fat contracts to expand Iraq's oil production and many see this as payback for their role in stabilising the country.

That said, the characterisation of the 2003 invasion as a 'war for oil' looks increasingly bizarre when one considers the financial clout that Iraq's government has gained in recent times - a bonanza paid for by motorists, or other oil users in the USA, and other major economies.

Many foreign experts doubt Iraq's ability to use the money wisely or fairly.

At the end of 2006, for example, it emerged that the government was sitting on $10bn in cash because they lacked the 'capacity' to spend it fast enough. Nobody knows quite how big the cash mountain is now, but the country is crying out for investment.

The electricity supply remains many people's bugbear, but there are a host of other ways the ministries could be spending money to improve the lives of ordinary Iraqis.

The doubts extend to whether the money will be distributed fairly among the country's ethnic groups and whether it will lead to galloping corruption. It is the delicate question of Sunni-Kurdish-Shia relations that has prevented the passage of an oil bill through Iraq's parliament for the years.

Walking with an American commander through the streets of Doura, a predominantly Sunni suburb of Baghdad, I ask which of the many visible public works projects are being paid for by the Iraqis rather than the US taxpayer. It transpires that very few are.

In his talks with local officials, the American has detected a "terror of corruption" in disbursing contracts that has prevented them moving much faster.

It is clear though that if the American job-creation money dries up and the government is not smart about stepping up its act, Sunni residents of Doura and elsewhere may soon be accusing the Shia-dominated cabinet of discrimination.

The oil bonanza thus carries risks as well as opportunities. As the cash mountain gets bigger and bigger, political pressure will build from ordinary Iraqis for it to be spent, and the character of the relationship with the US is changing.

"External pressure has less and less effect", notes one senior foreigner.

For the Americans, this is complicating their negotiations on a new Strategic Framework Agreement (see below) with the Iraqis - a treaty setting out why US troops will remain in the country once their United Nations mandate expires on 31st December 2008.

Many believe Prime Minister Nouri al-Maliki is tempted to drag out the negotiations, making the most of the Bush Administration's weakness in its dying days.

So, as the different parties enter the much talked about 'end game' in Iraq, the reduction of violence and high oil price change the diplomatic dynamics completely.

When the UN mandate for foreign troops expires, many expect a further boost to Dr al-Maliki's confidence.

"From the 1st January", jokes one wag currently negotiating with the Iraqis, "the lunatics will very much be in charge of the asylum".