The Iraqi Football Association said it will pay 400,000 euros ($527,000) in compensation to former national coach Egil Olsen, who was fired after the then Asian champions were knocked out of qualifying for the 2010 World Cup.
Olsen was fired in 2008 after his team lost to China and players began complaining about his training methods.
Iraqi FA official Abdul-Khaliq Masoud said FIFA ordered the association to pay Olsen, who now coaches Norway, the compensation for nullifying his contract. The association chose to pay up rather than face possible punishment from football's world governing body.
Iraq is set resume its 2014 World Cup campaign in June.