Lost in the noise of the story is what this is really about, the negotiations to establish a SOFA with Iraq. The SOFA, or Status of Forces Agreement, establishes the guidelines under which US Forces may operate in a given country, and protects both US Soldiers and the host country. Normal items in a SOFA are where when and how US forces can operate, entry/exit requirements, and also determines when soldiers fall under the laws of the host country or the UCMJ, or both.

The "dire consequences" the US Is warning about is the fact that without the SOFA, US forces will have to withdraw from Iraq.

It's not a threat, it's reality. If they continue to stall, all forces in Iraq, not just US forces, will have to leave.