The process of trade openness after 2003 cast a shadow on the economic reality, especially after the lifting of economic sanctions, which led to the return of the flow of oil exports to global markets. This led to an improvement in the financial conditions of successive Iraqi governments, which was reflected in an increase in individuals’ incomes (purchasing power) and in the absence of a base. Productivity Iraq turned towards imports to meet the multiple needs of the public (governmental) and private sectors, and with the presence of rapid profit from imports, most of the influential people turned to these transactions, which created economic chaos and a structural imbalance that affected the productive sectors, thus dominating the oil sector and achieving the rentierism of the Iraqi economy with complete distinction until the present time.
Since the discovery of oil for the first time by Colonel Dark in Pennsylvania in 1859, the oil commodity has been priced in the US dollar, and this has created a strong relationship between them, especially after World War II.
Accordingly, any sanctions imposed by the United States on oil-producing countries apply to commercial transactions in the dollar currency under the pretext of preserving their national security. This happened with Iran when economic sanctions were imposed on it. Consequently, any dealings in the dollar currency between Iran and the rest of the world were prohibited, with the exception of goods and humanitarian services, in accordance with the acceptance of the United States as well.
In light of what was stated, Iraq has commercial dealings with Iran due to relatively close ties, customs and traditions, in addition to the cheap prices of imported goods and the low costs of transportation and shipping as well.
However, after the beginning of the year 2023 and the new instructions to regulate Iraq’s foreign trade according to the new transfer mechanism through (the Central Bank platform), Iraqi merchants were prevented from official transactions in dollars with the sanctioned countries, and dealing outside the framework of the platform remained prevalent, which led to increased pressure on the cash dollar. Which the Central Bank sells through the foreign currency selling window, leading to a rise in the dollar exchange rate in the parallel market and reaching record levels compared to the official price approved by the Central Bank of Iraq.
The Central Bank has tried to remedy the situation by not aggravating it, and it has succeeded relatively recently through several measures, the most recent of which is providing the opportunity to import the dollar exclusively through airports and (diversifying the basket of commercial currencies) in terms of the agreement of Iraqi banks with Turkish banks to deal in the Turkish lira as well as dealing in the euro and the Emirati dirham.
Likewise, we hope that the Central Bank of Iraq will open commercial dealings with Iran, and this will go in two directions: – The first: (dinar versus riyal) and this depends on what products we export to Iran and import in the dinar currency? There is talk about relying on exports of petroleum products to Iran, but in light of the sanctions imposed on Iran by the United States, American sanctions will be imposed on Iraq (albeit indirectly, and the past few months are the best evidence), and therefore it is necessary to deal with this measure with complete caution.
Second: (exchanging goods for goods in light of the price weight of each type of goods) meaning organizing trade in currencies other than the dollar to relieve pressure on the dollar exchange rate in the parallel market. We propose electronic dealing by importing goods and products from Iran, and in return, the Iraqi private sector buys what the private sector needs. Iranian goods and services are shipped to them through a joint chamber of commerce and industry between the two sides.