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Staging an Iraqi Dinar Revaluation (RV): A Unique Background of Events

On October 23, 2023 By Awake-In-3D

In RV/GCR

This is Section 1 of: The Ultimate Guide to Every Economic and Political Reason for an Iraqi Dinar Revaluation (RV)

Amidst years of speculation, rumors, and expectations surrounding an Iraqi Dinar Revaluation (RV), there exists a base case to be made deserving serious consideration.

Coming Soon

Part 2 will identify and explain every key economic and political stability indicator that directly influences and supports a strong and stable currency exchange rate.

Part 3 will bring everything together to analyze and present a comparison between economic and political indicators for Iraq and the three strongest currencies in the world – Kuwait, Oman, and Bahrain.

However, it is crucial to ground any discussion in the real economic, financial, and political environment surrounding Iraq today.

While the speculative nature of previous claims may not align with economic reality, it is important to acknowledge the continuous improvements witnessed in Iraq’s economic development.

These advancements provide a legitimate rationale in support of considering the eventual revaluation of the Iraqi Dinar.

This report outlines a comprehensive set of factors contributing to this perspective, aiming to provide a thorough analysis of the landscape surrounding the case for an Iraqi Dinar revaluation (RV).

1.1 The Evolution of the Iraqi Dinar

The history of the Iraqi Dinar dates back to its introduction as Iraq’s official currency in 1932. At its inception, the IQD was at par with the British pound, reflecting a stable economy and strong financial position.

However, the subsequent decades witnessed a series of significant events that led to the devaluation of the IQD.

1.1.1 The Impact of Wars on the IQD

The Iran-Iraq war (1980-1988) and the subsequent Gulf War in 1991 had profound effects on Iraq’s economy and its currency.

These prolonged conflicts strained resources, disrupted economic stability, and resulted in the devaluation of the Iraqi Dinar.

See related article: IQD History: CBI Governor Speaks Publicly About Currency RV/RD in 2011

1.1.2 Economic Sanctions and Trade Restrictions

Economic sanctions, imposed by the international community due to various political and security issues, have played a pivotal role in the fluctuations of the Iraqi Dinar’s value.

Sanctions often limited Iraq’s ability to engage in international trade, leading to a decline in foreign currency reserves and contributing to the devaluation of the IQD.

1.2 Popular Reasons Fueling Speculation around an IQD Revaluation

Despite these challenges, speculations about the potential revaluation of the Iraqi Dinar have persisted.

Proponents of an Iraqi Dinar RV often highlight several primary arguments supporting their position.

These include:

1.2.1 Iraq’s Abundant Oil Reserves

Likely the most popular reason supporting expectations of an Iraqi Dinar revaluation is that Iraq possesses one of the world’s largest oil reserves, and the successful exploitation of these resources should significantly boost its economic potential.

This substantial oil wealth is a critical factor in the potential revaluation of the IQD.

SIDEBAR: Oil Credits for the USA?

Many argue that Iraq could support a high exchange rate to the U.S. Dollar because of a much rumored “Oil Credit Agreement” purportedly set up between Iraq and the USA after the Gulf War.

However, there is no conclusive evidence (other than what’s posted on various RV related internet sites) that supports such an agreement actually exists.

The trickle of oil imported from Iraq renders any Oil Credits insignificant. Source: US Energy Information Administration.

Furthermore, if such an Oil Credit Agreement did exist, the fact remains that in 2022:

The USA consumed 19.1 million barrels/day of petroleum

The USA produced 19.99 million barrels/day of petroleum

The USA imported 8.32 million barrels/day of petroleum

The USA only imported an average of 332 thousand barrels/day from Iraq (4% of USA’s total petroleum imports)

Source: US Energy Information Administration (https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php)

Source: US Energy Information Administration.

Given that the USA imports such an insignificant amount of petroleum from Iraq, the value of any “Oil Credits” would not support any meaningful role in an Iraqi Dinar RV.

1.2.2 Iraq’s Prospects of Economic Growth

Another popular reason offered in support of an IQD revaluation is Iraq’s potential for continued economic growth.

Underpinned by its oil resources and untapped economic potential, the community of IQD RV’ers has continued to grow over the years with committed interest.

Certainly there is a valid case to be made for a successful Iraqi Dinar revaluation being closely tied to Iraq’s ability to harness its economic potential.

Does Iraq now have a robust economic credentials to support a stable, high-value exchange rate?

A detailed analysis of Iraq’s key economic indicators will be presented in Section 3 of this report (link).

1.2.3 Political Stabilization in Iraq

Finally, Iraq’s purported progress in establishing political stability is another popular argument made in support of a significant currency revaluation.

Iraq’s journey towards political stability has been marred by challenges like corruption, security concerns, and political instability.

Protests in Baghdad over corruption, lack of jobs, and poor services in 2019. Photo: REUTERS/Khalid al-Mousily

As Iraq takes steps towards establishing lasting political stability and independent governance, the probability of a major currency revaluation (RV) would definitely increase.

Yet, has the government of Iraq (GOI) really made significant inroads to political stability?

This subject will be outlined in Section 3 of this report.

1.3 International Agencies and their Effect on Exchange Rates

It’s important to clarify that international agencies, such as the United Nations Security Council (UNSC) and the International Monetary Fund (IMF), do not possess the direct authority to arbitrarily set a country’s currency exchange rate (valuation).

This means that no international agency can mandate that the Iraqi Dinar (IQD) be changed from $3.00 per IQD to $0.0007 per IQD – or visa versa.

IMF members pose for a photograph April 22, 2017 at the IMF Headquarters in Washington, DC. Photo: Getty Images News

Currency exchange rates are primarily shaped by market forces, economic indicators, and the nation’s own financial policies.

While these agencies do not directly dictate exchange rates themselves, they do exert influence through mechanisms such as economic and geopolitical sanctions which may significantly impact a nation’s currency value.

1.4 Executive Orders and Economic Sanctions were a backdrop for an Iraq Dinar Revaluation

In the aftermath of the Gulf War and during the reconstruction of Iraq, a series of Executive Orders were issued to address assets, legal issues, and economic stability.

These Executive Orders collectively aimed to protect Iraqi assets, maintain the stability and security of Iraq, and support post-conflict reconstruction and development. Notably:

1.4.1 Executive Orders Effecting Iraqi Economic Reality

President George W. Bush signs executive orders and directives in the Oval Office on August 27, 2004 . Photo: White House Archives by Paul Morse

Here’s a list of every EO and U.S. Treasury Sanctions related to Iraq.

Executive Order 13303 (May 22, 2003)

Purpose: Protect the Development Fund for Iraq and Iraqi assets from being seized by creditors.

Safeguard the Development Fund for Iraq.

Prohibit attachment or judicial processes against Iraqi assets.

Ensure oil proceeds are used for Iraq’s reconstruction.

Maintain the stability and security of Iraq.

Executive Order 13315 (August 28, 2003)

Purpose: Expand measures to address security threats to Iraq’s stability, security, and reconstruction.

Broaden sanctions against individuals and entities.

Counteract threats to Iraq’s peace and security.

Support economic reconstruction and political reform.

Provide humanitarian aid to the Iraqi people.

Executive Order 13350 (July 29, 2004)

Purpose: Terminate previous national emergencies and modify EOs to address Iraq’s stability and security.

End prior national emergencies.

Modify EOs to counter Iraq’s stability threats.

Protect Iraq’s assets.

Promote reconstruction and development.

Executive Order 13364 (November 29, 2004)

Purpose: Modify protections for the Development Fund for Iraq while recognizing changes in Iraq’s circumstances.

Terminate prohibitions related to the Development Fund.

Balance asset protection with Iraq’s needs.

Address the evolution of Iraq’s financial situation.

Maintain the national emergency declared in EO 13303.

Executive Order 13438 (July 17, 2007)

Purpose: Block the property of individuals and entities that threaten Iraq’s stabilization efforts.

Block assets of those threatening Iraq’s stability.

Prohibit contributions to or from blocked individuals.

Counteract violence undermining peace and reconstruction.

Support Iraq’s economic and political progress.

Executive Order 13668 (May 27, 2014)

Purpose: End immunities granted to the Development Fund for Iraq, considering Iraq’s changing circumstances.

Terminate immunities related to the Development Fund.

Recognize changes in Iraq’s situation.

Balance asset protection with Iraq’s progress.

Maintain the national emergency declared in EO 13303.

1.4.2 Specifics Regarding Executive Order 13303

EO13303 Signed May 22, 2003. Photo: The American Presidency Project

There is much speculation over Executive Order 13303, issued by President George W. Bush in 2003, regarding the revaluation (RV) of the Iraqi Dinar.

Aimed to safeguard the Development Fund for Iraq and protect Iraqi petroleum-related assets, this order prohibited the attachment, judgment, or lien against these assets, aiming to facilitate Iraq’s reconstruction and stability.

Executive Order 13303 has been continuously extended beyond its initial issuance in 2003.

On May 16, 2023, a notice was issued to extend the national emergency with respect to the stabilization of Iraq, originally declared by Executive Order 13303 on May 22, 2003.

The order aimed to prevent obstacles to the orderly reconstruction of Iraq, the restoration of peace and security, and the development of political, administrative, and economic institutions in Iraq.

Executive Order 13303 does not directly mention the Iraqi Dinar currency or address a potential revaluation of the Iraqi Dinar but plays a role in protecting Iraq’s economic interests.

1.4.3 Economic Actions and Sanctions Levied Against Iraq by the U.S. Treasury

There were a number of Actions and Sanctions-related documents issued by the U.S. Treasury against Iraq. Below is a summarized explanation of each document.

OFAC Sets Out Expectations for Compliance with U.S. Sanctions

Establishing the Central Bank of Iraq/Oil Proceeds Receipts Account (May 22, 2003)

This document, issued on May 22, 2003, establishes the Central Bank of Iraq/Oil Proceeds Receipts Account.

The purpose of this account is to receive funds generated from the sale of Iraqi petroleum and petroleum products. It plays a crucial role in managing and allocating the revenue generated from oil sales for the benefit of Iraq.

Establishing the Iraq Stabilization and Insurgency Sanctions Regulations (June 13, 2003)

This document serves as an overview of the Iraq Stabilization and Insurgency Sanctions Regulations (ISISR) and was created around the same period as the ISISR.

It discusses several aspects of the sanctions on Iraq, including exporting to Iraq, financial transactions, prohibitions related to Iraqi cultural property, immunities from attachment, and exemptions for U.S. military forces operating in Iraq. The document provides a broader perspective on the sanctions’ context and application.

The Termination of Iraqi Sanctions and Removal from Chapter V of 31 C.F.R. (September 13, 2010)

What is 31 CFR Chapter V?

Title 31: Chapter V – OFFICE OF FOREIGN ASSETS CONTROL, DEPARTMENT OF THE TREASURY

Title 31 refers to Code of Federal Regulations (CFR) for the U.S. Department of Treasury

Subtitle B refers to Regulations Relating to Money and Finance

Chapter V refers specifically to the Office of Foreign Assets Control under the Department of the Treasury

https://www.ecfr.gov/current/title-31/subtitle-B/chapter-V/part-576

In September 2010, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) marked a significant milestone by formally ending economic sanctions on Iraq. This marked the removal of the Iraqi Sanctions Regulations from 31 C.F.R. Chapter V and introduced the Iraq Stabilization and Insurgency Sanctions Regulations (ISISR).

This transition was in line with several Executive Orders, including Executive Order 13303 (May 22, 2003), Executive Order 13315 (August 28, 2003), Executive Order 13350 (July 29, 2004), Executive Order 13364 (November 29, 2004), and Executive Order 13438 (July 17, 2007).

On September 13, 2010, the ISISR replaced the earlier Iraqi Sanctions Regulations, and as of that date, there were no comprehensive economic sanctions remaining against Iraq.

The ISISR contain the current OFAC restrictions related to Iraq and Iraqi property. As of the date of this document, there were no broad-based sanctions against Iraq. However, specific individuals and entities associated with the former Saddam Hussein regime were subject to prohibitions and asset freezes.

These individuals and entities were determined to have committed or posed a significant risk of committing acts of violence that could threaten the peace, stability of Iraq, the Government of Iraq, or undermine efforts for economic reconstruction, political reform, or humanitarian assistance in Iraq.

On September 13, 2010, the ISISR replaced the earlier Iraqi Sanctions Regulations, and as of that date, there were no comprehensive sanctions against Iraq.

Summary

This section has provided a detailed historical context surrounding the Iraqi Dinar, including its evolution, the impact of wars, the role of economic sanctions, the popular reasons for speculations regarding an Iraqi Dinar revaluation, and the role of international agencies and Executive Orders in currency exchange rates.

Coming Soon

Section 2 will identify and explain every key economic and political stability indicator that directly influences and supports a strong and stable currency exchange rate.

Section 3 will bring everything together to analyze and present a comparison between economic and political indicators for Iraq and the three strongest currencies in the world – Kuwait, Oman, and Bahrain.

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