On September 14, the US Federal Reserve issued a “warning” to the Iraqi authorities, specifically the Central Bank, announcing its intention to “isssue” more sanctions on the Iraqi banking sector if it does not take additional steps to stop “trokes” in its sector, the most important of which is the smuggling of the US dollar to the countries on which Washington imposes economic sanctions, the most important of which is Iran.
The threats of the US Federal Reserve came after issuing previous sanctions last July, affecting fourteen Iraqi banks out of 72 official banks, representing a third of the local banks. These sanctions left their impact on the Iraqi economy by raising the prices of local goods, which directly led to popular “discontent”, according to The National News.
The first direct response to the US threats was issued by the Governor of the Central Bank of Iraq, Ali Mohsen Al-Alaq, on September 15, announcing the adoption of “new measures” to implement the US conditions to prevent the smuggling of the dollar, and the direct devaluation of the Iraqi dinar.
Al-Alak officially announced that the Central Bank of Iraq will start from next year 2024, by preventing all forms of local trading in US dollars, limiting them to the Iraqi dinar, and allowing travelers only to obtain the US currency, steps described by The Crydel newspaper as “fligent” to reduce the inflation rates that the Iraqi dinar is now suffering from, and raise its value against the dollar by reducing the smuggling operations of rampant inside the country, as described.
But these measures, according to the description of the newspaper, will directly lead to “more loads” on the Iraqi market and its economy, which, according to its description, still “suffers” from the consequences of previous financial crises, the last of which was the financial liquidity crisis that occurred in December 2020 last year, which raised the value of the dollar against the Iraqi dinar to about 1470 dinars against the dollar.
This year, the exchange rate of the Iraqi dinar against the dollar reached about 1540 with a further increase from 2020 and its financial crisis, which The National News said that the Iraqi dinar was put in front of more dangers given the continued US threats of sanctions and its decline in its value against the dollar despite the Iraqi government’s setting an official exchange rate of 1300 dinars against the dollar through its auction of the currency, which began to work since 2004 until today, as an attempt to control local dollar prices.
The new procedures. Dealing in “alternative” currencies and no dollar domestically
According to Al-Alak’s statements to foreign media, including Bloomberg, next year will witness a “complete ban” of the use of the US dollar in all domestic private and public transactions. This applies to individuals and companies operating in the public and private sectors, with the exception of individuals wishing to travel outside Iraq who will receive amounts of money from the dollar pre-specified by the Central Bank of Iraq.
The governor of the Central Bank also confirmed that most of the “businessmen” inside Iraq have already joined the official channels to grant the dollar and the official amount set by the bank of 1320 dinars against the dollar,” despite the Iraqi budget for the years 2023, 2024, 2025 set the dinar exchange rate against the dollar at only 1320.
According to The National News, the Central Bank of Iraq also plans to use other currencies in Iraqi foreign transactions, including import and export operations, among those currencies, the European euro, the UAE dirham, the Turkish lira and the Indian rupee. These plans come within the movements of the Central Bank to reduce dependence on the US dollar in Iraqi foreign transactions after the problems faced by the bank in paying Iranian dues for the importing gas during the previous years.
The US dollar will be “completely absent” from the Iraqi market if the measures of the Central Bank of Iraq are applied according to the network, which said that these moves, although they “in hopes to stabilize the exchange rate and stabilize the dinar against the dollar,” may return with a “reverse result” in the event of the loss of the dollar within the Iraqi local markets, which will lead to a significant increase in demand for it against the scarcity of its supply, and thus raising its prices to large levels for the local market, which the Central Bank of Iraq hopes to avoid it by “tightening” the anti-reversive measures, in addition to relying entirely on the Iraqi dinar internally, and alternative currencies externally.
The bank governor announced in response to concern that the negative scenario will be taken next year within the “new system” will “protect all parties and financial exchanges,” stressing “these operations are internationally acceptable and fully in line with economic laws to combat money laundering and terrorist financing,” referring to US sanctions.
According to Bloomberg, Al-Alaq also stressed that the Central Bank of Iraq will stop “all financial transactions” issued by it, and be fully assigned to local private banks with the aim of “fully dedicated to “monitoring and following up” only, as he described it, which will put the dollar allowed to be traded inside Iraq at the disposal of local banks that Washington puts lines of objection to their work, which may also lead to a “reverse result” according to the network if those banks do not comply with the Central Bank’s restrictions and US conditions.
Amid “popular discontent”. Washington that “longenor hand” on the Iraqi economy
The new measures and moves of the Central Bank of Iraq, in addition to the crises suffered by the Iraqi dinar during the last period, and the trend towards more restrictions on the dollar locally, prompted critics to declare the Iraqi economy “hostage” to Washington, according to The Craidal, especially with its great ability to take action against Iraqi banks.
These criticisms stem from the continued control of the US Federal Reserve over Iraq’s treasury from the dollar it obtains through oil trade, as the newspaper confirmed that since 2003 Iraq and the “illegal” invasion of the country, is depositing its oil imports in a special account of the Central Bank of Iraq within the US Federal Reserve.
The US Federal Reserve controls the official account of Iraqi oil revenues, which are worth about 100 billion dollars. The newspaper said that it gave Washington a “tight hand” over the Iraqi economy, especially as Washington still prevents the Iraqi government from opening any other foreign bank accounts in its favor, and completely launders them in the United States and its federal reserve only.
The newspaper warned the Iraqi authorities not to fall victim to the US Federal Reserve, stressing that “two years ago, the US Federal Reserve prevented Afghanistan from accessing its dollar treasury in its official account inside the US reserve, which led Afghanistan to fall into an unprecedented economic crisis,” according to its description, stressing that Iraq is still under the same danger if it does not move urgently to open another foreign account through which it obtains its oil revenues.
The US measures, including sanctions and threats to the Iraqi banking sector, directly led to a “significant rise in the prices of local goods and services,” according to the newspaper, which led to “great popular discontent” as it described it, expecting that public discontent will increase over the next year as the actions of the Central Bank of Iraq enter into force and prevent the circulation of the dollar locally.
These warnings were confirmed by the movements of the Central Bank of Iraq, which during the last period took “wine pledges” from local traders and businesses that prevent them from dealing in the US dollar and lamented all local transactions in Iraqi dinars, according to the newspaper, which also confirmed that the deterioration of the value of the Iraqi dinar against the US dollar contributed in advance to raising the ceiling of local prices.
Until the moment, the consequences of the severe measures taken by the Central Bank of Iraq are still unclear, especially with the great fluctuation in the exchange rate of the dinar against the dollar despite its availability locally, to leave now the Iraqi economy and therefore the citizen whose layers have been affected by the most economically affected by the greatest harm,” according to the newspaper described the mercy of the US administration, whose only goal seems now to “cut off the financing of the dollar” from Iran and Lebanon without taking into account the negative consequences on the Iraqi economy, and the citizen who has become the weakest link according to its description, in the equation of pressure and flexibility between the Central Bank of Iraq. And Washington
