On a tightrope… Iraqi efforts to dry up “dollar channels” to Iran

On a tightrope… Iraqi efforts to dry up “dollar channels” to Iran
On a tightrope… Iraqi efforts to dry up “dollar channels” to Iran
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Under pressure from the United States, the Iraqi Prime Minister, Muhammad Shia al-Sudani, used the elite forces involved in “fighting terrorism” to confront merchants smuggling currency to Iran.

Saturday’s raids in Baghdad represent an early test for al-Sudani, who took office in October after more than a year of political paralysis and must now tread a delicate diplomatic path.

And approved the Federal Reserve (Central Bank of America) in New York, stricter controls on international transactions in dollars for Iraqi commercial banks in November.

The move aims to stem the flow of illicit dollars to Iran, which faces US sanctions linked to its “destabilizing” activities, including its nuclear programme.

Representative Aqil al-Fatlawi accused Washington of deliberately using the new regulations as a “political weapon”. He said in remarks reported by “Reuters”: “The Americans are using strict instructions regarding dollar conversions as warning messages to the prime minister, to keep him in line with American interests, that working against us may lead to the overthrow of your government. This is the American message.”

A senior banking official told Reuters, “The United States sent a clear message to Iraqi officials, that either adhere to the new regulations, or the Central Bank of Iraq will face fines.”

Walking the tightrope between Tehran and Washington

Al-Sudani relies on Washington’s intentions to ensure that oil revenues and his country’s finances are not subject to US control, and he also needs Washington’s help in fighting ISIS, but he came to power with the support of parties affiliated with Tehran.

Baghdad-based political analyst Ahmed Yunis said that the Iraqi prime minister “faces a complex challenge, which is how to pursue balanced policies with two of the most staunch enemies of each other, Washington and Tehran, and both countries are friends of Iraq at the same time, without taking sides. It is a task.” It is very difficult, and the Sudanese are walking on a tightrope.”

100 million dollars a month

Iran needs dollars to stabilize its deteriorating economy, which has been severely affected by US sanctions imposed since 2018, after then-US President Donald Trump announced his withdrawal from the nuclear agreement concluded between Iran and world powers in 2015.

The turbulent Iranian currency has lost about 30% of its value since the protests that swept the country following the death of Iranian-Kurdish Mahsa Amini (22 years) on September 16, which increased the country’s isolation.

For years, the religious establishment has been using shell companies outside its borders, including Iraq, to ​​obtain the dollars it needs for international transactions and to fund its agents across the Middle East, according to Reuters.

Two advisers to private Iraqi banks who regularly attend meetings with the central bank, who spoke on condition of anonymity, said Iran receives about $100 million a month from Iraqi traders.

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Iraqi security officials under the prime minister’s administration reported that they had “compelling evidence” that smugglers were buying large quantities of dollars from the currency markets in Baghdad and smuggling them through border crossings into Iran, particularly since mid-January.

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A colonel in the Iraqi border police at the Shalamja crossing near the city of Basra in the south said that dozens of smugglers buy dollars from the currency markets in Baghdad, and use school bags to transport them before filling them in four-wheel drive cars to the border, under the protection of armed guards.

Economical price

Under the new restrictions, Iraqi banks must use an electronic platform to disclose their dealings and details about the sender and recipients, and US officials can object to suspicious transfer requests.

Nabil Al-Marsoumi, a professor of economics at the University of Basra, considered that “the new system slowed down dollar transactions,” while banking officials said that anti-smuggling measures also created a gap in public finances.

Banks that were reluctant to register on the electronic platform resorted to free markets in Baghdad to buy dollars, which created a deficit, as demand exceeded supply.

At the same time, the price of consumer goods has increased and the value of the Iraqi currency has plummeted, deepening anti-American sentiment among politicians in Iraq, which remains unstable nearly 20 years after the invasion.

Dealer Jumaa Al-Hilfi said that the transfer of dollars to Iran and its ally Syria, which is affected by the sanctions, also affected the Iraqi currency.

The value of the dollar when selling was 1470 Iraqi dinars before the new transportation restrictions set by the Federal Reserve Board, and the dinar fell in December at 1620 dinars against the dollar, before the restrictions began to apply at the beginning of the week.

And the official news agency said, on Monday, that the Iraqi prime minister relieved the governor of the central bank from his post after the decline in the value of the dinar, adding that Mustafa Ghaleb Makhaif told the prime minister that he no longer wanted to remain in office.

The prime minister tried to reassure the Iraqis that the dinar and the economy would be safe from US restrictions and regulations.

Al-Sudani said in one of the events, on Saturday: “We have taken a number of bold decisions to support and stabilize the Iraqi dinar, and we warn those who try to exploit the crisis.”

Hadi Ali, an account manager at a private bank in Baghdad, expressed his skepticism about that. “Following the new American conditions means that we will have to wait for long periods of time to be allowed to transfer, this is harmful to our interests… Almost all dollar transfers end up reaching parties linked to Iranian interests, this is not a secret,” he said.

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