US Pressure Leads To New Rules On Using Dollars In Iraq But Will They Work?

(Iraqi News)

The US government is constantly telling Baghdad it has to tighten up its control of American dollars to fight money laundering and sanctions busting. In September a delegation from Washington arrived in Iraq to meet with Central Bank of Iraq officials who issued new regulations afterwards. The problem is the banking system is controlled by the elite who want to manipulate the system to make money and support its friends in Tehran so whatever rules are created will never work.

 

In September a US delegation arrived in Baghdad to talk with the Central Bank. The Americans said they might restrict dollars to Iraq if new rules aren’t created to deal with money laundering and sending funds to Iran in violation of sanctions. The Central Bank found that around 50% of dollars are used for illegal activities. Iraq is paid in dollars for its oil exports which is the main source of revenue and most transactions are also made using the US currency. Baghdad’s oil money is deposited in America which then sends the funds to Iraq.

 

Afterwards the Central Bank issued two new regulations. First, all transactions within Iraq would use dinars starting in 2024 unless people are travelling to another country and that people who deposit funds in Iraqi banks next year will only get dinars when they make a withdrawal. After the second rule was announced and there was a rush by people to get their money out of banks a government official said only individuals with overseas accounts would get dinars and everyone else would receive dollars. That immediately undermined the restriction.

 

Neither the Central Bank nor the US Treasury are addressing the root problem in this situation. As a parliamentarian recently noted the banking system is largely controlled by the ruling parties who manipulate the distribution of dollars. They make money by buying dollars from the Central Bank and then selling them on the black market for a profit because the exchange rates are different. Many are also connected to Iran and send dollars there violating sanctions or move the money into their own accounts in other countries such as Jordan and Lebanon. The elite therefore have no interest in the new regulations the Central Bank and the US are always pushing and will find loopholes to get around them. Without the political will to solve this problem it will never be fixed.

 

SOURCES

 

Al Aalem, “The Central Bank of Iraq and the dollar … ill-considered measures, and worse is coming,” 10/6/23

 

Azhari, Timour, “U.S. Treasury official says Iraq must act to avoid further action on banks” Reuters, 9/14/23

 

The Cradle, “Iraq central bank limits internal transactions to dinars,” 9/25/23

 

Al Mada, “Citizens queue at banks … and the dollar crisis is approaching a situation similar to Lebanon,” 10/7/23

 

Al Rafidain, “Representative Hussein Arab: There Are Serious Financial Manipulation Operations And The Economy Is Witnessing A Catastrophic Deterioration,” 10/10/23