Iraq has been worried about what the new Trump administration might do to it for its ties to Iran and got its first news in February.
It was announced as part of a new Maximum Pressure campaign against Iran that the U.S. will no longer give Iraq an exemption to buy electricity and natural gas from Iran. Iraq imports 33-40% of its energy needs from Tehran. Sanctioning Iraq for these purchases will have a major impact upon the economy and society as there is no way for Baghdad to replace these supplies at this time. Going without will lead to blackouts in central and southern sections of the country.
The U.S. also wants to crack down upon Iraq’s financial system which is manipulated by Iran to buy U.S. dollars which are crucial for Tehran to survive under sanctions. The Central Bank of Iraq auctions millions of dollars every day which are supposed to be used by companies to buy foreign goods and Iraqis travelling to other countries. The country’s ruling parties, Iran, Syria, the Islamic State and gangs have all abused the system by using fake invoices and front companies to get their hands on dollars. For years Washington has attempted to get the Bank to pass reforms to stop this process but as long as Iraq’s elite are taking part there is no political will to do anything substantive. This could lead to further punishments for Baghdad which could cripple the economy which is dependent upon dollars. The country’s main money maker is oil which is paid for in U.S. currency. The Iraqi dinar is also pegged to the dollar.
SOURCES
Al Mada, “Decline in Iranian gas supplies reduces 70% of electricity production in Diyala,” 12/9/24
NINA, “Trump cancels exemption granted to Iraq to import electricity and gas from Iran,” 2/5/25
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