Iraq’s Central Bank will exclude five domestic banks from America’s dollars transactions, sources of the matter have reported. The decision, after America’s Treasury officials had negotiations recently, is part of Iraqi measures to control financial abuses, including money laundry, dollars trafficking, and others abuses of global commerce rules.
The decision is coming after rounds of negotiations that were held recently in Dubai by officials of Central Bank of Iraq, officials of America’s Treasury, and financial officials of Fed. The negotiations were part of sustained actions to ensure that financial system of Iraq is compliant with global financial management norms free of activities that can undermine financial framework of region.
The latest ban is part of follow-through by Iraq of its decision of its move of its previous decision that excluded eight domestic banks of handling America’s dollars transactions. Despite its actions, there have been reservations by America on use of its banking system by its banking system by Iraq to launder money, especially by its neighbor, Iran.
The fact that Iraq is America’s key partner but also America’s arch-enemy, its neighbor, Iran, makes its financial situation complex. It has well over $100 billion of its money on deposit within America’s banks, meaning that America’s cooperation is critical to its financial flows of oil money as well as its financial resources abroad. Without its cooperation, its financial situation can collapse, its oil money flows very much subject to America’s financial institutions.
Nevertheless, more and more, the sum political strains of alliances Iraq finds itself involved in are becoming unmanageable. US President Donald Trump announced last month the reimposition of his “maximum pressure” foreign policy on Iran, which has made matters worse on Iraq-the country has always walked a thin line along which it continues to maintain relations with the U.S. while at the same time appeasing Iran. And even though Iraq stands to gain economically from ties to both countries, all these increasingly browbeating tensions put Iraq in an increasingly vulnerable position, obliging it to deftly wade through waters.
Iran, an economy lifeline to Iraq, has much say in all the political and military decisions of the country. To Tehran, Iraq always serves as a conduit of the diverse schemes of maneuvering around U.S. sanctions by hard currency transactions through local banks in the financial system of Iraq. It also deprives the local banks of an important source of revenue that can be used to prop militias and political parties it sponsors in Iraq.
By the U.S. inclination to tighten financial control and prevent the evasion of sanctions, that is, the decision taken by Iraq to limit local banks’ access to U.S. dollars, indicates that ongoing balancing is being done. Continuous pressure on Baghdad to secure these financial systems from being used to facilitate transactions potentially undermining international sanctions, particularly against Iran, would be inevitable.
U.S.-Iraqi diplomatic talks show how the world views Iraq as a center for illegal financial dealings. The U.S. governing body made its intentions clear to stop Iran from using Iraqi institutions for international financial activity because regional protection requirements and sanctions measures need to be enforced.
Iraq decided to restrict U.S. dollar purchases as part of two main objectives: it helps the country meet international banking requirements while ensuring participation in global financial networks. This strategic shift exposes Iraq to dangers that stem from multiple global power struggles between different countries.
The ongoing situation requires Iraq to handle its diplomatic connections with America and Iran simultaneously with sustaining an operational and intact financial structure. International financial institutions and Iraqi citizens will carefully monitor the upcoming decisions at the Central Bank of Iraq despite facing various geopolitical challenges.
