Iraq’s central bank is about to cut off five more local banks from doing business in U.S. dollars; this latest ruling has come as a product of discussions with U.S. Treasury officials on curbing money laundering, dollar smuggling, and other infractions, two sources familiar with the matter told Reuters on Sunday.
This action follows meetings held in Dubai last week between representatives of the Central Bank of Iraq-who had banned eight of such banks from dollar transactions last year officials from the U.S. Treasury and Federal Reserve.
As a rare ally to both the United States and Iran, Iraq as can be imagined with a reservoir of over $100 billion in reserves. It is within the U.S. is heavily dependent on American goodwill to safeguard its access to oil revenues and financial resources.
Iraq is the second-largest producer under OPEC, however, finds itself in a delicate position following U.S. President Donald Trump’s announcement to reimplement his maximum pressure strategy against Iran.
Iran perceives Iraq as an economic ‘lung’ and manifests considerable military, political, and economic influence in Iraq through its powerful Shi’ite militia networks and political factions.
Additionally, Iran enjoys hard currency inflow through exports to Iraq and uses its banking system to avail of the U.S. sanctions through its banking system.
A lot of evidence obtained by Reuters in December traced the roots of one of the most sophisticated smuggling syndicates in fuel oil that has taken place in Iraq since the advent of Prime Minister Mohammed Shia al-Sudani. The operation is worth more than $1 billion to Iran and its associate networks annually.
Although the banks that have been banned from doing dollar transactions can still operate and perform transactions with other currencies. The decision by the central bank has a significant limitation on their dollar transactions, and most of the transactions outside Iraq would be affected.
Business Journalist
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