- Several banks in Iraq have been banned from accessing daily dollar auctions run by the Iraqi Central Bank due to US sanctions.
- These auctions were a key source of hard currency in the import-dependent country, which has now been targeted with a US crackdown on currency smuggling to Iran.
- The Central Bank of Iraq has listed several banks in its ban, including Ahsur International Bank for Investment, Investment Bank of Iraq, and Union Bank of Iraq.
- These banks, however, can continue operations in other currencies, says the Iraqi Central Bank.
- The US applauds Iraq’s efforts towards curbing the flow of dollars to Iran and aligning the Iraqi economy with international standards.
US Sanctions Affect Iraqi Banks
The Iraqi banks are now prohibited from accessing the Iraqi Central Bank’s daily dollar auction. This auction was a significant source of hard currency for the import-reliant country. The crackdown by the US focuses primarily on halting currency smuggling to Iran, Iraq’s neighbour.
Iraq’s Reliance on US Goodwill
Being an uncommon supporter of both the US and Iran and with over $100 billion in reserves in the US, Iraq is highly dependent on Washington’s goodwill. This is to ensure its access to oil revenues and finances remains unhindered.
List of Banned Banks
Confirmed by an official at Central Bank, a document shows the list of banned banks, which includes Ahsur International Bank for Investment, Investment Bank of Iraq, Union Bank of Iraq, Kurdistan International Islamic Bank for Investment and Development, Al Huda Bank, Al Janoob Islamic Bank for Investment and Finance, Arabia Islamic Bank and Hammurabi Commercial Bank, among others.
Washington Applauds Iraq’s Steps
A representative from the Treasury has complimented the ongoing measures taken by the Central Bank of Iraq to shield the Iraqi financial system from misuse, thus leading to successful international connectivity for valid Iraqi banks through correspondent banking relationships.
Halt on Dollar Transactions
As part of a broader crackdown on dollar smuggling to Iran via the Iraqi banking structure, Iraq in July 2023 forbade 14 banks from conducting dollar transactions. Banks prohibited from dollar transactions are allowed to conduct business in other currencies, as per Iraqi central bank.
US and Iraq Cooperation
In a recent meeting in Baghdad, Brian Nelson, the top sanctions officer of the US Department of Treasury, spoke with senior Iraqi authorities about the protection of Iraqi and international financial frameworks from criminal, corrupt, and terrorist actors. The Treasury also announced moves against Al-Huda Bank during this meeting, accusing it of diverting several billion US dollars to Iran-backed factions.
Support for Current Iraqi Government
The current Iraqi government, supported by robust Iran-backed entities and armed groups interested in Iraq’s mainly informal economy, including its historically money-laundering prone financial sector. Nevertheless, Western officials have acknowledged Iraq’s cooperation in implementing economic and fiscal reforms to limit Iran and its allies’ access to U.S. dollars and align the Iraqi economy with global norms.
This development could impact forex trading, particularly involving the Iraqi dinar and US dollar assets, as it alters the dynamics between the US and Iraq in terms of economic relations and sanctions.