Iraqi banks ready to challenge dollar ban
Iraqi banks ready to challenge dollar ban
Iraqi Private Banks Ready to Challenge US Measures Over Dollar Transactions
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In a bold move, fourteen Iraqi private banks have expressed their readiness to challenge the measures imposed by the United States over alleged involvement in siphoning U.S. dollars to Iran. The banks have called on Iraqi authorities to provide assistance in this matter. These restrictions were imposed by U.S. financial authorities as part of a wider crackdown on dollar smuggling to Iran through the Iraqi banking system. The Iraq Central Bank officials have confirmed that these banks have been barred from conducting dollar transactions. However, they can still use Iraqi dinars and other foreign currencies.
It is important to note that the U.S. State Department has clarified that the measures taken by the U.S. against these banks are not sanctions, as referred to by the Iraq Central Bank governor. According to U.S. State Department Deputy Spokesperson Vedant Patel, the U.S. Treasury Department and the Federal Reserve Bank of New York have removed the banks’ access to the Central Bank of Iraq’s foreign currency sale window, also known as the dollar and wire auctions. Patel emphasized that these actions are aimed at limiting the ability of bad actors seeking to launder U.S. dollars, profit from the exploitation of money owned by the Iraqi people, and evade U.S. sanctions.
Iraqi Central Bank (CBI) Governor Ali al-Allaq has assured that the CBI is closely following up on the issue and currently there are no indications that the U.S. will impose further “sanctions” on more Iraqi banks. He also highlighted that other banks in Iraq are able to meet the market’s needs for dollar transactions, and the 14 banks under scrutiny represent only 8% of external transfers.
It has been revealed that the transactions that led to the U.S. curbs took place in 2022, before the CBI enforced tighter regulations on dollar transfers. The CBI now requires applicants to go through an online platform and provide detailed information on end-recipients, in line with U.S. regulations aimed at curbing the illegal siphoning of dollars to Iran. These measures are part of the broader efforts to apply pressure on Tehran, along with U.S. sanctions imposed over its nuclear program and other disputes.
However, Haider al-Shamma, speaking on behalf of the 14 banks, has expressed concerns about the potential negative consequences of the sanctions on Iraq’s currency and foreign investments. He pointed out that the value of the Iraqi dinar has already fallen from under 1,500 dinars per U.S. dollar last week to 1,580 as of Wednesday. The Iraq Central Bank attributes the dinar’s depreciation to merchants, including some engaged in illegitimate financial transactions, sourcing currency from the black market instead of the official platform.
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These recent measures by the U.S., along with previous curbs on eight other banks, have left nearly a third of Iraq’s 72 banks blacklisted, as reported by two Iraqi Central Bank officials. Al-Shamma further emphasized that these sanctions not only impact the value of the Iraqi dinar but also have a significant effect on foreign investments. He highlighted that the Iraqi private banks have nothing to do with political tensions and are independent financial institutions.
The standoff between the U.S. and these Iraqi private banks reflects the complex issues surrounding international financial systems and the challenges faced by countries caught in the middle of geopolitical disputes. It remains to be seen how the banks will proceed with their challenge and what impact it will have on the broader regional and global financial landscape.
