Middle East Policy has been one of the world’s most cited publications on the region since its inception in 1982, and our Breaking Analysis series makes high-quality, diverse analysis available to a broader audience.
Policy Brief Program
August 1, 2023
On July 26, 14 Iraqi banks released a joint statement to warn of the negative consequences emerging as the institutions are barred from dealing in dollars. Though Iraqi government leaders and other sources have cited these restrictions as a result of U.S. sanctions, the U.S. Department of State clarified that the measures are not sanctions; rather, the Treasury Department and Federal Reserve Bank of New York removed the 14 banks’ access to the Central Bank of Iraq’s foreign currency sale window, thus inhibiting the utilization of the dollar.
Regional sources analyze the causes and implications of these measures:
The United States’ removal of the banks’ access to the foreign currency sale window is a part of “ongoing efforts to lessen Iran’s access to international financial networks.” Iraqi News outlines that “the primary objective of the US sanctions is to curtail Iran’s ability to access US dollars through Iraqi banks. By targeting these financial institutions, the US hopes to disrupt the flow of funds that could potentially be used by Iran to support activities contrary to US interests.”
The Jerusalem Post explains the new procedures that coincide with these efforts: “Many forms of proof must be submitted by persons or entities wishing to buy the dollar, for whatever purpose… Iraqi banks are now required to record any dollar transfers on an electronic platform. The US Federal Reserve assesses the transfers and cancels any transaction it deems suspicious.” According to a source at the Central Bank of Iraq, in the past few months, “the Federal Reserve rejected 80% of requests for money transfers to Iraqi banks, due to doubts about the final recipient of these transfers.”
Iraq’s impacted banks responded with a joint statement highlighting emerging economic consequences, such as the dinar-dollar exchange rate dropping from 1470 dinars to the dollar to 1570 dinars to the dollar in two days. Asharq Al-Awsat outlines the statement, which notes that the banks “deal in dollars with the Central Bank, under the supervision of the US Federal Reserve, and will apply the best auditing standards and investigation of financial transactions.” The banks expressed that they are “ready to challenge the measures and face audits through the Central Bank or an international auditing firm, asserting they’d take full responsibility for any violations if committed.”
Iraqi economist Ahmed Tabaqchali elaborates: “The volatility of the dinar is linked to the start of Iraq’s compliance with some standards of the international transfer system, which Iraqi banks must comply with as of mid-November in order to access Iraq’s dollar reserves in the United States… In order for Iraq to be able to access reserves amounting to $100 billion, it must comply with regulations that require compliance with global anti-money laundering provisions, anti-terrorist financing provisions, and those related to sanctions, such as those applied to Iran and Russia.”
These restrictions, “along with previous action against eight banks, have left nearly a third of Iraq’s 72 banks blacklisted.” The Arab Weekly cites Iraqi Central Bank Governor Ali al-Allaq: “‘Forcing sanctions on a third of the Iraqi private banks from conducting dollar transactions will have negative consequences not only on the value of the Iraqi dinar against the US dollar, but it will have a very big impact on foreign investments.’”
Asharq Al-Awsat shares the civilian reaction to these economic decisions: “Dozens demonstrated in front of the Central Bank in Baghdad to protest the sharp decline in the exchange rates of the Iraqi dinar against foreign currencies and chanted against the governor and some political parties and figures, accusing them of manipulating the exchange rates.”
This is not the first time such actions have impacted Iraq’s economy. Ahram Online reports that the dinar’s value dove in a similar matter “earlier this year after measures taken by the United States late last year to stamp out money laundering and the channeling of dollars to Iran and Syria from Iraq severely restricted Iraq’s access to hard currency.”
Middle East Policy has been one of the world’s most cited publications on the region since its inception in 1982, and our Breaking Analysis series makes high-quality, diverse analysis available to a broader audience.
Partner with the Council
We appreciate any support towards the Middle East Policy Council to help educate Americans on the political, economic and cultural issues that affect U.S. interests in the Middle East.
The Middle East Policy Council's senior leadership and board of directors can offer unique insights into the complex issues facing U.S. policy making in the Middle East.
Policy Brief Program
August 1, 2023
On July 26, 14 Iraqi banks released a joint statement to warn of the negative consequences emerging as the institutions are barred from dealing in dollars. Though Iraqi government leaders and other sources have cited these restrictions as a result of U.S. sanctions, the U.S. Department of State clarified that the measures are not sanctions; rather, the Treasury Department and Federal Reserve Bank of New York removed the 14 banks’ access to the Central Bank of Iraq’s foreign currency sale window, thus inhibiting the utilization of the dollar.
Regional sources analyze the causes and implications of these measures:
The United States’ removal of the banks’ access to the foreign currency sale window is a part of “ongoing efforts to lessen Iran’s access to international financial networks.” Iraqi News outlines that “the primary objective of the US sanctions is to curtail Iran’s ability to access US dollars through Iraqi banks. By targeting these financial institutions, the US hopes to disrupt the flow of funds that could potentially be used by Iran to support activities contrary to US interests.”
The Jerusalem Post explains the new procedures that coincide with these efforts: “Many forms of proof must be submitted by persons or entities wishing to buy the dollar, for whatever purpose… Iraqi banks are now required to record any dollar transfers on an electronic platform. The US Federal Reserve assesses the transfers and cancels any transaction it deems suspicious.” According to a source at the Central Bank of Iraq, in the past few months, “the Federal Reserve rejected 80% of requests for money transfers to Iraqi banks, due to doubts about the final recipient of these transfers.”
Iraq’s impacted banks responded with a joint statement highlighting emerging economic consequences, such as the dinar-dollar exchange rate dropping from 1470 dinars to the dollar to 1570 dinars to the dollar in two days. Asharq Al-Awsat outlines the statement, which notes that the banks “deal in dollars with the Central Bank, under the supervision of the US Federal Reserve, and will apply the best auditing standards and investigation of financial transactions.” The banks expressed that they are “ready to challenge the measures and face audits through the Central Bank or an international auditing firm, asserting they’d take full responsibility for any violations if committed.”
Iraqi economist Ahmed Tabaqchali elaborates: “The volatility of the dinar is linked to the start of Iraq’s compliance with some standards of the international transfer system, which Iraqi banks must comply with as of mid-November in order to access Iraq’s dollar reserves in the United States… In order for Iraq to be able to access reserves amounting to $100 billion, it must comply with regulations that require compliance with global anti-money laundering provisions, anti-terrorist financing provisions, and those related to sanctions, such as those applied to Iran and Russia.”
These restrictions, “along with previous action against eight banks, have left nearly a third of Iraq’s 72 banks blacklisted.” The Arab Weekly cites Iraqi Central Bank Governor Ali al-Allaq: “‘Forcing sanctions on a third of the Iraqi private banks from conducting dollar transactions will have negative consequences not only on the value of the Iraqi dinar against the US dollar, but it will have a very big impact on foreign investments.’”
Asharq Al-Awsat shares the civilian reaction to these economic decisions: “Dozens demonstrated in front of the Central Bank in Baghdad to protest the sharp decline in the exchange rates of the Iraqi dinar against foreign currencies and chanted against the governor and some political parties and figures, accusing them of manipulating the exchange rates.”
This is not the first time such actions have impacted Iraq’s economy. Ahram Online reports that the dinar’s value dove in a similar matter “earlier this year after measures taken by the United States late last year to stamp out money laundering and the channeling of dollars to Iran and Syria from Iraq severely restricted Iraq’s access to hard currency.”