In the aftermath of widespread US attacks on proxy forces linked to the Iranian regime in the Middle East, the US Treasury Department has initiated a new round of pressure on Iraqi banks. This effort appears to be strategically aimed at severing the Iranian regime’s access to US dollars within Iraq.
As reported by Reuters, Iraq has taken decisive action by prohibiting eight commercial banks in the country from participating in US dollar transactions. These measures, which include a crackdown on banks and efforts to curb fraud, money laundering, and illegal use of the US currency, have unfolded shortly after a high-ranking US Treasury official’s recent visit.
The move marks a significant escalation in efforts to cut off financial channels supporting the Iranian regime in Iraq. Iraqi media has further reported that the Central Bank of Iraq has revoked the license of the National Bank of Iran to operate within its borders due to international sanctions.
Ammar Hamad Khalaf, the deputy of the Central Bank of Iraq, communicated the revocation of the National Bank of Iran’s license in a letter addressed to the General Administration of the National Bank of Iran. The decision was based on considerations of the bank’s losses in Iraq, limited activity, and the impracticality of its operation or expansion. The letter highlights that the National Bank of Iran’s continued activities in Iraq have no benefit for the country, especially given the bank’s status under international sanctions.
This recent action follows a previous move by the Central Bank of Iraq during the summer, wherein 14 banks were prohibited from engaging in dollar transactions under pressure from the US Department of the Treasury and the US Federal Reserve. Analysts suggest that these decisions aim to block the flow of dollars to Iran, stemming from massive smuggling through the Iraqi banking system.
The eight banks now banned from dollar transactions are: Ashur International Bank for Investment, Investment Bank of Iraq, Etihad Bank Iraq, Kurdistan International Bank for Investment and Development, Al-Huda Bank, Al-Janoob Islamic Bank, Islamic Bank of Arabia, and Hammurabi Commercial Bank. The Central Bank of Iraq has clarified that these banks are only restricted from trading in US dollars and are permitted to continue their activities with other international currencies.
During the recent visit by Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, to Iraq, it was revealed that Al-Huda Bank was involved in transferring billions of dollars to militia and armed groups supported by Iran. Nelson’s visit aimed at aligning Iraq’s financial sector with international standards and implementing measures to prevent the circumvention of sanctions, ultimately blocking Iran’s access to dollars through the Iraqi banking network.
Iraq, as an ally of both the United States and Iran, holds over $100 billion in foreign exchange reserves with American banks. The imposition of similar banking restrictions last summer had led to an increase in the price of the dollar and other currencies in the free market of Iraqi and Iranian currency, indicating the potential economic implications of such measures. The ongoing developments underscore the delicate balance Iraq must navigate as it aligns itself with global financial standards while maintaining its relationships with the international community.