Washington threatens further sanctions on Iraq if ‘misuse of dollars’ not addressed

The Cradle 

An official from the US Treasury Department has urged Iraq to “address continued risks of the misuse of dollars” by commercial banks to avoid a new round of sanctions targeting the war-torn country’s battered financial sector.

Although nearly a third of Iraq’s 72 banks are now banned from facilitating dollar transactions due to unilateral US measures, a Treasury official who spoke anonymously with Reuters on 14 September said Iraqi banks were still operating with risks “that must be remediated.”

In July, Washington blacklisted 14 commercial banks accused of facilitating US dollar transactions to Iran, a country Washington seeks to strangulate economically.

The unilateral measures led to increased demand for the greenback on the black market and damaged the exchange rate of the dinar.

With more than $100 billion in reserves held by US banks, Baghdad heavily relies on US authorities’ goodwill to ensure its economy doesn’t collapse entirely. Furthermore, since 2003, all Iraqi oil revenues have been paid into an account with the US Federal Reserve, allowing Washington to control the Iraqi economy and pressure its government.

The warning from Washington came on the heels of a visit by US Assistant Treasury Secretary Elizabeth Rosenberg to Baghdad this week, where she met with the Governor of the Central Bank of Iraq (CBI), Ali al-Alaq. The two discussed “bilateral relations and measures taken by the bank to fight money laundering and terrorist financing,” according to a statement released by the US Treasury.

Since 2022, the CBI has enforced tighter regulations under US pressure to ensure dollars do not reach Iran. Bank clients wishing to transfer dollar funds must apply through an online platform and provide detailed information on end recipients before a transfer is approved.

July’s sanctions were the latest effort by Washington to coercively intervene in Iraq’s economy, to the detriment of the country the US army illegally invaded and occupied in 2003. US efforts include blocking Iraqi payments for Iranian natural gas, which has led to power blackouts amid Iraq’s blistering hot summer.

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