The Iraqi government will ban all cash withdrawals and transactions in U.S. dollar starting Jan. 1, 2024.
Mazen Ahmed, director-general of investment and remittances at the Central Bank of Iraq (CBI), said people who deposit dollars into banks before the end of 2023 will still be able to withdraw these funds in dollars next year. However, dollars deposited in 2024 will only be available in local currency at the official rate of 1,320 Iraqi dinars to the greenback. (Related: BRICS members discuss possible expansion and creation of common currency to challenge US dollar's supremacy.)
"You want to transfer? Transfer. You want a card in dollars? Here you go, you can use the card inside Iraq at the official rate, or if you want to withdraw cash, you can at the official rate in dinars … But don't talk to me about cash dollars anymore," Ahmed told Reuters.
He also claimed the move is meant to "stamp out the illicit use" of about 50 percent of the $10 billion that Iraq imports in cash each year on semi-monthly cargo flights from the New York Federal Reserve.
With more than $100 billion in reserves held by U.S. banks, Baghdad heavily relies on the goodwill of U.S. officials to ensure the economy doesn't collapse.
Furthermore, since 2003, all Iraqi oil revenues have been paid into an account with the U.S. Federal Reserve, allowing Washington to control the Iraqi economy and pressure its government.
The Wall Street Journal (WSJ) reported on Oct. 5 that U.S. officials last month refused to approve the transfer of an extra $1 billion in cash to Iraq from the country's oil sales proceeds.
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"After the U.S. denied Iraq's initial appeal last month, the [CBI] last week submitted a formal request, which the [U.S.] Treasury is still considering," a senior Iraqi official told the WSJ.
The move reportedly angered Iraqi officials, who said they need access to their oil revenues to protect Iraq's cash reserves after recent restrictions from the White House "set off panic buying of greenbacks and hoarding of dollars by exchanges."
Officials at the U.S. Department of the Treasury reportedly told their counterparts at the CBI that "sending a large extra shipment is contrary to Washington's goal of reducing Iraq's use of U.S. banknotes in favor of more easily traceable electronic transactions."
Washington controls Iraqi economy and banking system
With more than $100 billion in reserves held hostage by the U.S., Washington has significant leverage over the Iraqi economy and banking system.
In July, the U.S. Treasury sanctioned 14 Iraqi private banks, accusing them of facilitating U.S. dollar transfers to Iran – a country whose economy Washington seeks to suffocate via sanctions. As a result of this, nearly a third of Iraq's 72 banks are now banned from facilitating dollar transactions.
In 2022, Iraq's central bank enforced tight regulations under U.S. 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.
"Iraq has been and continues to be a slave to the U.S. dollar," said lawmaker Hussein Mouanes, member of the Finance Committee in Iraq's Council of Representatives. "Every country's economic strength depends on the strength of its currency."
"It is clear that Iraq is economically dominated by the U.S., and our government does not truly control or have access to its own money … We believe that it is crucial to move away from the hegemony of the dollar, especially as it has become a tool to impose sanctions on countries. It is time for Iraq to rely on its local currency," he told The Cradle in an exclusive interview back in May.
Learn more about the downfall of the American dollar at DollarDemise.com.
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