British website: Iran has stopped buying Iraqi dollars on the black market

[yota691]

Tehran is working on a Plan B

British website: Iran has stopped buying Iraqi dollars on the black market

2023.04.07 - 15:26

 

Baghdad - people  

Iraqi officials told Middle East Eye, which operates from Britain, that Iran is wasting money by buying US dollars from the Iraqi black market by increasing 400 thousand dollars per million dollars and is now pressuring the Iraqi government to pay its debts to Tehran through official channels.  

 

  

  

And the site mentioned in a report followed and translated by “NAS” (April 7, 2023), neighboring Iran was the most important market for Iraq over the past two decades, as it provided gas, electricity, food, and building materials, among other necessities, as the total trade between the two countries amounted to about $14 billion annually. However, since the United States imposed a harsh sanctions regime on Iran in 2018, Iraq has struggled to pay for its Iranian goods and services. Last year, Iraq was able to pay most of its gas and electricity debts from 2019-2021 in Iraqi dinars.  

  

These dinars were initially converted into US dollars (which are more beneficial to Iran) through a daily currency auction held by the Central Bank of Iraq. But Washington in November imposed restrictions on the auction so that unidentified persons and sanctioned countries such as Iran could no longer use the service to obtain dollars.  

  

Iraqi officials and politicians close to Iran told MEE that this means that the Iranians have begun to rely heavily on the Iraqi black market to obtain their dollars.  

  

With the black market surging, exchange rates began to rise alarmingly, driving up consumer prices and leaving the Iraqi government struggling to pay salaries, pensions, and benefits.  

  

Meanwhile, officials said illicit dollars have flowed to Iran, Turkey, Oman and Dubai.  

  

In February, the exchange rate on the black market was about 1,800 dinars to the dollar, compared to 1,480 three months ago.  

  

The cost of exchanging dinars on the black market - with rising prices and fees for illegal transactions - has become significant.  

  

Iraqi officials said the Iranians pay about 40% more for every $1 million they change, money that goes to brokers, middlemen and dollar smugglers who funnel money out of Iraq.  

  

A senior Iraqi official said, "The Iranians have incurred very large losses over the past four months as a result of their frantic quest to buy dollars from the black market, especially after the recent restrictions imposed by the US Federal Reserve on the currency sale auction," which prompted Tehran to decide to stop buying dollars from the market. Black in Iraq last week.  

  

Soon after, the exchange rate on the black market dropped rapidly. The price today, Monday, was 1495 dinars to the dollar, compared to 1580 dinars the previous day.  

  

A large number of exchange houses, especially in the semi-autonomous Kurdistan region, which is the main land corridor for dollar smuggling operations, began making dollars available to anyone after reserving the currency for their most exclusive clients in February and March.  

  

"The Iranians have no choice but to stop buying the process. It has turned into a drain and they are not in a position to lose half their money against the dollar," a senior official involved in the matter told MEE.  

  

"Fortunately, the market's response is quick. Dollar exchange rates have started to decline and will fall further in a few days," the official added.  

  

He added that "the exchange companies in Kurdistan were among the main players in dollar smuggling operations in recent months, so they took the initiative before anyone else to get rid of the large quantities of dollars that they had stored to reduce their losses."  

  

It is too early to say for sure whether the price drop and the decision of Kurdish exchange houses to offload dollars is a direct result of the Iranians ending their black market activities - especially since it is unclear where Iran will now get its dollars from.  

  

However, there has also been a marked increase in sales at the central bank's currency auction over the past two weeks - which has only added to the uncertainty.  

  

FX auction data for the last week of March shows that at least $200 million were sold per day on average, compared to $168.5 million in the last week of February.  

  

Most of these sales were amounts to cover "overseas transfers" and prepaid electronic card credit.  

  

Ammar Khalaf Hamad, deputy governor of the Central Bank, told the state-owned Al-Iraqiya TV that the increase in activity resulted from the lifting of all restrictions on auctions.  

  

However, Iraqi officials told MEE that the US Federal Reserve had not made any changes to the restrictions it had imposed on the auction, and that the increase in activity was due to other factors, such as the Ministry of Commerce's need for dollars to pay for food purchases.  

  

“There is no change in the procedures imposed by the US Federal Reserve on the currency auction and there are no exceptions, but there is a gradual return of traders to participate in the auction away from the “second” private banks, according to a senior official.  

  

He added, "The other large transfers are caused by the large withdrawal of dollars by citizens through prepaid electronic cards, and this is the latest mechanism for smuggling dollars."  

  

Iranian pressure  

  

Iraq succeeded in paying off all its debts to Iran in October, Iraqi and Iranian officials said, but the money was placed in a special account at the Trade Bank of Iraq, which Iran could use to purchase goods not targeted by US sanctions, such as medicine.  

  

However, Iran wants to use the money that Iraq owes it in any way it chooses.  

  

Iraqi officials told the site that Iran still has $8 billion in this account, which it is unable to withdraw because the US Federal Reserve keeps it under supervision.  

  

The officials also revealed that Iraqi Foreign Minister Fouad Hussein and Central Bank Governor Ali Mohsen Al-Alaq are negotiating with US officials to find an appropriate mechanism to obtain this money for Iran.  

  

The Iranians say, "You arranged all your papers with the Americans and left us. We want our money and we don't want anything else."  

  

"We are currently seeking to find a middle ground that satisfies both parties. We told the Americans: 'We have done everything you asked, and you must give us something in return,'" according to an Iraqi consultant.  

  

The adviser added that Iraq asked Washington for an exemption to allow it to pay Iran for its past and future energy imports in dollars without any problems until further notice.  

  

"The Americans said they understood our position and promised to make recommendations to the US Treasury, but we have not received a final response yet," he said.  

  

Indications are that the Americans will gradually ease the pressure on this issue.  

[yota691]

Iran stopped buying Iraq’s illicit dollars. But is it getting them another way?

The Iranians have been paying $400,000 extra in fees for every $1m they've changed on the Iraqi black market. It's a price that became unsustainable

A man holds money as he poses for a picture at a foreign currency exchange market in Baghdad, December 2020 (Reuters)

By 

Suadad al-Salhy

Published date: 7 April 2023 10:48 BST | Last update: 3 hours 4 mins ago

 

Iran has been haemorrhaging money by buying US dollars on the Iraqi black market and is now pressuring Iraq’s government to pay its debts to Tehran through official channels, Iraqi officials told Middle East Eye.

 

Neighbouring Iran has been Iraq’s most important market over the past two decades, providing gas, electricity, food, and construction materials, amongst other necessities, with trade between the countries totalling about $14bn annually.

 

Yet since the US imposed a harsh sanctions regime on Iran in 2018, Iraq has struggled to be able to pay for its Iranian goods and services. Last year, Iraq was able to pay off most of its gas and electricity debt from 2019-2021 in Iraqi dinar.

 

Those dinars were at first converted into US dollars (which are far more useful to Iran) through a daily currency auction held by the Iraqi Central Bank. But Washington in November imposed restrictions on the auction so anonymous people and sanctioned countries like Iran could no longer use the service to obtain dollars.

 

That meant the Iranians began to heavily rely on the Iraqi black market to get its dollars, Iraqi officials and politicians close to Iran told MEE.

 

With currency exchanges on the black market hitting a high, exchange rates began to rise in an alarming manner, raising the prices of consumer goods and leaving the Iraqi government struggling to pay salaries, pensions, and benefits.

 

Meanwhile, illicit dollars flowed into Iran, Turkey, Oman, and Dubai, officials said.

In February, the exchange rate on the black market was around 1,800 dinars to the dollar, compared to 1,480 three months before.

 

The cost of exchanging dinars on the black market - both with the rising rates and fees for illicit deals - became significant. 

 

Iraqi officials told MEE the Iranians were paying around 40 percent extra for every million dollars they changed, money that goes to brokers, intermediaries, and dollar smugglers who transfer the funds out of Iraq.

 

"The Iranians have incurred very large losses over the past four months as a result of their frantic quest to buy dollars from the black market, especially after the recent restrictions imposed by the US Federal Reserve on the currency sale auction," a senior Iraqi official told MEE.

Declining rates

Iraqi officials said the Iranians decided to stop buying dollars from Iraq’s black market last week.

 

Soon after, the black market exchange rate declined rapidly. The rate on Monday was 1,495 dinars per dollar compared to 1,580 the day before.

 

A large number of exchange companies, especially in the semi-autonomous Kurdistan region, which is the main land corridor for dollar-smuggling operations, began to make dollars available for anyone after reserving the currency for its most exclusive clients in February and March.

 

"The Iranians have no choice but to stop the process. It has turned into a drain and they are in no position to lose half of their money in exchange for dollars," a senior official involved in the issue told MEE.

 

"Fortunately, the market's response is quick. The dollar's exchange rates have begun to decline, and they will fall further in a few days," the official added.

 

"The exchange companies in Kurdistan were the major players in dollar-smuggling operations in recent months, so they took the initiative before anyone else to get rid of the large quantities of dollars they had stored, to reduce their losses."

 

It is too early to say for sure whether the rate’s decline and the decision by Kurdish exchange offices to offload dollars are a direct result of the Iranians ending their black market activities - especially as it’s not clear where Iran will now get its dollars.

 

Yet there has also been a remarkable increase in sales in the Central Bank’s currency auction during the past two weeks - only adding to the uncertainty.

 

Foreign currency auction data for the last week of March shows no less than $200m was sold per day on average, compared to $168.5m in the last week of February.

Most of these sales were amounts to cover “external transfers” and credit for prepaid electronic cards.

 

Ammar Khalaf Hamad, deputy governor of the Central Bank, told state-owned al-Iraqiya TV that the increase in activity was caused by all restrictions being lifted on the auctions.

However, Iraqi officials told MEE the US Federal Reserve has made no changes to the restrictions it forced on the auction, and that the increase in activity was caused by other factors, such as the trade ministry needing dollars to pay for food purchases.

 

"There is no change in the procedures imposed by the US Federal Reserve on the currency auction and there are no exceptions, but there is a gradual return of traders to participate in the auction away from private banks," the second senior official told MEE.

"The other large transfers are caused by the large withdrawal of dollars by citizens through electronic prepaid cards, and this is the latest mechanism for smuggling dollars.”

New smuggling mechanism

The foreign currency auction is the Iraqi Central Bank’s main way to obtain Iraqi dinars.

Most of the Iraqi government’s earnings are through oil sales. The dollars raised through these are held by the US Federal Reserve and then requested by Baghdad whenever it needs funds.

 

The Fed’s restrictions caused the Iraqi government a huge liquidity crisis, which the Central Bank has tried to ward off with a package of remedies, including allowing every Iraqi passenger to obtain $7,000 in cash at the airport.

 

By showing a valid plane ticket for that day along with proof that they have deposited sums in a local bank account that are the Iraqi dinar equivalent of $7,000, passengers can withdraw $7,000 from any exchange company, a local bank, or get it at the airport.

It was an opportunity that banking firms, financial mediators, and smugglers could not miss, and they quickly began to find new ways to obtain dollars by taking advantage of this development.

 

Some smugglers have been using fake tickets to obtain cash. Others have offered Iraqis free trips to Dubai, Turkey, Iran, and Lebanon in return for withdrawing $7,000. Iraqis have also been approached by smugglers and exchange companies asking if they can use their identities to get cash at the airport in return for payment.

 

Dozens of Iraqis, including government officials, have said they were surprised to find their names on the list of passengers who had received dollars, suggesting their identities had been stolen to get hold of cash.

'The Iranians have stopped buying smuggled dollars. They are now angry and reproachful because they hold us responsible for the losses they incurred'

- Advisor to Iraqi prime minister

Aware the system was being abused, on 14 March the Central Bank issued new instructions that reduced the traveller’s share to only $2,000. 

 

As an alternative, people planning to travel outside Iraq were allowed to obtain $10,000 at the official exchange rate of 1,320 dinars through electronic prepaid cards issued by licenced banks and electronic payment companies that can only be used abroad but can be refilled if necessary.

 

In response, private banks and exchange companies then began issuing thousands of prepaid cards to Iraqis, who allowed the companies to use their identity papers in exchange for small sums of money.

 

The ruse was quickly identified by authorities, however, and customs began arresting travellers in possession of hundreds of prepaid cards.

 

On 30 March, customs officers at Baghdad airport arrested several travellers after finding 366 cards in their possession. 

 

A day earlier, three passengers were arrested at Basra airport in possession of 522 cards.

 

Customs’ public data does not reveal where these passengers were heading, but Iraqi officials told MEE they were on their way either to Dubai or Jordan.

 

"The Iranians have stopped buying smuggled dollars. They are now angry and reproachful because they hold us responsible for the losses they incurred to obtain dollars," one of Iraqi Prime Minister Mohammed al-Sudani's advisors told MEE.

 

According to the advisor, people in Iran and Turkey are no longer smuggling dollars from Iraq, leaving Dubai and Jordan as the main destinations.

 

"This money is withdrawn from Jordan or Dubai, and then deposited in smugglers' accounts, which they provide to those who request quick transfers away from the supervision of the US Federal Reserve in exchange for large commissions," the advisor said.

Iranian pressure

Iraqi and Iranian officials said Iraq managed to pay all its debt to Iran in October, but the money was placed in a special account in the Trade Bank of Iraq, which Iran can use to purchase goods not targeted by US sanctions, like medicine.

 

Iran, however, wants to use the money Iraq owes it in any way it chooses.

Iraqi officials told MEE that Iran still has $8bn in this account, which it is unable to withdraw because the US Federal Reserve is keeping it under supervision.

 

The officials also revealed that Iraqi Foreign Minister Fuad Hussein and the governor of the Central Bank, Ali Mohsen al-Alaq, are conducting negotiations with US officials to find a suitable mechanism to get Iran this money.

 

“The Iranians say: ‘You have arranged all your papers with the Americans and left us. We want our money and nothing else,’" the advisor told MEE.

 

"We are currently seeking to find a compromise that satisfies both sides. We told the Americans: ‘We have done everything you asked, and you should give us something in return’.”

 

Iraq asked Washington for a waiver to allow it to pay Iran for its previous and future energy imports in dollars without any issues until further notice, the advisor added.

 

“The Americans said they understood our position and promised to make recommendations to the US Treasury Department, but we have not yet received a final response,” he said. 

 

"Indications suggest that the Americans are going to gradually ease pressures on this issue."

[yota691]

Tehran is working on a Plan B

Iran stops buying Iraqi dollars on the black market

2023.04.07 - 15:26

 

Baghdad - people  

Iraqi officials told the British "Middle East Eye" website that Iran is wasting money by buying US dollars from the Iraqi black market by increasing 400 thousand dollars per million dollars and is now pressuring the Iraqi government to pay its debts to Tehran through official channels.  

  

  

  

And the site mentioned in a report followed and translated by “NAS” (April 7, 2023), that neighboring Iran was the most important market for Iraq over the past two decades, as it provided gas, electricity, foodstuffs, and building materials, among other necessities, as the total trade between the two countries amounted to about $14 billion annually. However, since the United States imposed a harsh sanctions regime on Iran in 2018, Iraq has struggled to pay for its Iranian goods and services. Last year, Iraq was able to pay most of its gas and electricity debts from 2019-2021 in Iraqi dinars.  

  

These dinars were initially converted into US dollars (which are more beneficial to Iran) through a daily currency auction held by the Central Bank of Iraq. But Washington in November imposed restrictions on the auction so that unidentified persons and sanctioned countries such as Iran could no longer use the service to obtain dollars.  

  

Iraqi officials and politicians close to Iran told MEE that this means that the Iranians have begun to rely heavily on the Iraqi black market to obtain their dollars.  

  

With the black market surging, exchange rates began to rise alarmingly, driving up consumer prices and leaving the Iraqi government struggling to pay salaries, pensions, and benefits.  

  

Meanwhile, officials said illicit dollars have flowed to Iran, Turkey, Oman and Dubai.  

  

In February, the exchange rate on the black market was about 1,800 dinars to the dollar, compared to 1,480 three months ago.  

  

The cost of exchanging dinars on the black market - with rising prices and fees for illegal transactions - has become significant.  

  

Iraqi officials said the Iranians pay about 40% more for every $1 million they change, money that goes to brokers, middlemen and dollar smugglers who funnel money out of Iraq.  

  

A senior Iraqi official said, "The Iranians have incurred very large losses over the past four months as a result of their frantic quest to buy dollars from the black market, especially after the recent restrictions imposed by the US Federal Reserve on the currency sale auction," which prompted Tehran to decide to stop buying dollars from the market. Black in Iraq last week.  

  

Soon after, the exchange rate on the black market dropped rapidly. The price today, Monday, was 1495 dinars to the dollar, compared to 1580 dinars the previous day.  

  

A large number of exchange houses, especially in the semi-autonomous Kurdistan region, which is the main land corridor for dollar smuggling operations, began making dollars available to anyone after reserving the currency for their most exclusive clients in February and March.  

  

"The Iranians have no choice but to stop buying the process. It has turned into a drain and they are not in a position to lose half their money against the dollar," a senior official involved in the matter told MEE.  

  

"Fortunately, the market's response is quick. Dollar exchange rates have started to decline and will fall further in a few days," the official added.  

  

He added that "the exchange companies in Kurdistan were among the main players in dollar smuggling operations in recent months, so they took the initiative before anyone else to get rid of the large quantities of dollars that they had stored to reduce their losses."  

  

It is too early to say for sure whether the price drop and the decision of Kurdish exchange houses to offload dollars is a direct result of the Iranians ending their black market activities - especially since it is unclear where Iran will now get its dollars from.  

  

However, there has also been a marked increase in sales at the central bank's currency auction over the past two weeks - which has only added to the uncertainty.  

  

FX auction data for the last week of March shows that at least $200 million were sold per day on average, compared to $168.5 million in the last week of February.  

  

Most of these sales were amounts to cover "overseas transfers" and prepaid electronic card credit.  

  

Ammar Khalaf Hamad, deputy governor of the Central Bank, told the state-owned Al-Iraqiya TV that the increase in activity resulted from the lifting of all restrictions on auctions.  

  

However, Iraqi officials told MEE that the US Federal Reserve had not made any changes to the restrictions it had imposed on the auction, and that the increase in activity was due to other factors, such as the Ministry of Commerce's need for dollars to pay for food purchases.  

  

“There is no change in the procedures imposed by the US Federal Reserve on the currency auction and there are no exceptions, but there is a gradual return of traders to participate in the auction away from the “second” private banks, according to a senior official.  

  

He added, "The other large transfers are caused by the large withdrawal of dollars by citizens through prepaid electronic cards, and this is the latest mechanism for smuggling dollars."  

  

Iranian pressure  

  

Iraq succeeded in paying off all its debts to Iran in October, Iraqi and Iranian officials said, but the money was placed in a special account at the Trade Bank of Iraq, which Iran could use to purchase goods not targeted by US sanctions, such as medicine.  

  

However, Iran wants to use the money that Iraq owes it in any way it chooses.  

  

Iraqi officials told the site that Iran still has $8 billion in this account, which it is unable to withdraw because the US Federal Reserve keeps it under supervision.  

  

The officials also revealed that Iraqi Foreign Minister Fouad Hussein and Central Bank Governor Ali Mohsen Al-Alaq are negotiating with US officials to find an appropriate mechanism to obtain this money for Iran.  

  

The Iranians say, "You arranged all your papers with the Americans and left us. We want our money and we don't want anything else."  

  

"We are currently seeking to find a compromise that satisfies both parties. We told the Americans: 'We have done everything you asked, and you must give us something in return,'" according to an Iraqi consultant.  

  

The adviser added that Iraq asked Washington for an exemption to allow it to pay Iran for its past and future energy imports in dollars without any problems until further notice.  

  

"The Americans said they understood our position and promised to make recommendations to the US Treasury Department, but we have not received a final response yet," he said.  

  

Indications are that the Americans will gradually ease the pressure on this issue.  

[coorslite21]

 

 

 

Iran stopped buying Iraq’s illicit dollars. But is it getting them another way?

The Iranians have been paying $400,000 extra in fees for every $1m they've changed on the Iraqi black market. It's a price that became unsustainable

A man holds money as he poses for a picture at a foreign currency exchange market in Baghdad, December 2020 (Reuters)

By 

Suadad al-Salhy

Published date: 7 April 2023 10:48 BST|Last update: 1 day 7 hours ago

 

Iran has been haemorrhaging money by buying US dollars on the Iraqi black market and is now pressuring Iraq’s government to pay its debts to Tehran through official channels, Iraqi officials told Middle East Eye.

Neighbouring Iran has been Iraq’s most important market over the past two decades, providing gas, electricity, food, and construction materials, amongst other necessities, with trade between the countries totalling about $14bn annually.

Yet since the US imposed a harsh sanctions regime on Iran in 2018, Iraq has struggled to be able to pay for its Iranian goods and services. Last year, Iraq was able to pay off most of its gas and electricity debt from 2019-2021 in Iraqi dinar.

Those dinars were at first converted into US dollars (which are far more useful to Iran) through a daily currency auction held by the Iraqi Central Bank. But Washington in November imposed restrictions on the auction so anonymous people and sanctioned countries like Iran could no longer use the service to obtain dollars.

That meant the Iranians began to heavily rely on the Iraqi black market to get its dollars, Iraqi officials and politicians close to Iran told MEE.

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 With currency exchanges on the black market hitting a high, exchange rates began to rise in an alarming manner, raising the prices of consumer goods and leaving the Iraqi government struggling to pay salaries, pensions, and benefits.

Meanwhile, illicit dollars flowed into Iran, Turkey, Oman, and Dubai, officials said.

In February, the exchange rate on the black market was around 1,800 dinars to the dollar, compared to 1,480 three months before.

The cost of exchanging dinars on the black market - both with the rising rates and fees for illicit deals - became significant. 

Iraqi officials told MEE the Iranians were paying around 40 percent extra for every million dollars they changed, money that goes to brokers, intermediaries, and dollar smugglers who transfer the funds out of Iraq.

"The Iranians have incurred very large losses over the past four months as a result of their frantic quest to buy dollars from the black market, especially after the recent restrictions imposed by the US Federal Reserve on the currency sale auction," a senior Iraqi official told MEE.

Declining rates

Iraqi officials said the Iranians decided to stop buying dollars from Iraq’s black market last week.

Soon after, the black market exchange rate declined rapidly. The rate on Monday was 1,495 dinars per dollar compared to 1,580 the day before.

A large number of exchange companies, especially in the semi-autonomous Kurdistan region, which is the main land corridor for dollar-smuggling operations, began to make dollars available for anyone after reserving the currency for its most exclusive clients in February and March.

"The Iranians have no choice but to stop the process. It has turned into a drain and they are in no position to lose half of their money in exchange for dollars," a senior official involved in the issue told MEE.

"Fortunately, the market's response is quick. The dollar's exchange rates have begun to decline, and they will fall further in a few days," the official added.

US efforts to stop Iraqi money laundering sparks huge cross-border dollar smuggling

Read More »

"The exchange companies in Kurdistan were the major players in dollar-smuggling operations in recent months, so they took the initiative before anyone else to get rid of the large quantities of dollars they had stored, to reduce their losses."

It is too early to say for sure whether the rate’s decline and the decision by Kurdish exchange offices to offload dollars are a direct result of the Iranians ending their black market activities - especially as it’s not clear where Iran will now get its dollars.

Yet there has also been a remarkable increase in sales in the Central Bank’s currency auction during the past two weeks - only adding to the uncertainty.

Foreign currency auction data for the last week of March shows no less than $200m was sold per day on average, compared to $168.5m in the last week of February.

Most of these sales were amounts to cover “external transfers” and credit for prepaid electronic cards.

Ammar Khalaf Hamad, deputy governor of the Central Bank, told state-owned al-Iraqiya TV that the increase in activity was caused by all restrictions being lifted on the auctions.

However, Iraqi officials told MEE the US Federal Reserve has made no changes to the restrictions it forced on the auction, and that the increase in activity was caused by other factors, such as the trade ministry needing dollars to pay for food purchases.

"There is no change in the procedures imposed by the US Federal Reserve on the currency auction and there are no exceptions, but there is a gradual return of traders to participate in the auction away from private banks," the second senior official told MEE.

"The other large transfers are caused by the large withdrawal of dollars by citizens through electronic prepaid cards, and this is the latest mechanism for smuggling dollars.”

New smuggling mechanism

The foreign currency auction is the Iraqi Central Bank’s main way to obtain Iraqi dinars.

Most of the Iraqi government’s earnings are through oil sales. The dollars raised through these are held by the US Federal Reserve and then requested by Baghdad whenever it needs funds.

The Fed’s restrictions caused the Iraqi government a huge liquidity crisis, which the Central Bank has tried to ward off with a package of remedies, including allowing every Iraqi passenger to obtain $7,000 in cash at the airport.

By showing a valid plane ticket for that day along with proof that they have deposited sums in a local bank account that are the Iraqi dinar equivalent of $7,000, passengers can withdraw $7,000 from any exchange company, a local bank, or get it at the airport.

It was an opportunity that banking firms, financial mediators, and smugglers could not miss, and they quickly began to find new ways to obtain dollars by taking advantage of this development.

Some smugglers have been using fake tickets to obtain cash. Others have offered Iraqis free trips to Dubai, Turkey, Iran, and Lebanon in return for withdrawing $7,000. Iraqis have also been approached by smugglers and exchange companies asking if they can use their identities to get cash at the airport in return for payment.

Dozens of Iraqis, including government officials, have said they were surprised to find their names on the list of passengers who had received dollars, suggesting their identities had been stolen to get hold of cash.

'The Iranians have stopped buying smuggled dollars. They are now angry and reproachful because they hold us responsible for the losses they incurred'

- Advisor to Iraqi prime minister

Aware the system was being abused, on 14 March the Central Bank issued new instructions that reduced the traveller’s share to only $2,000. 

As an alternative, people planning to travel outside Iraq were allowed to obtain $10,000 at the official exchange rate of 1,320 dinars through electronic prepaid cards issued by licenced banks and electronic payment companies that can only be used abroad but can be refilled if necessary.

In response, private banks and exchange companies then began issuing thousands of prepaid cards to Iraqis, who allowed the companies to use their identity papers in exchange for small sums of money.

The ruse was quickly identified by authorities, however, and customs began arresting travellers in possession of hundreds of prepaid cards.

On 30 March, customs officers at Baghdad airport arrested several travellers after finding 366 cards in their possession. 

A day earlier, three passengers were arrested at Basra airport in possession of 522 cards.

Customs’ public data does not reveal where these passengers were heading, but Iraqi officials told MEE they were on their way either to Dubai or Jordan.

"The Iranians have stopped buying smuggled dollars. They are now angry and reproachful because they hold us responsible for the losses they incurred to obtain dollars," one of Iraqi Prime Minister Mohammed al-Sudani's advisors told MEE.

According to the advisor, people in Iran and Turkey are no longer smuggling dollars from Iraq, leaving Dubai and Jordan as the main destinations.

"This money is withdrawn from Jordan or Dubai, and then deposited in smugglers' accounts, which they provide to those who request quick transfers away from the supervision of the US Federal Reserve in exchange for large commissions," the advisor said.

Iranian pressure

Iraqi and Iranian officials said Iraq managed to pay all its debt to Iran in October, but the money was placed in a special account in the Trade Bank of Iraq, which Iran can use to purchase goods not targeted by US sanctions, like medicine.

Iran, however, wants to use the money Iraq owes it in any way it chooses.

Iraqi officials told MEE that Iran still has $8bn in this account, which it is unable to withdraw because the US Federal Reserve is keeping it under supervision.

The officials also revealed that Iraqi Foreign Minister Fuad Hussein and the governor of the Central Bank, Ali Mohsen al-Alaq, are conducting negotiations with US officials to find a suitable mechanism to get Iran this money.

“The Iranians say: ‘You have arranged all your papers with the Americans and left us. We want our money and nothing else,’" the advisor told MEE.

"We are currently seeking to find a compromise that satisfies both sides. We told the Americans: ‘We have done everything you asked, and you should give us something in return’.”

Iraq asked Washington for a waiver to allow it to pay Iran for its previous and future energy imports in dollars without any issues until further notice, the advisor added.

“The Americans said they understood our position and promised to make recommendations to the US Treasury Department, but we have not yet received a final response,” he said. 

"Indications suggest that the Americans are going to gradually ease pressures on this issue."

 

 

 

 

[ametad]

BRICS will resolve this problem, or Iraq decides to settle in yuan with Iran; either solution would work, and both solutions leave the USA out of the middle of economic relations between bordering countries halfway across the world.