Washington declined Iraq’s request for one billion dollars in cash from the Federal Reserve Bank, citing concerns over Baghdad’s use of the dollar and potential illicit cash flows to Iran.
According to a report by The Wall Street Journal, the United States has been providing $10 billion or more every year to Baghdad through bi-monthly cargo flights since the American invasion of Iraq two decades ago. This money is sourced from the proceeds of Iraqi oil sales that are deposited with the Federal Reserve Bank.
American officials stated that banknotes in the hands of Iraqis have become a profitable source of illicit dollars that end up with militias, corrupt politicians, and Iran.
Iraq has requested an additional $1 billion shipment to support its weakening currency. The Central Bank of Iraq submitted an official request last month, which was rejected by Washington. However, a new request was submitted last week and is currently being studied by the Treasury Ministry. A senior Iraqi official provided this information.
According to the newspaper, since November 2020, Washington has blocked 18 Iraqi banks from conducting transactions in US dollars. The US has also imposed stricter regulations for electronic transfers in dollars from its banks.
Treasury officials informed Iraqi central bank governors that sending an additional shipment could conflict with Washington’s goal of limiting Iraq’s use of US banknotes, according to Iraqi officials.
American officials claimed that some of the dollars entering Iraq were smuggled in cash to Iran, Turkey, Lebanon, Syria, and Jordan.
A Treasury Department spokeswoman stated that the United States supports Iraq by providing them with dollar banknotes and that the access to them has not been restricted for ordinary Iraqis and businesses. The Central Bank of Iraq is continuing to collaborate with the US.
