By Maha El Dahan and Ahmed Rasheed
DUBAI/BAGHDAD (REUTERS) – The Central Bank of Iraq will prohibit five local banks from carrying out American dollar transactions, a movement that comes after meetings with American treasury officials in attempts to launch money, dollars smuggling and other violations, two sources with Direct knowledge of the case told Reuters on Sunday.
After meetings in Dubai last week, the move comes between officials from the Central Bank of Iraq – who already forbade eight banks from American dollar transactions – and American treasury and Federal Reserve -Officers last year, according to one of the sources.
A rare ally of both the United States and Iran with more than $ 100 billion in reserves being held in the US, Iraq strongly relies on Washington’s goodwill to ensure that access to oil income and finances are not blocked.
But the second largest producer of OPEC may be in sight after the US President Donald Trump said that he would repair his “maximum pressure” policy for Iran this month.
Iran regards his neighbor and ally Iraq as an economic “long” and has significant military, political and economic influence there by the powerful Shiite militias and political parties that supports it. It also gets hard currency from Iraq through export and avoids American sanctions through its banking system.
Reuters unveiled an advanced network of fuel oil network in December, which generates at least $ 1 billion a year for Iran and the attorney, was flourishing in Iraq since Prime Minister Mohammed Shia al-Sudani took office in 2022.
Banks prohibited from dollar transactions may continue to work and can carry out transactions in other currencies, says the Central Bank.
But the relocation limits the ability of the banks to carry out transactions in dollars, so that most activities outside of Iraq are impeded.
The current Iraqi government came to power with the support of powerful parties supported by Iran and armed groups with interests in the very informal economy of Iraq, including the financial sector that has long been seen as a hotspot with money.
Western officials had praised cooperation with Prime Minister Sudani to implement economic and financial reforms that are intended to curb the ability of Iran and his allies to get access to US dollars, but the pressure is expected to stack with the government of Trump.
The five banks are Al-Mashreq al-Arabi Islamic Bank, United Bank for Investment, Al Sanam Islamic Bank, Misk Islamic Bank and Amin Iraq for Islamic investments and finances.
The Central Bank of Iraq did not immediately respond to a request for comments.
