Washington presses Iraq's delegation on Iran sanctions: MEI
Shafaq News/ During the Iraqi foreign minister’s visit to Washington last week, the Biden administration pressed Baghdad to reorient its energy sector away from Iran and to address accusations that Iraq’s financial sector is helping the Iranian regime evade sanctions, the Washington-based Middle East institute said.
The Biden administration used the latest “Strategic Framework Agreement” meeting with high-level Iraqi officials, held in Washington, on Feb. 9, to press Iraq to reduce its economic ties to Iran. The head of the visiting delegation, Iraqi Foreign Minister Fuad Hussein, told journalists that this latest meeting was the first in the series, launched in 2009, to focus on economic issues. Ahead of his talks with Secretary of State Antony Blinken, Hussein expressed hope that partnerships with the American government and private companies would help Iraq develop its economy. The American side was more pointed. Blinken publicly urged Iraq to become energy independent in electricity, thus signaling that the government in Baghdad should find alternatives to imports of Iranian energy for its flailing domestic power sector. He added that the United States would support efforts among Gulf countries and Jordan to integrate Iraq into the “regional” economy. These remarks followed the Feb. 2 telephone call between U.S. President Joe Biden, Jordanian King Abdullah II, and Iraqi Prime Minister Mohammed Shia’ al-Sudani, in which Biden expressed American support for joint Iraqi-Jordanian projects, including in the fields of electric power transmission and an oil pipeline. An American team in Iraq last month also pressed the Iraqis to advance these regional energy projects.
From Baghdad’s perspective, the most immediate issue for its delegation was the U.S. Federal Reserve’s action last November to restrain dollar transfers from the Iraqi government’s oil revenues account at the New York Federal Reserve bank to the Central Bank of Iraq. These restrictions have reduced dollar flows from the Central Bank to Iraqi commercial bank customers seeking to transfer dollars out of Iraq, as the Federal Reserve now checks on transfer recipients to ensure the dollar transfers do not violate American sanctions on Iran and Syria. The reduced wire transfers have driven up demand for paper American dollars and pushed up the dollar exchange rate in Iraq. Resulting higher import prices generated a popular backlash against Prime Minister Sudani’s government.
While in Washington last week as part of his country’s visiting delegation, Central Bank Governor Ali Alaq promoted steps Baghdad is taking to bring the Iraqi banking sector into compliance with international money-transfer practices. Alaq and Foreign Minister Hussein also explained how Baghdad aims to revalue the dinar upward while coping with the problems of counterfeit currency notes and weak border controls on paper dollars leaving Iraq. The Iraqi government had hoped that Hussein and Alaq could secure a moratorium on the Federal Reserve’s restriction of dollar transfers to Iraq, but Washington made no such commitment in public. There is pressure inside the administration and from Congress to tighten restrictions on the dollar flows from Iraq that help Iran evade sanctions. In turn, Baghdad has sought to remind Washington about Iraq’s difficult position: On Feb. 12, Hussein pointedly told the English-language media outlet Al-Monitor that Iraq would benefit from lower tensions between the U.S. and Iran.