Economic imbalance"... Iran is at risk of losing Iraq soon
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The American Middle East Forum Institute has monitored the "economic imbalance" between Iraq and Iran, noting that the potential strategic repercussions of diminishing Iranian economic influence in Iraq in the coming period could leave Tehran vulnerable to losing Baghdad, as it is one of its last significant geopolitical and financial defenses in the region.
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The American Institute's report, translated by Shafaq News Agency, stated that despite the severe shortages it faces domestically in terms of electricity and natural gas supplies and the difficulty in obtaining payments due to US sanctions, Iran continues to export energy resources to Iraq. This represents a contradiction in its long-term geopolitical calculations, which aim to "deeply entrench its influence in the Iraqi economy and political system."
Noting that Iran's exports to Iraq have increased more than 100-fold over the past two decades, demonstrating the depth of this intertwining, the report said, "Iran's energy exports to Iraq have become a fundamental pillar of its influence in the country. Its modest non-oil exports to Iraq have increased from $145 million in 2005 to $11.9 billion in 2024, representing 20% of its total non-oil exports. This figure does not include approximately $3 billion in electricity and gas exports to Iraq last year."
According to the institute's report, its data, based on Iranian customs figures, shows that Iran has exported goods and services to Iraq worth more than $100 billion over the past two decades. Furthermore, according to the report, Iran began exporting electricity to Iraq in 2005, generating approximately $10 billion in revenue over the past two decades.
He continued, "Since 2017, Iran has increased its gas exports, delivering more than 60 billion cubic meters over seven years, worth approximately $18 billion."
Overall, he confirmed that Iran's exports to Iraq amounted to $130 billion over 20 years, while Iranian imports from Iraq remained marginal. Prior to US sanctions on Iran in 2018, they amounted to a few tens of millions of dollars annually, and recently reached approximately $500 million.
The report stated that "this economic imbalance has led to Iraq's dependence on Iranian goods, energy, and services, which has allowed Iran to exert political influence in Baghdad, fund its pro-Iranian groups, and use Iraqi financial networks to facilitate currency smuggling and the secret sale of oil under Iraqi control."
After noting the numerous restrictions imposed by the US Treasury Department on several Iraqi banks, the report explained that these measures have made it more difficult for Iran to access hard currency through Iraq, a vital lifeline in light of Tehran's broader isolation from the global financial system .
The report found that Iran's regional influence has declined since mid-2024 following Israeli strikes against its proxies and the fall of Bashar al-Assad's regime in Syria, making Iran's role in Iraq more vulnerable.
Therefore, the report considered that this situation created a new space for Iraq to strengthen its independence, while the "maximum pressure" campaign launched by the Donald Trump administration against Tehran encouraged Baghdad to begin diversifying its partnerships and reducing its dependence on the political and economic axis represented by Iran .
He explained that the International Monetary Fund expects the Iraqi economy to shrink by 1.5% in 2025, with the phasing out of US energy import waivers a contributing factor. He added that despite Turkey doubling its electricity exports to Iraq this year, Iraq's gas deficit remains unresolved in the short term, posing a serious threat to the electricity grid and industry, and could lead to summer power outages and civil unrest.
The report continued: " After Washington imposed a "maximum pressure" campaign on Tehran in 2018, Iraq has been accumulating unpaid gas and electricity debts to Iran, reaching nearly $8 billion."
He added, "Despite this, Tehran insists on continuing its exports, based on its strategic calculations rather than its economic logic," considering that this influence may decline, as the International Monetary Fund expects Iran's total exports to decline by $11 billion in 2025 compared to 2024, while the Fund also expects a daily decline of 300,000 barrels in Iranian oil exports due to renewed US pressure, in addition to the decline in global oil prices."
The report indicated that the US Treasury's restrictions on Iraqi banks' access to dollars will undermine Tehran's ability to recover its funds. As a result, the Iranian rial will lose approximately 50% of its value in 2024, while the International Monetary Fund expects Iran's GDP to decline by $60 billion in 2025, reaching $341 billion, its lowest level in 18 years .
He emphasized that Iran's economic influence over Iraq remains significant, but fragile, adding that US financial restrictions, internal resentment in Iraq over Iranian interference, and Baghdad's plans to diversify its gas sources all pose serious threats to Tehran's influence.
He pointed out that if Iraq succeeds in reducing imports of Iranian goods, replacing Iranian gas with local or Turkmen supplies, and enhancing the compliance of its banking system with international standards, Iran "could lose one of its last significant geopolitical and financial defenses in the region."
The report considered that, for the United States and its allies, strengthening Iraq's energy independence and financial stability should be a strategic priority, adding that, for Iran, the cost of clinging to Iraq in the near future could outweigh the benefits
Most notably, the travelers' dollar. Al-Sudani's advisor reveals the reasons for the exchange rate's decline.
Mazhar Mohammed Saleh, the Prime Minister's financial advisor, revealed on Thursday the reasons for the decline in the dollar exchange rate, indicating that three factors led to weak demand in the parallel market: the Central Bank's success in financing foreign trade by strengthening the dollar with national bank correspondents abroad, encouraging financing small businesses without costly intermediaries, and the success of travelers in collecting their dues in foreign currency through payment cards in large amounts at a reduced cost and at an exchange rate of 1,320 dinars per dollar.
Three main factors have led to weak demand in the parallel market for the dollar, causing its price to decline towards the official exchange rate at an average rate of change in favor of the dinar by about 15% over the past few weeks or months. The first is the success of the Central Bank of Iraq in financing foreign trade for the private sector and major traders by rapidly strengthening the dollar with correspondent banks of national banks abroad with AAA ratings. This is in addition to the start of direct financing of foreign banking operations in euros, Emirati dirhams, and Chinese yuan through bank correspondents of Iraqi banks with high credit ratings, which encouraged the speed of payments and transfers in trade with the markets of the UAE, Turkey, and China, which are among the largest commercial shopping centers for Iraq. The second is encouraging the financing of small businesses without costly intermediaries, which constitutes approximately 60% of private sector trade after many of the previously imposed restrictions were lifted and dealings were conducted through the same solid correspondent banks and directly through Iraqi banks. The third and most important factor is the success of the traveler segment, which has quickly become accustomed to collecting its dues in foreign currency through payment cards in large amounts at a reduced cost and at an exchange rate of 1320. One dinar for every dollar, plus, without any hassle, the collection of cash dollars through the airports of the Republic of Iraq, in the amount of $3,000 at the official exchange rate for each traveler per month, provided they carry an electronic payment card, whether credit, debit, or prepaid, as we mentioned earlier.
In addition to the legal scrutiny that citizens can do without in dealing in dollars on the black market, there are also the risks of the dollar's extreme volatility against gold, and the tendency of individuals to store their financial surpluses in gold and sovereign government bonds, which are guaranteed to pay and pay attractive semi-annual interest under a successful government program offered to the public, as well as in debt instruments that can be discounted or traded on the local secondary market.
Therefore, all these factors have truly helped reduce demand for the dollar in parallel local markets, without overlooking the role played by hypermarkets in a defensive and price stability policy that has disrupted the role of the parallel market and its price impact on consumer prices and the stability of the competitive market throughout the country. This is a successful experiment that has absorbed the fluctuations of the black market to maintain the stability of living standards, as was the case in the past. This is a successful aspect of the success of the trade policy in our country today. Let's not forget the rush to buy gold at very high costs at the peak of the gold asset cycle or its highest price levels, replacing the purchase of local dollars, amid veiled, unconfirmed threats circulating on the street that the Federal Reserve will write off generations of cash dollars for reasons that conflict with the interests and politics of the United States.
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A new digital gateway: Iraq launches first unified telecom transit route
Iraq has signed a strategic transit agreement with DIL Technology, a Kurdish-licensed firm, to enable seamless data flow across its territory.
The deal, finalized on Thursday by the Ministry of Communications, marks the first time Iraq presents a unified telecom front to international companies. It streamlines the process of transmitting data through the country, eliminating the need for companies to negotiate separately with federal and Kurdish entities.
Hayam Al-Yasiri, the Minister of Communications, said the agreement boosts Iraq’s potential as a secure and efficient alternative to unstable maritime routes, especially amid rising concerns from global telecom providers over regional disruptions.
The newly integrated corridor stretches from the southern port of Al-Faw to the northern border at Ibrahim Khalil border crossing, forming a continuous fiber-optic network under centralized oversight.
The agreement, according to Al-Yasiri, not only enhances Iraq’s appeal to international partners but also supports long-term revenue generation and digital sovereignty.
DIL Technology, which maintains infrastructure across Iraq’s border crossings, will serve as the technical facilitator under the federal ministry’s authority.
The dollar bows to sanctions when politicians "pretend" for fear of American wrath, not the pain of citizens.
For more than a year, Iraq has been experiencing sharp fluctuations in the dollar exchange rate, between an official market fixed at 1,320 dinars per dollar, and a parallel market that peaked in July 2023 at 1,570 dinars, imposing a new layer of costs on citizens and raising serious questions about who actually controls the country's currency. Today, the dollar has begun to falter in the parallel market, recording approximately 1,420-1,450 dinars at the beginning of May 2025, a significant drop from the peak of previous months. This decline did not come by chance, but rather as a result of a long battle waged by the state, along with the Americans, against the parallel economy system, smuggling arms, and a fragile banking system accustomed to financing without accountability or oversight.
Investment Committee Member: Market Begins to Become Under State Control
MP Mohammed Radhi, a member of the parliamentary Investment and Development Committee, told Baghdad Today, "What is happening now is a true result of the measures imposed on banks and money transfer operations." He added, "Financial authorities have begun to push for adherence to the official exchange rate, and the dollar on the parallel market will continue to decline until it approaches the rate legally set by the Central Bank."
However, this optimism does not preclude looking at the other side of the equation. The facts indicate that the Central Bank's actions came in the wake of direct US pressure, which threatened to isolate Iraq from the international financial system if the dollar's chaos continued.
US Pressure... A Policy with a "Cash Touch"
Since mid-2023, the US Treasury Department has tightened its oversight of financial transfers from Iraq, targeting private banks close to political parties accused of money laundering and transferring it abroad, particularly to Iran and Syria. In the same context, more than 14 banks were banned from accessing dollars through the official platform, and Iraq was required to comply with AML/CFT compliance standards, conditions that were quietly but rigorously enforced.
These moves were not only to protect the international financial system, but also to send a message to the Iraqi political class: "If you don't control the market, we will control you through the dollar."
Is the government trying to win Washington's favor?
Economic observers indicate that the current government has found this issue an opportunity to reshape its image before the international community, particularly Washington. After years of accusations of corruption and money laundering, the government now needs to present a new, reformist face, one that suggests "Iraq has begun to care about its people, not just its own pockets."
MP Radi makes no secret of the fact that the crisis has had a severe domestic impact, saying, "The high exchange rate has directly harmed the national economy and led to stifling living costs. Now, a solution to the crisis is approaching, and there is a clear seriousness on the part of the authorities to control the previous chaos."
But the question remains: Is this decline the result of genuine reform, or is it merely a temporary embellishment to attract support and temporarily ease American pressure?
The parallel market... a state in the shadows.
It is impossible to discuss the dollar crisis without understanding the structure of the parallel market, which is not governed by law but by the logic of supply and demand, often linked to illegitimate factors. For years, this market has constituted a gray economy used by certain entities to finance foreign operations and dubious political and commercial deals, and through which millions of dollars are smuggled monthly.
However, the current spread between the official rate (1320) and the parallel rate (1420–1450) remains attractive, meaning that there are still those who benefit from keeping the gap alive. Hence, the battle is not over, but has entered a "repositioning" phase, with players forced to temporarily bow to the storm.
The numbers don't lie: Market and citizen losses between the two dollars.
At the height of the crisis in mid-2023, the dollar exchange rate on the parallel market was around 1,570 dinars, while the official rate was 1,320 dinars, meaning a gap of 250 dinars per dollar. Today, on May 8, 2025, the dollar exchange rate on the parallel market has fallen to around 1,420 dinars, while the official rate has stabilized at 1,310 dinars, narrowing the gap to 110 dinars per dollar.
This narrowing of the gap is a positive indicator of the improving economic situation and reflects the Central Bank of Iraq's efforts to control the parallel market. In terms of purchasing power, a report issued by Numbeo indicated that Iraq ranked sixth in the Arab world and 68th globally in the 2025 Purchasing Power Index, with a score of 54.5%, reflecting a relative improvement in citizens' purchasing power.
However, challenges remain, as any fluctuation in the exchange rate directly impacts the prices of goods and services and weakens citizens' purchasing power, especially given the heavy reliance on imports.
Public funds are at stake... and the budget is subject to fluctuations
in the 2025 budget, which was based on an official exchange rate of (1320) dinars to the dollar. Any additional difference in the parallel market is not just a number, but translates into actual losses in purchasing power, imbalances in the distribution of public spending, and distortion of all financial accounts. If the difference persists, even if it is around 100 or 150 dinars, it means in practice that funds allocated for support and care may erode, and the state's hard currency revenues will not enter the official stream, but will be smuggled or stored outside the financial cycle.
What's even more dangerous is that continued doubts about the dinar's stability will affect the confidence of investors, donors, and countries seeking to establish strategic partnerships with Iraq. Money, like politics, hates uncertainty.
Therefore, controlling the foreign exchange market is no longer merely an economic requirement, but has become an international sovereign standard, measuring the government's seriousness, the regime's stability, and its ability to transition from a fragile rentier state to an economic entity that can be trusted in international forums.
Unless the current measures become permanent policy, and unless the shadow economy is completely suppressed, any improvement in the market will remain fragile and subject to reversal at any moment.
9 Reasons for the Sudden Drop in the Dollar in Iraq: An Economist Explains
An economic expert revealed the reasons behind the sudden drop in the US dollar's exchange rate against the Iraqi dinar over the past few days, noting the possibility of the US currency continuing its decline.
Over the past few days, Iraqi markets have witnessed a significant decline in the dollar exchange rate against the dinar on the parallel market, approaching 1,420 dinars per dollar, a level very close to the official rate after accounting for associated costs. According to the economic expert, "This decline reflects multiple changes in supply and demand within the local market and raises questions about the factors behind it."
Iraqi economic expert Munar Al-Abidi pointed to nine reasons that led to the decline in the value of the US currency in Iraqi markets:
First: Declining demand versus abundant supply
The main reason for this decline is a decline in demand for dollars on the parallel market, coupled with a significant increase in the supply of hard currency within the market. "This new balance has contributed to narrowing the gap between the parallel and official rates," according to Al-Obaidi.
Second: Investors shift towards gold
The economist pointed to a decline in confidence among some local investors in the dollar as a savings instrument, especially with growing expectations of a decline in its value against gold. This trend prompted many to cash in their dollar holdings and convert them into gold as a safe haven, increasing the supply of dollars in the market.
Third: Dollar inflow from non-oil sources
According to Al-Obaidi, the amount of dollars coming from outside Iraq has increased, "particularly from foreign investments and financial transfers from international companies operating within the country, which has boosted the dollar supply, regardless of oil sales."
Fourth: The decline in the money supply of the dinar
The Central Bank of Iraq has reduced the dinar money supply by more than 6 trillion dinars over the past six months, from 104 trillion to approximately 98 trillion dinars. This contraction has led to a relative increase in the value of the dinar, which has put downward pressure on the dollar, according to Al-Obaidi.
Fifth: Declining imports and trade contraction
Despite a 6% increase in imports from China, exports from key countries such as India, Turkey, and the United States declined. Import data from the UAE—Iraq's largest trading partner, which accounts for 30% of its total imports—is expected to arrive, according to Al-Obaidi. "The figures are likely to reveal a decline, reflecting an economic contraction and a decline in general demand, thus declining the need for dollars."
Sixth: Diversify channels for obtaining dollars at the official price.
The recent period has witnessed an expansion in access to dollars at the official exchange rate, through bank transfers, cards, and direct transfers. Many merchants have adapted to these channels, reducing their reliance on the parallel market.
Seventh: The impact of regional conditions
Al-Obaidi explained that the deteriorating economic situation in Iran led to a decline in demand for goods imported from Iraq, especially since a portion of these goods were re-exported to Iran. Furthermore, the halt in trade with Syria—which also received a portion of Iraqi goods through re-export—contributed to a decline in demand for imports and, consequently, for the dollar.
Eighth: Pressure on the smuggled oil trade
Markets also witnessed a tightening of Iranian oil smuggling channels, which had been used by the Iraqi market to obtain dollars. This restriction reduced the amount of dollars required for these activities, thereby contributing to easing pressure on foreign currency.
Ninth: Decline in the trade of prohibited substances
Illicit trade has declined as a result of the cessation of its sources, including drug and similar trade, a large portion of which used to be conducted with Syria and which placed significant pressure on the dollar price on the parallel market, as this trade was covered through the parallel market.
The economic expert emphasized that all of these factors combined have created an environment that has driven the dollar's exchange rate down. Given these indicators, it is expected that the US currency will continue its decline, approaching 1,395 dinars per dollar in the coming period, unless there are fundamental changes in monetary policy or the regional and international situation.
Learn about the 10 memoranda of understanding signed between the Prime Minister and the Turkish President.
Prime Minister Mohammed Shia Al-Sudani and Turkish President Recep Tayyip Erdogan sponsored, on Thursday, the signing ceremony of 10 memoranda of understanding between Iraq and Turkey.
The Prime Minister's media office stated that "the most prominent memoranda of understanding included the following:
1- A memorandum of understanding on cooperation in the fields of defense industries and exchange of expertise
2- A cooperation protocol on the opening of a branch of Turkish universities in Baghdad and Basra
3- A memorandum of understanding in the field of standard operating procedures for the voluntary return of Iraqi citizens from Turkey
4- A memorandum of understanding in the field of emergency and disaster management
5- A draft memorandum of understanding for cooperation in the judicial fields
6- A memorandum of understanding for cooperation in the fields of digital public relations
7- A memorandum of understanding on cooperation in the field of combating illicit drug trafficking
8- A memorandum of understanding in the field of measurement and calibration activities
9- Two memoranda of understanding in the field of training cooperation for the Ministry of Interior
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