Hantoush: Dismantling the parallel market is key to the dollar's return to 135,000.
Financial researcher Mustafa Akram Hantoush emphasized that addressing the exchange rate issue in Iraq requires working on two main aspects: reforming the banking system and dismantling the parallel market. He noted that any partial solutions will not be sufficient to achieve the desired stability.
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In an interview with Jarida Platform, Hantoush explained that “the Iraqi banking system suffers from weak competition due to the limited sale of dollars to a limited number of banks, in addition to the fact that most of them face international sanctions.” He indicated that “the current cooperation with Oliver Wyman aims to find practical solutions and increase the banks’ capital.”
He pointed out that "reducing restrictions on the banking system and opening up competition in foreign remittances will contribute to market stability," noting that "the other side of the solution is dismantling the parallel market linked to trade with Iran, where small traders and travelers to sanctioned countries operate."
Hantoush explained that "possible solutions include agreeing with the US Treasury Department on mechanisms for transferring funds, establishing three-way accounts for imported goods, and developing legal formulas for transferring funds to sanctioned countries via payment cards in their local currencies."
He concluded by saying, "Controlling the parallel market could restore the dollar exchange rate to 135,000 dinars per $100, if these steps are implemented comprehensively."
US Lawmaker Threatens to Cut Iraq Funding Over Bank's Alleged Houthi Ties
U.S. Congressman Joe Wilson threatens to cut Iraq's funding, accusing its state-owned Rafidain Bank of financing the Houthis. A Fox News report detailed a U.S. warning to Iraqi officials on the matter, which Iraq’s embassy has categorically denied.
U.S. Republican Congressman Joe Wilson has accused Iraq's state-owned Rafidain Bank of processing payments for the Houthi movement, a U.S.-designated terrorist organization, and has threatened to work towards cutting U.S. funding to Iraq as a consequence. In a forceful statement posted to his official X account on Friday, the South Carolina representative leveled a severe charge against the Iraqi state, suggesting a designation that carries significant diplomatic and economic ramifications.
"Iraq’s state-owned Rafidain bank is processing payments for the Houthis, a terrorist organization!" Congressman Wilson stated. "We have a name describing these types of countries - state sponsors of terrorism. I will work to cut funding to Iraq during the upcoming appropriations legislation. I urge the U.S. Department of the Treasury to sanction Al Rafidain Bank.”
his twitter/X
The congressman's public call to action follows an exclusive report by Fox News detailing accusations that Rafidain Bank's branch in Sana'a, the Yemeni capital controlled by the Houthis, has been facilitating payments for the group.
According to the report, which cited an unnamed Iraqi official, U.S. Treasury officials directly confronted senior Iraqi diplomats about the issue during a high-level meeting in Washington on April 29. The meeting reportedly included Dr. Michael Faulkender, a deputy secretary of the U.S. Treasury, Iraq’s Foreign Minister Fuad Hussein, and Iraq’s Ambassador to the U.S., Nazar Al Khirullah.
Fox Business, which obtained what it described as minutes from the meeting, reported that Treasury officials warned Hussein that the state-controlled bank needed to cease conducting business with the Houthis.
The U.S. also requested that the Rafidain branch be relocated to Aden, the seat of Yemen’s internationally recognized government. The financing of the Houthi movement has significant implications for global commerce, as the group has repeatedly launched missile attacks on commercial vessels in the Red Sea.
The official slogan of the Houthi movement includes the phrases "Death to America" and "Death to Israel."
According to the reported minutes, Foreign Minister Hussein responded by stating, "The Iraqi government deals with the internationally recognized Yemeni government, which maintains an embassy in Iraq."
He reportedly emphasized that there was "no possibility of the Houthis accessing the Iraqi financial system, and pledged to personally verify this matter." In a more formal and categorical denial sent to Fox Business, a spokesperson for Iraq’s embassy in Washington, Dr. Sadeq Ali Hasan, called the allegations "categorically false."
The embassy statement insisted that the Sana'a branch has been "fully non-operational since 2017," has no access to the SWIFT international banking system, lacks liquidity, and "has not processed any domestic or international payments – particularly not to the Houthi group – since its closure."
However, the Iraqi official who spoke to Fox News countered the embassy's position, describing Rafidain as "Iraq’s most opaque bank" and noting it has never been externally audited.
"The U.S. Treasury should act," the source stated, adding that the bank pays for projects of the Popular Mobilization Forces (PMF) and issues unsecured loans to its fighters. The Iraqi embassy also addressed this, stating that Rafidain Bank "no longer holds any PMF-related accounts" and that they had been transferred to Al-Nahrain Islamic Bank.
The official U.S. government response has been more measured. A U.S. Treasury spokesperson told Fox Business that while the department does not comment on specific allegations, it takes any potential sanctions violations "extremely seriously."
Similarly, a State Department spokesperson said they do not comment on private diplomatic discussions but affirmed that "no country should be processing payments to the Houthis." Michael Knights, a senior fellow at the Washington Institute, told Fox Business that U.S. congressional representatives have been aware of Rafidain Bank since February 2025 over concerns it facilitates money transfers to Iran and its proxies, putting the bank "in the danger zone."
The bank has a history of being under international scrutiny; it was previously blacklisted by the U.S. and the United Nations to punish Saddam Hussein's regime before sanctions were lifted in the years following the 2003 invasion.
Rafidain Bank signs an agreement with an American company in the field of financial consulting and oversight.
Rafidain Bank announced today, Friday, the signing of a professional partnership agreement with an American company in the field of financial consulting and oversight.
Rafidain Bank Director General Ali Karim Hussein Zahir Al-Fatlawi said in a statement published by the Iraqi Embassy in Washington, "In a new strategic step that reflects Iraq's growing financial standing on the international stage, the Iraqi Embassy in Washington witnessed the signing of a professional partnership agreement between Rafidain Bank and K2 Integrity, a global leader in financial and regulatory consulting."
He added that "the agreement includes providing a comprehensive package of services, including combating money laundering and terrorist financing, implementing compliance systems in line with international standards, and strengthening the regulatory infrastructure of Iraqi banks." He noted that "this cooperation is part of the Iraqi government's strategy to build a strong and transparent financial sector capable of keeping pace with global economic transformations and consolidating Iraq's position as a promising financial center in the region."
He explained that "this partnership represents a qualitative leap forward in the path of banking reform," noting that "the agreement will contribute to strengthening confidence in Iraqi banks and opening broader horizons for cooperation with correspondent banks around the world, supporting the government's goals of building a strong, transparent financial sector that is consistent with international best practices."
This signing comes as an extension of the government's approach to launching strategic projects that enhance Iraq's position as a promising financial center in the region, and consolidate its image as a country capable of keeping pace with global economic transformations with confidence and competence.
Rafidain Bank Signs Professional Partnership Agreement with K2 Integrity in Washington
In a new strategic step reflecting Iraq’s growing financial presence on the international stage, the Embassy of the Republic of Iraq in Washington hosted the signing ceremony of a professional partnership agreement between Rafidain Bank and K2 Integrity, a U.S.-based global leader in financial and regulatory consulting. The agreement is based on Iraqi Cabinet Resolution No. (23274) of 2023.
Under the agreement, K2 Integrity will provide a comprehensive package of services, including anti-money laundering and counter-terrorist financing measures, the implementation of compliance systems in line with international standards, and the enhancement of regulatory infrastructure for Iraqi banks.
This cooperation falls within the Iraqi government’s strategy to build a strong and transparent financial sector capable of keeping pace with global economic transformations, reinforcing Iraq’s position as a promising financial hub in the region.
The Embassy of the Republic of Iraq in Washington emphasized that this partnership reflects the strength and continued growth of Iraq–U.S. relations, particularly in the areas of economic diplomacy and strategic partnerships that support sustainable development. The Embassy reaffirmed its commitment to further deepening these ties, advancing mutual interests, and expanding investment opportunities between the two countries.
Ankara sends Baghdad a draft of a new oil agreement: The current situation does not meet our expectations.
Turkey's Energy Ministry announced on Friday that Ankara is seeking to conclude a new pipeline agreement with Iraq, confirming that it recently informed Baghdad that the current oil export agreement no longer "meets ambition."
Turkey Today quoted Energy Minister Alparslan Bayraktar, in a statement translated by Shafaq News Agency, as saying, "The pipeline with Iraq has a capacity of 1.5 million barrels per day, but it has not been operating at full capacity for 50 years."
He added, "We recently informed the Iraqi government that the current agreement no longer meets expectations and does not respond to the world's energy needs today, and we have sent a new draft agreement." He stressed, "We are currently reviewing the structure of the new draft, and I hope the technical teams will meet soon to begin negotiations on the new agreement."
The Turkish minister emphasized that "the Iraqi government's goal is to fully exploit this pipeline," explaining that "Turkey's oil and gas exploration and production strategy focuses on domestic production while evaluating opportunities abroad, especially since it currently produces very small quantities of oil in Iraq."
Turkish sources had previously revealed that negotiations had begun between Ankara and Baghdad to reach a new, more comprehensive oil transport agreement. A Turkish presidential decree published in the Official Gazette on July 21 indicated that the current agreement, signed between the two countries in 1973, would expire on July 27, 2026.
The Turkish Energy Minister announced that the new draft agreement regarding the transfer of Iraqi oil to the Turkish port of Ceyhan also includes cooperation in the field of natural gas extraction and power generation projects.
Bayraktar said in a televised interview today with the Emirati Sky News channel: Turkey sent the draft of the new agreement to the Iraqi side at the end of last month for review and negotiation of a new formula that would replace the provisions of the previous agreement, which officially expires on July 26 of next year. He pointed out that his country recently informed the Iraqi government that the current agreement no longer meets expectations and does not meet the current energy needs.
Bayraktar added: The capacity of the Iraqi oil pipelines through Turkey is 1.5 million barrels per day, but it has not been used at full capacity for 50 years. Therefore, we said this agreement is not commercially or legally beneficial. Let's not prolong this matter. But immediately after that, I sent a letter to my Iraqi counterpart, the Oil Minister, attaching a draft of our new agreement.
He also said, "We said we now want to work on this matter through an agreement on the Iraq-Turkey pipeline. The essence of that agreement is this: Let us utilize the full capacity of this pipeline, avoiding any legal disputes between us. Let us allow 1.5 million barrels of oil to flow through it. That is our goal. Furthermore, we discussed the development road project, and it is possible to transform it into an energy road. Today, 1.5 million barrels represents an annual investment of nearly $40 billion."
Asked about extending the pipeline to southern Iraq, Bayraktar said, "To reach a capacity of 1.5 million barrels (per day), this pipeline must extend south. "Because it cannot be filled, but rather up to half of it with production in the north, including Kirkuk."
Meanwhile, the Turkish Energy Minister announced that his country's electricity exports to Syria will reach 900 megawatts by the first quarter of next year.
Bayraktar stressed the great importance of infrastructure services, such as energy and water, for the return of normal life in Syria, pointing to the success of delivering Azerbaijani gas to Syria via Turkish territory on the second of this month.
In this context, he pointed to the participation of the Qatar Fund for Development in the project to deliver Azerbaijani gas to Syria, indicating that the project began as a bilateral track and later developed into an important multilateral humanitarian project.
The Turkish Minister stated that the amount of gas coming from Azerbaijan to Syria currently amounts to about 3.4 million cubic meters per day, and that the pipeline transporting this gas has a capacity of about 6 million cubic meters.
Bayraktar confirmed that the parties are working to increase the amount of Azerbaijani gas to Syria to 6 million cubic meters, indicating that this amount is capable of generating about 1,200 megawatts of electricity, which meets the needs of about 5 million families in Syria.
Syria and Azerbaijan signed an agreement on July 12th that includes cooperation and coordination in the fields of energy and the supply of natural gas to Syria via Turkey. The first phase of the project to pump gas from Azerbaijan via Turkey to Syrian territory began with Qatari funding. It includes the supply of approximately 3.4 million cubic meters of gas per day, allocated for use in operating gas-fired power plants.
Regarding the direct export of electricity to Syria, Bayraktar explained that Turkey is currently exporting 281 megawatts of electricity to Syria through eight points, stressing that Turkey is working to increase the amount to 360 megawatts in the coming weeks. The ultimate goal is to export an additional 500 megawatts of electricity to Syria in the coming months by increasing the amount of energy exported from the "Birehcik" region (on the Turkish border) to Aleppo, Syria.
He added: "This electrical connection requires some technical work on Syrian territory, and by the first quarter of next year, we will be able to export approximately 900 megawatts of electricity directly to Syria."
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Iraq's oil fortune: The two-decade grip of a US 'fortress'
Before dawn in Basra, giant oil tankers edge into the jetties, loading arms glinting under floodlights as millions of barrels of crude stream aboard for export. Yet most of the proceeds from this trade never pass through Baghdad’s vaults. Instead, they cross the Atlantic to a heavily fortified building in Manhattan — the US Federal Reserve Bank of New York — where they remain under strict American oversight.
What began in 2003 as a “temporary safeguard” after the invasion and the fall of Saddam Hussein has endured for 22 years, outliving its original UN mandate and embedding itself in Iraq’s financial system — and in the debate over whether such oversight protects or undermines the country’s economic sovereignty.
From Mandate to Custody
In May 2003, UN Security Council Resolution 1483 required Iraq to deposit all oil and gas revenues into a Federal Reserve account under UN monitoring, with 5% deducted for reparations to Kuwait. That same month, then-US President George W. Bush issued Executive Order 13303, granting the account full legal immunity from seizure.
For nearly two decades, Iraq sent steady payments to Kuwait — $52.4B in total — until the last $44M cleared in late 2021, closing the file. Iraqi lawmakers hailed it as “a new beginning,” yet the financial mechanism remained.
UN Security Council Resolution 1956, adopted on December 15, 2010, ended the UN-supervised arrangements for the Development Fund for Iraq (DFI) as of June 30, 2011. Yet Washington has renewed the executive order every year since — most recently in May 2025.
In US policy circles, the arrangement has shifted from a post-war safeguard to a permanent instrument — one that, according to American officials, helps stabilize Iraq’s fragile economy and monitor dollar flows.
Supporters point to improved investor confidence and reduced risk from oil market volatility, while critics see a foreign power keeping a hand on Iraq’s wealth.
Billions in New York
Central Bank of Iraq (CBI) officials told Shafaq News, in condition of anonymity due to the sensitivity of the matter, that the US Federal Reserve currently holds between $80B and $85B of Iraq’s reserves. These funds pay for imports, settle foreign obligations, stabilize the dinar, and help curb inflation — making uninterrupted access critical to Iraq’s economy.
However, that dependence has given US regulators leverage; after, what it alleged, tracing dollar transfers to sanctioned states such as Iran and Syria, the US Treasury barred 35 of Iraq’s 72 licensed banks from dollar transactions. Iraqi officials note that banks can be reinstated if they meet compliance standards, but until then, access to dollars remains restricted.
With fewer dollars in circulation, the parallel exchange rate climbed from about 1,470 dinars per dollar in 2022 to peaks of 1,600 in 2024. Higher import costs rippled through markets, straining traders, raising consumer prices, and fueling public frustration.
Washington has also considered limits on foreign electronic payments, potentially affecting the use of international cards — a reminder that decisions made in New York can directly influence transactions in Baghdad’s shops and markets.
Old Debt, New Risks
To some, this Fed account is a vital shield, including Washington-based economist and policy adviser Dr. Frank Masmar, who described it to Shafaq News as “a safe haven for revenues in volatile oil markets” that also facilitates debt servicing and trade finance. He warned, however, that “the United States can, if it chooses, use these funds as political leverage.”
Others in Baghdad, such as Prime Minister’s economic adviser Mudhir Muhammad Salih, call it a “legal safety net” that has allowed Iraq to diversify reserves into other protected central banks. He stressed that while the US does not directly control oil inflows, the dominance of the dollar means transactions are inevitably subject to American oversight.
Meanwhile, Economist Nabil al-Tamimi warned that Saddam-era claims could still be used to target Iraqi assets if they lose the Fed’s legal protection, noting that gaps left since 2003 could be exploited by foreign creditors. Former senior banker Mahmoud Dagher agrees, arguing that with outstanding cases against the Ministry of Finance, moving the reserves would be “a strategic mistake.” Both see the same hazard: without immunity, Iraq’s wealth could become entangled in court battles abroad.
A Delicate Balance
Oil revenues fund more than 90% of Iraq’s budget; any delay in accessing them would disrupt salaries, stall public services, and unsettle markets. Altering the arrangement could also raise borrowing costs, hurt credit ratings, and weaken the dinar — risks Baghdad cannot afford to ignore.
Iraq’s choices are few: keep the system, renegotiate it, or cut the tie entirely. Each path carries consequences beyond accounting and deep into the question of sovereignty.
As some analysts put it, relying on the Federal Reserve is like walking a tightrope — it offers security, but it can become a pressure point the moment "Washington’s political calculus shifts."
Two decades after the first oil dollars landed in New York, Iraq’s economic lifeline shall continue running through a foreign vault for the foreseeable future — a reminder that in global finance, the lines between protection and control can be dangerously thin.
Washington intends to withdraw hundreds of troops from Ain al-Asad base
Al-Araby Al-Jadeed learned from Iraqi political and government sources that the US administration has notified the government of Prime Minister Mohammed Shia al-Sudani of the imminent withdrawal of hundreds of US soldiers and military personnel from the Ain al-Assad base in Anbar province, western Iraq. The withdrawal is related to the Iraqi-US agreement, which stipulates the gradual withdrawal of US forces operating under the cover of the international coalition fighting ISIS since 2014. However, other sources spoke of US "displeasure" with the Iraqi government's failure to adhere to understandings and agreements with the US administration.
According to the sources, "a senior Iraqi government advisor recently visited Washington and met with American officials, who informed him that the Iraqi government had failed to fulfill its commitments to restricting the militias' weapons and preventing their empowerment, in addition to its inability to end its reliance on Iranian gas and prevent missile attacks on areas of the Kurdistan Region, not to mention its failure to free the kidnapped Russian-Israeli, Elizabeth Tsurkov."
Sources: Washington believes that Al-Sudani's actions toward armed factions are insufficient
The sources added that "American officials informed the Iraqi advisor that the prime minister must withdraw the Popular Mobilization Forces bill from parliament, but the advisor informed them that this would be difficult because the bill had already been read twice, and there was no longer a possibility of withdrawing it from parliament." The sources explained that "the Washington administration believes that al-Sudani's measures against the armed factions are insufficient."
The sources pointed out that "the decision to withdraw a portion of US forces comes in contravention of the previously agreed-upon timetable between Baghdad and Washington for a gradual withdrawal, which was supposed to take place after the parliamentary elections scheduled for November, meaning it is an emotional response from the US administration." They expect the withdrawal from Ain al-Asad base to begin next month.
Ain al-Assad base was attacked
Ain al-Asad Air Base, which houses the largest number of US forces in Iraq, has been subjected to numerous missile attacks over the years. These attacks increased following Operation Protective Edge, part of Iraq's response to the massacres committed by the Israeli occupation against civilians in the Gaza Strip since October 7, 2023. Ain al-Asad Air Base is located 200 kilometers west of Baghdad, near the Euphrates River in the town of al-Baghdadi, west of Anbar Governorate, and is considered the largest US base in Iraq.
Ain al-Asad Air Base currently houses hundreds of American soldiers and military personnel. Along with American forces, the base is shared with the Iraqi Army's 7th Division, part of the Badia and Al-Jazeera Operations Command, which is responsible for Iraq's borders with Jordan and Syria, and parts of the border with Saudi Arabia.
America is not satisfied with Al-Sudani's performance.
In this context, a member of the Iraqi parliament told Al-Araby Al-Jadeed, "The United States is not satisfied with the performance of the Iraqi prime minister, and is exerting real pressure from all sides. Therefore, there must be real support for this government and prevent the continuation of American interference ." He added to Al-Araby Al-Jadeed, "The decision to withdraw American forces is expected, and may come within the framework of the security threat that may precede any expected Israeli operations in the coming period. We do not currently know whether the forces will withdraw towards the Harir or Al-Tanf bases, or perhaps to bases in the Gulf, but these hints are nothing but tools to pressure the current government."
Iraqi MP: The United States is dissatisfied with the Prime Minister's performance.
However, security expert Ahmed Al-Sharifi pointed out, in an interview with Al-Araby Al-Jadeed, that "the American and foreign forces present at the Ain al-Assad base are considered mobile forces, meaning they are not fixed and are constantly moving between three bases: Al-Tanf and Al-Omar in Syria, and Ain al-Assad in Iraq. Each of these bases is linked to the others, which means that the possibility of the withdrawal of American forces from the Ain al-Assad base may be linked to the movement or perhaps a final withdrawal."
Baghdad and Washington had agreed, at the end of last September, to an official date for the end of the international coalition's mission against ISIS in the country, no later than the end of September 2025. This date was reached after months of dialogue between the two sides. This came in the wake of escalating demands from armed factions and Iraqi forces allied with Iran to end its presence, particularly after the US strikes at the time on the headquarters of those factions in response to their attacks on coalition bases inside and outside the country, against the backdrop of the Gaza war.
Trump's developments with Baghdad: A "rapid" withdrawal from Iraq before an imminent Israeli strike on Iran
After the US troop withdrawal from Iraq was scheduled to be suspended after the October 11 elections, Iraqi executive and parliamentary sources told Al-Araby Al-Jadeed that a decision was made in Washington to “accelerate” the withdrawal of hundreds of troops from the large Ain al-Assad base in Anbar. This comes against the backdrop of escalating controversy between the Donald Trump administration and the Iraqi government over the Popular Mobilization Forces (PMF) law, which is no longer a secret. This is in addition to the successive explosion of numerous files, from the dollar to the smuggling of Iranian oil in Basra, as well as security agreements that Baghdad has recently been confused about. The sources expressed their fear that this is related to expectations that are becoming more serious by the day, regarding “the resumption of war between Iran and Israel,” after experts stated that Iraq survived the previous war thanks to a heavy US presence in major Iraqi bases.
Al-Araby Al-Jadeed learned from Iraqi political and governmental sources that the US administration has notified the government of Prime Minister Mohammed Shia al-Sudani of the imminent withdrawal of hundreds of US soldiers and military personnel from the Ain al-Assad base in Anbar province, western Iraq. The withdrawal is related to the Iraqi-US agreement, which stipulates the gradual withdrawal of US forces operating under the cover of the international coalition fighting ISIS since 2014. However, other sources spoke of US “displeasure” with the Iraqi government’s failure to adhere to understandings and agreements with the US administration.
According to the sources, "a senior advisor to the Iraqi government recently visited Washington and met with American officials, who informed him that the Iraqi government had not fulfilled its commitments to restrict the factions' weapons."
The sources pointed out that "the decision to withdraw a portion of US forces comes in contravention of the previously agreed-upon timetable between Baghdad and Washington for a gradual withdrawal, which was supposed to take place after the parliamentary elections scheduled for next November, meaning it is an emotional response from the US administration," expecting the withdrawal from Ain al-Assad base to begin next month.
Ain al-Asad Air Base is located 200 kilometers west of Baghdad, near the Euphrates River in the town of al-Baghdadi, west of Anbar Governorate, and is the largest US base in Iraq.
Ain al-Asad Air Base currently houses hundreds of American soldiers and military personnel. Along with American forces, the base is shared with the Iraqi Army's 7th Division, part of the Badia and Al-Jazeera Operations Command, which is responsible for Iraq's borders with Jordan and Syria, and parts of the border with Saudi Arabia.
In this context, a member of the Iraqi parliament told Al-Araby Al-Jadeed, “The United States is not satisfied with the performance of the Iraqi prime minister, and is exerting real pressure from all sides. Therefore, there must be real support for this government and prevent the continuation of American interference.” He added to Al-Araby Al-Jadeed, “The decision to withdraw American forces is expected, and may come within the framework of the security threat that may precede any expected Israeli operations in the coming period. We do not currently know whether the forces will withdraw towards the Harir or Al-Tanf bases, or perhaps to bases in the Gulf, but these hints are merely tools to pressure the current government.”
However, security expert Ahmed Al-Sharifi pointed out, in an interview with Al-Araby Al-Jadeed, that “the American and foreign forces present at the Ain al-Assad base are considered mobile forces, meaning they are not fixed and are constantly moving between three bases: Al-Tanf and Al-Omar in Syria, and Ain al-Assad in Iraq. Each of these bases is linked to the others, which means that the possibility of the withdrawal of American forces from the Ain al-Assad base may be linked to the movement or perhaps the final withdrawal.”
Baghdad and Washington had agreed, at the end of September last year, to an official date for the end of the international coalition's mission against ISIS in the country, no later than the end of September 2025. This date was reached after months of dialogue between the two sides. This came in the wake of escalating demands from armed factions and Iraqi forces allied with Iran to end its presence, particularly after the US strikes at the time on the headquarters of those factions in response to their attacks on coalition bases inside and outside the country, against the backdrop of the Gaza war.
From Basra to Manhattan: The Full Story of Iraq's Money Being Withheld by the Federal Reserve
At dawn, giant oil tankers dock at the docks of Basra port, loading pipes gleaming under the lights, and pumps pump millions of barrels of crude into the bilges of ships bound for world markets.
A scene that reflects immense wealth, but what is often overlooked is that the bulk of the proceeds from this "black gold" travel a route that does not end in Baghdad, but rather extends across the Atlantic Ocean to the heart of Manhattan in New York, inside the fortified US Federal Reserve building.
There, Iraqi wealth is transformed into numbers in American financial books, subject to strict oversight and procedures that leave no room for maneuver. These arrangements were created in 2003 but remain in place today, even though their original justifications (on paper) have disappeared.
For many Iraqis, this equation amounts to little more than a combination of protection and guardianship, with officials and analysts saying that any attempt to sever this link could mean freezing assets, disrupting employee salaries, or even losing control over the country's finances.
These concerns did not arise out of thin air. Rather, they are an extension of a long process that began with UN resolutions and US executive orders that shaped the management of these funds since 2003. Therefore, the Shafaq News Agency team began investigating the background of this file, opening what some describe as the "black box" of the financial relationship between Baghdad and Washington. How did the arrangement come about, why does it continue to this day, and who benefits from keeping Iraqi funds under external supervision?
From the Security Council to the American umbrella
In May 2003, the Security Council issued Resolution 1483, which required Iraq to transfer all oil and gas revenues to a special account in the name of the Central Bank of Iraq at the US Federal Reserve, under UN supervision, with 5% of the revenues to be set aside for reparations to Kuwait for the 1990 invasion. In parallel, then-US President George W. Bush issued Executive Order 13303, which granted these funds full legal immunity from any seizure or confiscation.
Over nearly two decades, Iraq continued to pay reparations, reaching a total of $52.4 billion, and the Kuwait case was finally closed in 2022.
But despite the original commitment ending and UN protection being lifted in 2011, Washington has continued to renew the executive order year after year, most recently in May 2025.
For American policymakers, the arrangement has transcended its original purpose, becoming a tool for ensuring financial stability in a country experiencing political and economic volatility, while also providing a means of monitoring the dollar's movements and protecting strategic interests.
Between Washington and Baghdad
In Washington, economists do not view this mechanism as merely a technical financial measure. For example, Dr. Frank Musmar, an economist and chairman of the University of Maryland's Advisory Board, describes it as "more than just a financial measure."
He told Shafaq News, "The Federal Reserve provides Iraq with a safe haven for its revenues amid volatility in energy markets, and enhances investor confidence that funds are managed according to transparent standards. Its presence there also allows Iraq easy access to the US financial system, facilitating debt repayment and import financing."
But Mismar warns of the other side of this umbrella: "This is a double-edged sword. The United States can, if it wants, use this money as a political bargaining chip. Iraq is here between financial stability and the loss of some of its economic sovereignty."
On the other side of the river, in Baghdad, Mazhar Mohammed Salih, the prime minister's economic advisor, defends keeping the funds at the Federal Reserve as a "legal safety net" that allows for diversification of reserves and depositing a portion of them in other central banks protected by law.
He told the agency: "The United States does not control oil revenues themselves, but it does control the movement of the dollar, a reality imposed by the US currency's position in the global financial system."
Money under the microscope
According to leaks obtained by Shafaq News Agency from a senior source in the Central Bank, the balances deposited in the Federal Reserve range between $80 and $85 billion. These funds are used to finance foreign trade, pay the state's obligations, control the dinar exchange rate, and curb inflation.
However, after discovering routes for smuggling dollars to Iran and other sanctioned countries, the US Treasury Department tightened controls and imposed sanctions on 35 of Iraq's 72 banks, including the Bank of Baghdad, which holds accounts for US embassy staff.
These restrictions have reduced the flow of dollars into the local market, driving up the exchange rate and increasing the cost of imports, weighing heavily on commercial activity and citizens' livelihoods.
Old debt risks
In international markets, these reserves are viewed as a key guarantee for meeting international payments and a safety valve against oil price fluctuations. Any indication of a change in the deposit mechanism or a relaxation of US oversight could raise Iraq's borrowing costs, impact its credit rating, and potentially put the dinar under additional pressure.
In this vein, economic expert Nabil Al-Tamimi warns that excessive reliance on the US umbrella conceals a greater risk, noting that "there are debts and claims that have not been settled since 2003, making assets vulnerable to seizure if they are removed from the Fed's protection. Negligence in closing debt files has left legal loopholes that can be exploited."
He adds that part of these risks are due to "defects in government performance after 2003 and the lack of serious follow-up on these commitments."
In contrast, Mahmoud Dagher, a former banking official, believes that withdrawing funds from the Federal Reserve would be a "strategic mistake," noting that "the international immunity enjoyed by the Federal Reserve protects Iraq from any claims, given the existence of unresolved international financial cases against the Ministry of Finance."
Iraq relies on oil to finance more than 90% of its budget, making the timely arrival of revenues extremely critical. Any delay, whether for political or technical reasons, could lead to a crisis of confidence locally and internationally, placing the dinar under additional pressure in the markets.
Between the desire to regain full control over the funds and the need for the legal protection provided by the US umbrella, the issue remains open to multiple possibilities, from renegotiating the deposit mechanism to maintaining the status quo out of necessity.
But the deeper question revolves around Iraq's ability to balance its economic sovereignty with protecting its finances. As Mismar warns, "Relying on the US Federal Reserve is like walking a tightrope. It provides Iraq with a financial safety net, but it could at any moment become a pressure tool if political calculations change in Washington." This serves as a reminder that managing national wealth is not just a matter of numbers and calculations, but a daily test of decision-making independence.
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