Iraq bans 8 banks from trading USD, heat in the Middle East increases

Under the deal, banks will be barred from accessing the daily dollar transactions of the Central Bank of Iraq, the main source of currency in the import-dependent country and the focus of a US crackdown on currency smuggling in the region.

The headquarters of the Central Bank of Iraq in Baghdad. Photo: Reuters

Prevent money laundering and militant financing

As a rare ally of both the US and Iran with more than $100 billion in reserves held in the US, Iraq relies heavily on Washington to ensure that its access to oil and financial revenues is not blocked.

The banned banks are: Ahsur International Investment Bank; Iraq Investment Bank; Iraq Union Bank; Kurdistan International Islamic Development and Investment Bank; Al Huda Bank; Al Janoob Islamic Finance and Investment Bank; Arab Islamic Bank and Hammurabi Commercial Bank.

"We commend the next steps taken by the Central Bank of Iraq to protect the Iraqi financial system from abuse," a US Treasury spokesman said.

In July 2023, Iraq banned 14 banks from handling dollar transactions as part of a broad crackdown on dollar smuggling to Iran through the Iraqi banking system. The decision came after a request from Washington, according to Iraqi and US officials.

Top US Treasury official Brian Nelson met with top Iraqi officials in Baghdad last week to discuss ways to protect the Iraqi and international financial systems from criminal, corrupt and terrorist actors.

The current Iraqi government came to power with the support of powerful parties and armed groups with interests in Iraq's highly informal economy , including a financial sector long considered a money laundering hotspot.

The US must deal on many fronts in the Middle East.

The decision was made by the Iraqi government in the context of the Middle East conflict spreading to this country, with the US having just conducted dozens of airstrikes on many rebel targets in Iraq and Syria, in response to the death of three US soldiers when a UAV attacked an outpost in Jordan.

A Tomahawk missile is launched from the US Navy destroyer USS Gravely against Houthi military targets in Yemen on February 3, 2024. Photo: US Central Command

A fighter jet launches from the US Navy aircraft carrier USS Dwight D. Eisenhower during an attack on Houthi military targets in Yemen on February 3, 2024. Photo: US Navy

Houthi forces parade in a show of defiance following US and British airstrikes on Houthi positions near Sanaa, Yemen on February 4, 2024. Photo: Reuters

A retaliatory strike by US B-1 bombers killed at least 40 people, and the US is planning further strikes on militant groups in the Middle East, the White House national security adviser said on Sunday.

Currently, the US is very busy in the wars in the Middle East. As is known, in addition to having to solve many problems in Israel's war in Gaza, the US military is also carrying out an air campaign against the Houthi group to prevent the rebel group in Yemen from attacking ships passing through the Red Sea.

The US and UK have launched new strikes on 36 Houthi targets in Yemen, a day after US forces struck militant groups in Iraq and Syria. The strikes are the latest in a series of flare-ups in the Middle East since the Israel-Hamas conflict erupted on October 7.

Huy Hoang (according to Reuters, AP)

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