News Desk - The Cradle
The process has begun to move Iraqi funds owed to Iran to banks in Oman as Washington seeks to maintain control of Iraq's finances
“Work is continuing with the American side concerning unpaid bills, which have fallen to 9.2 billion” euros ($10 billion), Iraqi Prime Minister Mohammed Shia al-Sudani told reporters at a press conference on Tuesday, recalling that Baghdad in the last few months paid Iran around $1.9 billion it owed.
Iraq heavily depends on Iran for natural gas to produce some 40 percent of the country’s electricity. For years, the US Treasury has only allowed Baghdad to deposit payments to Iran in restricted accounts at the Iraqi Trade Bank. Furthermore, Iraq can only send payments in US dollars to Iran with the approval of the US Treasury, and only for Tehran to fund imports of food and medicines.
Washington's draconian policies led to about $11 billion earmarked for Iranian gas payments to remain in restricted accounts. This situation forced Iran to cut gas shipments to Iraq in July, leading to widespread outages during Iraq’s hottest summer period.
On July 11, Prime Minister Mohammed Shia al-Sudani announced that Iraq would start paying for Iranian gas with oil as a way of circumventing the US restrictions.
This prompted US Treasury officials to decide to move the funds owed by Iraq for Iranian gas purchases to banks in the Sultanate of Oman.
Sudani said a delegation from Iraq’s central bank and the Trade Bank of Iraq went to Oman on Tuesday “to agree on a formula for transferring these funds to the Sultanate of Oman, in agreement with the US Treasury.”
“We thought it was important to get this money out of Iraq because it is a source of leverage that Iran uses against its neighbor. So, this money will be held in a fund or an account in [Oman]," US State Department spokesperson Matt Miller told reporters on 24 July.
However, the funds “will still be subject to the same restrictions as when the money was held in accounts in Iraq, meaning that the money can only be used for non-sanctionable activities such as humanitarian assistance and that all the transactions need to be approved by the United States Treasury Department in advance,” Miller added.
Last month, the US Treasury Department and the Federal Reserve Bank of New York also barred 14 Iraqi banks from conducting transactions in US dollars as part of a “sweeping crackdown” to stop Iran and other sanctioned nations from acquiring the greenback.
These decisions were announced mere days after Sudani sealed the deal to trade crude oil for natural gas with Iran without notifying Washington.
Baghdad also recently proposed shifting payments to the Iraqi dinar in trade with Tehran. Moreover, Baghdad has been looking to move its bilateral trade away from the greenback to negate the effect of US sanctions and, in May, banned the use of the US dollar for personal and business transactions.
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