An Iraqi government spokesman said on Saturday that Baghdad and Washington had reached an understanding to ensure the continued shipment of cash dollars to Iraq, with a new consignment due to arrive in the coming days after months of disruption to the flow of the U.S. currency.
The understanding follows the resumption of some U.S. dollar shipments to Iraq in July after a suspension lasting several months. Washington had halted a cash shipment estimated at around 500 million dollars in April, as part of measures that Iraqi sources said at the time were aimed at pressuring Baghdad over the activities of Iran-backed armed factions.
Dollars linked to oil revenues
The funds do not constitute U.S. aid to Iraq; rather, they are linked to Iraqi oil revenues deposited with the Federal Reserve Bank of New York. Some of the funds are transported in cash to the Central Bank of Iraq to meet market needs.
Cash dollars are used mainly to meet demand related to travel, medical treatment and education abroad, while the suspension decision in April did not cover electronic transfers used to finance imports and trade.
Monthly shipments and tighter oversight
Shipments gradually resumed in July, and the Central Bank of Iraq received a cash consignment worth 500 million dollars from the U.S. Federal Reserve in August, allocated for travelers’ transactions and foreign remittances. A government official said at the time that the shipments were expected to arrive monthly, with an annual total ranging between 8 and 10 billion dollars.
Iraqi financial institutions’ access to dollars has been subject for years to strict U.S. oversight and requirements related to compliance, anti-money laundering and preventing the financing of sanctioned entities. Given Iraq’s heavy reliance on oil revenues, the mechanism for moving dollars from its accounts in New York is an important element in providing foreign currency and meeting domestic cash demand.
