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He described it as a "stupid step".. British report: The Iraqi government created a cash crisis by paying its debts to Iran in dinars
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2023-03-04 10:59
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Shafaq News/ The British "Middle East Eye" website quoted, on Saturday, Iraqi officials as saying that Iraq exacerbated its financial crisis and contributed to the depreciation of its national currency, by paying its debts to Iran in the Iraqi dinar, which has been suffering for months against the dollar after imposing the Reserve Board The US Federal Reserve, the new restrictions on how the Central Bank of Iraq deals with oil revenue dollars.
The British report, translated by Shafaq News Agency, stated that a liquidity crisis appeared later, as the government failed to pay the salaries of millions of public sector employees, retirement benefits and benefits to beneficiaries of social welfare programs.
The report indicated that Iraq was one of the largest importers of Iranian goods during the past two decades, especially gas, electricity, foodstuffs and building materials, as the volume of trade exchange between the two countries amounted to about $14 billion.
US sanctions
And the report continued, because of the US sanctions imposed on Iran in 2018, Iraq faced difficulties in paying the financial dues owed to Iran between the years 2019-2021.
The report pointed out that Iran sometimes cut off electricity and gas supplies in the middle of the summer, to pressure Iraq to pay these debts, which amounted to more than $1.6 billion from gas and energy purchases alone between 2019 and 2021.
The report quoted informed sources as saying that most or all of this debt has been settled, with the final payment due in October 2022.
Iraqi dinar instead of the dollar
And the report continued that instead of the payments in dollars that Iran was receiving before the sanctions were imposed on it, Baghdad paid its debts in Iraqi dinars.
The report quoted Iraqi officials as saying that the new payment system was put in place in order to avoid anti-government demonstrations that would have erupted inevitably due to the reduction of electricity service in Iraq.
The report indicated that Iran was able to convert these dinars into dollars, through the use of the currency auction, which is supervised by the Central Bank of Iraq.
The report added that since last November, the US Federal Reserve, which retains the money Iraq earns from oil sales and transfers it to Baghdad, imposed new restrictions aimed at preventing Iran from accessing these dollars and combating money laundering.
The British website mentioned that it had previously indicated that parties, including sanctioned countries and criminals, had discovered new ways to obtain dollars, such as the black market and smuggling dollars through the Kurdistan Region.
Additional pressure on the dinar
Now, the report says that with Iran and others avoiding the exchange of dinars through the auction, Iraq has become unable to exchange its dollars for the dinars it needs to meet its needs, which put additional pressure on the dinar.
And after the report indicated that the price of the dinar on the black market rose last January, from 1480 dinars to 1700 dinars per dollar in October 2022, money changers were quoted as saying that these fluctuations are “terrifying,” explaining that there is great competition for The dollar with speculators willing to pay "any price."
At the same time, consumer prices continued to rise, the report added.
Reducing the price of the dollar
The report pointed out that the Iraqi government has taken a set of measures in order to control the exchange rate, including reducing the official rate to 1,300 dinars, and that despite the decrease in the price on the black market to about 1,500 dinars, it is still fluctuating sharply.
The report considered that the effects of Iran's handing over large sums of dinars while it - i.e. Tehran - is not able to trade in dollars, its effects are still felt.
The report quoted a senior Iraqi official as saying, "Paying the Iraqi debt to Iran in Iraqi dinars was not a calculated step. The financial crisis that we are suffering from at the present time is caused by this stupid step."
The Iraqi official wondered, "What do the decision-makers think about what Iran will do with these huge quantities of the Iraqi currency when it is in dire need of the US dollar? Would it have distributed them as gifts to the Iraqis, or would it have invested them in the Iraqi market?"
He added, "Their thinking was limited to achieving quick imaginary successes to prove that they are the most capable of dealing with the intractable problems of Iraq, and for this, they took us out of the well and threw us into the sea."
Money for food and medicine
In addition, the report indicated that Iraq officially spends about $900 million a month on importing Iranian goods, according to Iranian officials, and that 50% of that is in return for imports related to electricity and gas from Iran.
He added that Washington was aware of the unstable situation in Iraq, and that is why it exempted Iraq from its sanctions on Iran, but that from the first day, problems arose related to how to pay the purchase price.
He pointed out that the United States agreed to waive the sanctions only if Iraq deposited money in the Iraqi Trade Bank on the grounds that Iran would later use it to pay for food and medicine.
According to an Iraqi official, "This was not enough for Iran, as the account's movement is under American control."
And the report added that instead, Iran demanded another way to receive its money, and used threats to energy supplies as a means of pressure on Baghdad in order to obtain what it wanted.
After referring to the demonstrations of October 2019, and how the energy shortage turned into an existential crisis for the Iraqi authorities, and then the advent of Mustafa Al-Kazemi to head the government, the report said that Al-Kazemi sought to find quick solutions to the intractable problems that Iraq suffers from, including the debt issue. Iranian.
The report added that in April 2022, when the political vacuum prevailed after the October elections, the Sadrists proposed the emergency law to serve as a mini-budget, noting that the debts owed to Iran, which had accumulated since 2019, were one of the most pressing issues for the Al-Kazemi government in that. the time.
The report quoted one of Al-Kazemi's former advisors as saying that "Al-Sadr had to find a way out for his Al-Kazemi ally."
He continued, saying that at the same time, al-Sadr wanted to present "a gesture of goodwill to the Iranians to prove that his project does not target them and does not threaten their interests," noting that the emergency law allocated 4 trillion Iraqi dinars (about $3 billion) in order to pay off the external debt of the Ministry of Electricity. And debts for the purchase of gas and energy.
The report added that in June Parliament approved the law and the government began paying what it owes directly to the Iranians in dinars, and that the last payment was in October, according to what officials said. However, the exact amounts paid by the Al-Kazemi government to Iran in dinars were not disclosed, but it was not the first time that this happened.
Euro instead of dollars
The report indicated that in February 2019, the Central Bank of Iraq reached an agreement with the Central Bank of Iran, allowing customers of the two banks to open accounts in the two countries and conduct their banking transactions in dinars and euros, as the Central Bank of Iraq stated at the time that this was done in order to "remove Obstacles to paying Iraq's debts related to gas and electricity exports.
The report quoted an Iraqi politician close to Tehran as saying that Washington was expecting pressure on the Iraqi currency when it allowed Baghdad to pay dinars to Iran.
He continued, saying, "The Iranians are very smart and invest in every detail that serves their goals. They were clear from the beginning, and they said if you cannot pay in dollars, pay in dinars."
"It is not their problem if their American opponent is arrogant and treats others as helpless, and they will follow their own path," he added.
Translation: Shafak News Agency
[You must be registered and logged in to see this link.]
[You must be registered and logged in to see this image.]
2023-03-04 10:59
Share
Font
Shafaq News/ The British "Middle East Eye" website quoted, on Saturday, Iraqi officials as saying that Iraq exacerbated its financial crisis and contributed to the depreciation of its national currency, by paying its debts to Iran in the Iraqi dinar, which has been suffering for months against the dollar after imposing the Reserve Board The US Federal Reserve, the new restrictions on how the Central Bank of Iraq deals with oil revenue dollars.
The British report, translated by Shafaq News Agency, stated that a liquidity crisis appeared later, as the government failed to pay the salaries of millions of public sector employees, retirement benefits and benefits to beneficiaries of social welfare programs.
The report indicated that Iraq was one of the largest importers of Iranian goods during the past two decades, especially gas, electricity, foodstuffs and building materials, as the volume of trade exchange between the two countries amounted to about $14 billion.
US sanctions
And the report continued, because of the US sanctions imposed on Iran in 2018, Iraq faced difficulties in paying the financial dues owed to Iran between the years 2019-2021.
The report pointed out that Iran sometimes cut off electricity and gas supplies in the middle of the summer, to pressure Iraq to pay these debts, which amounted to more than $1.6 billion from gas and energy purchases alone between 2019 and 2021.
The report quoted informed sources as saying that most or all of this debt has been settled, with the final payment due in October 2022.
Iraqi dinar instead of the dollar
And the report continued that instead of the payments in dollars that Iran was receiving before the sanctions were imposed on it, Baghdad paid its debts in Iraqi dinars.
The report quoted Iraqi officials as saying that the new payment system was put in place in order to avoid anti-government demonstrations that would have erupted inevitably due to the reduction of electricity service in Iraq.
The report indicated that Iran was able to convert these dinars into dollars, through the use of the currency auction, which is supervised by the Central Bank of Iraq.
The report added that since last November, the US Federal Reserve, which retains the money Iraq earns from oil sales and transfers it to Baghdad, imposed new restrictions aimed at preventing Iran from accessing these dollars and combating money laundering.
The British website mentioned that it had previously indicated that parties, including sanctioned countries and criminals, had discovered new ways to obtain dollars, such as the black market and smuggling dollars through the Kurdistan Region.
Additional pressure on the dinar
Now, the report says that with Iran and others avoiding the exchange of dinars through the auction, Iraq has become unable to exchange its dollars for the dinars it needs to meet its needs, which put additional pressure on the dinar.
And after the report indicated that the price of the dinar on the black market rose last January, from 1480 dinars to 1700 dinars per dollar in October 2022, money changers were quoted as saying that these fluctuations are “terrifying,” explaining that there is great competition for The dollar with speculators willing to pay "any price."
At the same time, consumer prices continued to rise, the report added.
Reducing the price of the dollar
The report pointed out that the Iraqi government has taken a set of measures in order to control the exchange rate, including reducing the official rate to 1,300 dinars, and that despite the decrease in the price on the black market to about 1,500 dinars, it is still fluctuating sharply.
The report considered that the effects of Iran's handing over large sums of dinars while it - i.e. Tehran - is not able to trade in dollars, its effects are still felt.
The report quoted a senior Iraqi official as saying, "Paying the Iraqi debt to Iran in Iraqi dinars was not a calculated step. The financial crisis that we are suffering from at the present time is caused by this stupid step."
The Iraqi official wondered, "What do the decision-makers think about what Iran will do with these huge quantities of the Iraqi currency when it is in dire need of the US dollar? Would it have distributed them as gifts to the Iraqis, or would it have invested them in the Iraqi market?"
He added, "Their thinking was limited to achieving quick imaginary successes to prove that they are the most capable of dealing with the intractable problems of Iraq, and for this, they took us out of the well and threw us into the sea."
Money for food and medicine
In addition, the report indicated that Iraq officially spends about $900 million a month on importing Iranian goods, according to Iranian officials, and that 50% of that is in return for imports related to electricity and gas from Iran.
He added that Washington was aware of the unstable situation in Iraq, and that is why it exempted Iraq from its sanctions on Iran, but that from the first day, problems arose related to how to pay the purchase price.
He pointed out that the United States agreed to waive the sanctions only if Iraq deposited money in the Iraqi Trade Bank on the grounds that Iran would later use it to pay for food and medicine.
According to an Iraqi official, "This was not enough for Iran, as the account's movement is under American control."
And the report added that instead, Iran demanded another way to receive its money, and used threats to energy supplies as a means of pressure on Baghdad in order to obtain what it wanted.
After referring to the demonstrations of October 2019, and how the energy shortage turned into an existential crisis for the Iraqi authorities, and then the advent of Mustafa Al-Kazemi to head the government, the report said that Al-Kazemi sought to find quick solutions to the intractable problems that Iraq suffers from, including the debt issue. Iranian.
The report added that in April 2022, when the political vacuum prevailed after the October elections, the Sadrists proposed the emergency law to serve as a mini-budget, noting that the debts owed to Iran, which had accumulated since 2019, were one of the most pressing issues for the Al-Kazemi government in that. the time.
The report quoted one of Al-Kazemi's former advisors as saying that "Al-Sadr had to find a way out for his Al-Kazemi ally."
He continued, saying that at the same time, al-Sadr wanted to present "a gesture of goodwill to the Iranians to prove that his project does not target them and does not threaten their interests," noting that the emergency law allocated 4 trillion Iraqi dinars (about $3 billion) in order to pay off the external debt of the Ministry of Electricity. And debts for the purchase of gas and energy.
The report added that in June Parliament approved the law and the government began paying what it owes directly to the Iranians in dinars, and that the last payment was in October, according to what officials said. However, the exact amounts paid by the Al-Kazemi government to Iran in dinars were not disclosed, but it was not the first time that this happened.
Euro instead of dollars
The report indicated that in February 2019, the Central Bank of Iraq reached an agreement with the Central Bank of Iran, allowing customers of the two banks to open accounts in the two countries and conduct their banking transactions in dinars and euros, as the Central Bank of Iraq stated at the time that this was done in order to "remove Obstacles to paying Iraq's debts related to gas and electricity exports.
The report quoted an Iraqi politician close to Tehran as saying that Washington was expecting pressure on the Iraqi currency when it allowed Baghdad to pay dinars to Iran.
He continued, saying, "The Iranians are very smart and invest in every detail that serves their goals. They were clear from the beginning, and they said if you cannot pay in dollars, pay in dinars."
"It is not their problem if their American opponent is arrogant and treats others as helpless, and they will follow their own path," he added.
Translation: Shafak News Agency
[You must be registered and logged in to see this link.]
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