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[size=30]Research paper: Washington's emphasis on the dollar is a message to the factions that al-Sudani can benefit from
[ltr]2023.02.25 - 20:21[/ltr]
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[ltr]2023.02.25 - 20:21[/ltr]
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Baghdad - Nas
Former government advisor and researcher at the French National Center for Scientific Research (CNRS) Hisham Daoud wrote about the strategic and political dimensions of the dollar exchange rate crisis against the dinar in Iraq, stressing that the repercussions and consequences of the financial crisis resulting from the dollar are "the most dangerous since 2003" because they are not limited to Not only on the economic situation, but it also has geo-strategic repercussions, and it will have a great impact on the political power relations in Iraq.
Daoud stated in a research paper he wrote for the Emirates Policy Center (EPC), followed by "NAS" (February 25, 2023), that the goal of restricting the Federal Reserve in New York is to ensure Baghdad's compliance with an electronic system that guarantees transparency in dollar transactions and to stop money laundering and dollar "smuggling". To neighboring countries, and this constitutes an incentive for the Iraqi authorities to adopt more prudent financial and economic policies. "This American policy also includes a strong message to the Iraqi factions loyal to Iran, which depend to a large extent in exercising their influence on networks of corruption and money laundering."
Daoud pointed out that in the medium term, the Iraqi prime minister could benefit from the tightening US monetary policy to weaken his distant opponents, such as the Sadrist movement, as well as weaken his "close allies" in the coordination framework, who aspire to expand their sphere of influence and exercise extended executive powers.
The research paper indicated that, while the United States is likely to ease its financial policy towards Iraq, it is not possible for it to accept the return of the previous situation to what it was. The electronic financial system will be implemented gradually, and factions linked to Iran will have to deal with it as a fait accompli.
The following are excerpts from the paper:
The crisis was exacerbated to some extent by rumors, misunderstandings, and a state of uncertainty, which led to a halt in the demand for some imported goods, which became expensive and were seen as unnecessary, and thus affected small traders who are today threatened with leaving the market and joining the ranks of Jobless. The World Bank estimates the unemployment rate in Iraq at 14.5% among the general population, and 27.5% among youth. The crisis has also prompted many merchants to resort entirely to the informal market (let's call it the parallel market), or even to load trucks with dollars and transport them out of Iraq.
Over the years, the armed factions and parties took control of the banking and private financial sector (full control or owning a majority stake in banks), and used the dollar auction system either to achieve huge profits (by taking advantage of the low price of selling dollars by the Central Bank of Iraq), Or to launder illegal money (resulting from smuggling, embezzlement of public property or commissions), or to send money to both Iran and Syria. The result is that these factions are now relying heavily on the regime to recycle their income. However, there is a problem with the new US restrictions towards the monetary system in Iraq represented in the fact that they affect individuals and importers, as well as financial institutions linked to the factions without any kind of exception or discrimination. However, the armed factions have huge sums of money at stake, and pressure from the New York Federal Reserve could incentivize them to "clean up".
And while the United States is likely to ease its financial policy towards Iraq, it is not possible for it to accept the return of the previous situation to what it was. The electronic financial system will be implemented gradually, and factions linked to Iran will have to deal with it as a fait accompli. By using disguised sanctions against pro-Iranian elements, supporting the approach of the Iraqi prime minister and his successor, the Dawa Party, and exerting direct pressure on Tehran, this new US policy may bear fruit. In any case, this crisis shows that all pressure cards are in the hands of the United States, such as the dollar weapon, as well as its ability to collect and extract data, in light of the fact that the information infrastructure of the main Iraqi ministries and institutions is entirely American industry, and the American military aid to Iraq, and the sanctions weapon, Perhaps resorting, as a last resort, to targeted strikes targeting militia leaders and their facilities.
In the meantime, the Iranian position has been greatly weakened due to the continuation of the protest movement in the country and the high rates of inflation (one of the motives for smuggling dollars from Iraq to Iran is to pump dollars into the market for the purpose of slowing down the decline in the value of the Iranian riyal and the resulting inflation and financing the budget deficit); And the continuation of drone attacks (by Israel and with the approval of Washington) on strategic facilities in Iran. In light of this state of weakness, the Iranian regime now needs to rely on an Iraqi government backed by Washington. Therefore, Iran is likely to exercise its hegemony over Iraqi factions and militias, and limit these factions' obstruction of the Iraqi government's efforts to implement policies to adhere to the new monetary systems.
At the local level in Iraq, there are fears of a slowdown in commercial activity, and a delay in approving the 2023 budget (which was supposed to be approved at the end of January, and to be approved within two months after that). The worsening economic crisis may also lead to social unrest, especially before the month of Ramadan, which will begin at the beginning of the last third of March, and thus the possibility of re-igniting the protest movement in the country. Moreover, the Sadrist movement may find itself increasingly besieged and excluded from informal decision-making positions and financial resources, and thus may threaten to organize mass demonstrations and possibly resort to street clashes.
conclusions
Today, Iraq has come to the conclusion that it is necessary to get rid of the dominance of the informal sector and abandon the cash-based economic model, and move towards an organized banking sector that would make way for the growth of the private sector. The commitment of Iraqi Prime Minister Muhammad Shia al-Sudani to make his rule an opportunity to launch major development projects sends two somewhat contradictory messages. He appears to be sending a message to the factions that he will not attempt to change the status quo, while at the same time encouraging them to transcend political and factional differences to focus on the economy. However, it is clear that the aspirations of economic development require adherence to international standards, transparency and the fight against corruption, standards that the dominant factions currently see as weakening them organizationally, socially and politically. After it became a wealthy class that relied for an important part of its income on the dollar auction system, these same factions created a weapon that Washington can now use against it.
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Former government advisor and researcher at the French National Center for Scientific Research (CNRS) Hisham Daoud wrote about the strategic and political dimensions of the dollar exchange rate crisis against the dinar in Iraq, stressing that the repercussions and consequences of the financial crisis resulting from the dollar are "the most dangerous since 2003" because they are not limited to Not only on the economic situation, but it also has geo-strategic repercussions, and it will have a great impact on the political power relations in Iraq.
[You must be registered and logged in to see this link.]
Daoud stated in a research paper he wrote for the Emirates Policy Center (EPC), followed by "NAS" (February 25, 2023), that the goal of restricting the Federal Reserve in New York is to ensure Baghdad's compliance with an electronic system that guarantees transparency in dollar transactions and to stop money laundering and dollar "smuggling". To neighboring countries, and this constitutes an incentive for the Iraqi authorities to adopt more prudent financial and economic policies. "This American policy also includes a strong message to the Iraqi factions loyal to Iran, which depend to a large extent in exercising their influence on networks of corruption and money laundering."
Daoud pointed out that in the medium term, the Iraqi prime minister could benefit from the tightening US monetary policy to weaken his distant opponents, such as the Sadrist movement, as well as weaken his "close allies" in the coordination framework, who aspire to expand their sphere of influence and exercise extended executive powers.
The research paper indicated that, while the United States is likely to ease its financial policy towards Iraq, it is not possible for it to accept the return of the previous situation to what it was. The electronic financial system will be implemented gradually, and factions linked to Iran will have to deal with it as a fait accompli.
The following are excerpts from the paper:
The crisis was exacerbated to some extent by rumors, misunderstandings, and a state of uncertainty, which led to a halt in the demand for some imported goods, which became expensive and were seen as unnecessary, and thus affected small traders who are today threatened with leaving the market and joining the ranks of Jobless. The World Bank estimates the unemployment rate in Iraq at 14.5% among the general population, and 27.5% among youth. The crisis has also prompted many merchants to resort entirely to the informal market (let's call it the parallel market), or even to load trucks with dollars and transport them out of Iraq.
Over the years, the armed factions and parties took control of the banking and private financial sector (full control or owning a majority stake in banks), and used the dollar auction system either to achieve huge profits (by taking advantage of the low price of selling dollars by the Central Bank of Iraq), Or to launder illegal money (resulting from smuggling, embezzlement of public property or commissions), or to send money to both Iran and Syria. The result is that these factions are now relying heavily on the regime to recycle their income. However, there is a problem with the new US restrictions towards the monetary system in Iraq represented in the fact that they affect individuals and importers, as well as financial institutions linked to the factions without any kind of exception or discrimination. However, the armed factions have huge sums of money at stake, and pressure from the New York Federal Reserve could incentivize them to "clean up".
And while the United States is likely to ease its financial policy towards Iraq, it is not possible for it to accept the return of the previous situation to what it was. The electronic financial system will be implemented gradually, and factions linked to Iran will have to deal with it as a fait accompli. By using disguised sanctions against pro-Iranian elements, supporting the approach of the Iraqi prime minister and his successor, the Dawa Party, and exerting direct pressure on Tehran, this new US policy may bear fruit. In any case, this crisis shows that all pressure cards are in the hands of the United States, such as the dollar weapon, as well as its ability to collect and extract data, in light of the fact that the information infrastructure of the main Iraqi ministries and institutions is entirely American industry, and the American military aid to Iraq, and the sanctions weapon, Perhaps resorting, as a last resort, to targeted strikes targeting militia leaders and their facilities.
In the meantime, the Iranian position has been greatly weakened due to the continuation of the protest movement in the country and the high rates of inflation (one of the motives for smuggling dollars from Iraq to Iran is to pump dollars into the market for the purpose of slowing down the decline in the value of the Iranian riyal and the resulting inflation and financing the budget deficit); And the continuation of drone attacks (by Israel and with the approval of Washington) on strategic facilities in Iran. In light of this state of weakness, the Iranian regime now needs to rely on an Iraqi government backed by Washington. Therefore, Iran is likely to exercise its hegemony over Iraqi factions and militias, and limit these factions' obstruction of the Iraqi government's efforts to implement policies to adhere to the new monetary systems.
At the local level in Iraq, there are fears of a slowdown in commercial activity, and a delay in approving the 2023 budget (which was supposed to be approved at the end of January, and to be approved within two months after that). The worsening economic crisis may also lead to social unrest, especially before the month of Ramadan, which will begin at the beginning of the last third of March, and thus the possibility of re-igniting the protest movement in the country. Moreover, the Sadrist movement may find itself increasingly besieged and excluded from informal decision-making positions and financial resources, and thus may threaten to organize mass demonstrations and possibly resort to street clashes.
conclusions
Today, Iraq has come to the conclusion that it is necessary to get rid of the dominance of the informal sector and abandon the cash-based economic model, and move towards an organized banking sector that would make way for the growth of the private sector. The commitment of Iraqi Prime Minister Muhammad Shia al-Sudani to make his rule an opportunity to launch major development projects sends two somewhat contradictory messages. He appears to be sending a message to the factions that he will not attempt to change the status quo, while at the same time encouraging them to transcend political and factional differences to focus on the economy. However, it is clear that the aspirations of economic development require adherence to international standards, transparency and the fight against corruption, standards that the dominant factions currently see as weakening them organizationally, socially and politically. After it became a wealthy class that relied for an important part of its income on the dollar auction system, these same factions created a weapon that Washington can now use against it.
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