Iraq allows foreign trade with China in yuan
Iraq's Central Bank said in a statement on Wednesday that assets of Iraqi banks that have accounts in Chinese yuan will be reinforced for the purpose of organising trade with China.
The bank also indicated it would increase the assets of Iraqi banks through its yuan accounts at J.P. Morgan and the Development Bank of Singapore (DBS).
"In the future, facilitations will be offered for the purpose of financial transfers to US and Europe with the same mechanism," the statement said.
The Iraqi government earlier this month adjusted the dinar's value against the dollar to address a shortage of hard currency in local markets. The United States has sanctioned several Iraqi banks dealing mainly with Iran, which is under American sanctions, amid concerns that hard currency is being routed from Iraq to Iran.
Khalid Haider, professor of economics at the University of Sulaimaniyah, told The New Arab that the step by ICB was "predictable", and aimed at reducing demand for dollars by Iraqi traders that caused the value of the currency to rise sharply against the dinar.
"In order for Iraq to revalue its currency and deal with the rising demand on the dollar, it needs to shift all foreign trade transactions via bank transfers," Haider said.
"Nearly 90 percent of Iraq’s foreign trade is with China, Turkey, and Iran, thus the country needs to either pay for imports with dinar or the currencies of those three countries."
Iraq's endeavor to carry out trade with the US in dinars and other currencies, however, might not be acceptable for the Americans, since they wish to maintain the dollar's dominance in global trade, Haider indicated.
"Iraq has sovereignty in which currency to trade with other countries, however, if Baghdad would be serious in doing trade with the US in other currencies than the dollar, I think Washington will reject that and might limit its corporations, including military assistance, with Iraq," he said.