Senior Iraqi delegation heads to US to tackle banking issues, how to pay Russian energy firms

Senior Iraqi delegation heads to US to tackle banking issues, how to pay Russian energy firms
An Iraqi delegation headed to Washington to gain US support for a decision by Iraq’s cabinet for revaluing the national currency, and waivers for Iraqi banks to pay back Russian energy firms. 
3 min read
09 February, 2023
FM Hussein is currently hosting Sergey Lavrov in Baghdad. [Getty images]

The visit by a senior Iraqi delegation to the United States aims to garner support from US officials for the Iraqi cabinet's new financial and banking policy, the spokesperson of Iraq's foreign ministry said on Wednesday. 

The delegation, headed by Iraq's foreign minister and deputy prime minister Fuad Hussein, also includes finance minister Taif Sami, governor of Iraq's Central Bank (ICB) Ali al-Allaq and other senior officials.  They left Iraq on Wednesday, and are scheduled to meet with officials from the US treasury to deal with the country's financial issues.

The visit to the US also comes at the heels of Russian foreign minister Sergey Lavrov's visit to Iraq last week.

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Iraq's cabinet on Tuesday approved a currency revaluation, setting the exchange rate at 1,300 dinars per U.S. dollar. The previous official rate was 1,460 dinars per dollar.   

"The meeting by the delegation with the US side in Washington will focus on support for Iraq's monetary policy, and joint corporation on financial and banking sectors aiming at reinforcing the view by the Iraqi government on measures taken regarding the dollar exchange rate [per dinar]," Ahmed al-Sahaf, spokesperson of Iraq's foreign ministry told Iraq's state-run News Agency (INA).

"The steps taken by the Iraqi cabinet are key for strengthening the new monetary policy and the negotiations with the US are aimed at Iraq's national interest," he said. 

He also added that bolstering Iraq's "economic diplomacy" can be achieved through "trust and balanced foreign relations," arguing that they are getting international support for the policies of the Iraqi cabinet.  

Earlier this month, the Iraqi dinar experienced its worst drop in value not seen for decades as the Iraqi authorities struggled to stop or limit the outflow of the hard currency from the country. 

The value of the Iraqi dinar versus the US dollar declined to 1,750 against the dollar at the black currency market on 2 February.

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Iraq will discuss with Washington this week how to pay dues owed to Russian oil companies despite sanctions, Foreign Minister Fuad Hussein said on Monday.

"We will discuss this problem with the American side. There are sanctions in place that should not be imposed on the Iraqi side because the cooperation with Russian companies is ongoing and there are active Russian companies in Iraq," Hussein said during a news conference with visiting Russian Foreign Minister Sergei Lavrov in Baghdad.

Russian investments in Iraq are believed to be worth more than US$10 billion, mostly in the oil industry. Huessin said that one of the main issues he and Lavrov talked about was how to pay bills owed to Russian energy companies such as Lukoil and Gazprom that do business in Iraq even though Russia is under international sanctions.

The goal is to "protect Iraqi banks and central banks from sanctions".

Iraq, the second-largest crude oil producer in OPEC after Saudi Arabia, mainly depends on income from selling oil in US dollars. The Central Bank of Iraq then sells the US dollar, as well as other foreign currencies, during daily auctions.

However, private banks and currency market companies - mostly owned by the ruling parties and tycoons - have been funnelling the dollar to Iran and other neighbouring countries under US sanctions.  

The United States sanctioned several Iraqi banks dealing mainly with Iran. Late last year, the US Federal Reserve began taking measures on transactions to slow the flow of dollars into Iraq.

The West, previously Russia's main energy market, has responded to the invasion of Ukraine by targeting Moscow's energy revenues through sanctions that also restrict sales to third countries and are set to tighten further.