Coffee with MarkZ 10/05/2023

Iraq’s Central Bank Limits Dollar Provision to Local Banks: Economic Implications and Repercussions, 5 OCT

 Iraq’s Central Bank Limits Dollar Provision to Local Banks: Economic Implications and Repercussions, 5 OCT

Banking Shift: Iraq Limits Dollar Access

The Central Bank of Iraq (CBI) has made a notable shift in its policy, officially confirming a decision to limit the provision of cash dollars to local banks. This change is set to become effective from January 1, 2024, as part of an effort to curb financial crimes and the evasion of U.S. sanctions on Iran, according to Mazen Ahmed, director-general of investment and remittances at the CBI.

Each year, Iraq imports $10 billion in cash from the New York Federal Reserve. However, it’s estimated that around 50% of this hard currency reserve has been misused, leading the CBI to take decisive action. This move also aligns with a broader push to de-dollarize an economy that has increasingly favored the U.S. dollar over local notes, due to recurrent wars and crises that have plagued the country since the 2003 U.S. invasion.

Implications for Banks and Individuals

While this policy change is expected to help curtail illicit activities, it also has significant implications for local banks, businesses, and individuals who rely heavily on these banks. Individuals who deposit dollars into banks before the end of 2023 will still be able to withdraw funds in dollars in 2024. However, dollars deposited in 2024 can only be withdrawn in local currency at the official rate of 1,320. This change could potentially impact the liquidity of the banks, their ability to conduct transactions, and the overall financial stability in the country.

Moreover, the parallel market rate of the Iraqi dinar sat at 1,560 on Thursday, roughly 15% percent below the official rate. This discrepancy could cause significant financial strain for individuals and businesses, particularly those that rely heavily on U.S. dollars for their transactions.

International Impact and Responses

This policy change is also likely to attract the attention of international entities dealing with these banks. The United States Treasury and Federal Reserve Bank of New York, for instance, have already banned 14 Iraqi banks from conducting US dollar transactions due to concerns that US currency could be redirected to sanctioned individuals and possibly benefit Iran. This restriction is part of an attempt to stem the flow of United States currency to Iran and other sanctioned jurisdictions, demonstrating increased scrutiny of Iraq’s financial practices.

Looking Ahead: The Future of Iraq’s Economy

The exact future implications of this policy change are uncertain. However, it’s clear that it could significantly alter the economic landscape in Iraq, potentially affecting everything from the day-to-day transactions of individuals to the international financial relations of the country. As the country navigates this change, the focus will likely remain on maintaining financial stability, curbing illicit activities, and managing the delicate balance of international relations.

"RV UPDATE" BY MILITIAMAN, 5 OCT

 Militia Man 

 Where are they going to get all the money to do all this road construction?  Where are you going to get all the money for the water, sewer and all of those things?  Where is that money going to come from when you have an exchange rate at 1310?   

Everybody should be pretty happy to see Iraq is getting ready to be underway... 

 Did they say they were Sovereign?  

According to the Prime Minister at the U.N., yes they did say they were sovereign ...What you can deduce from the bigger picture...Iraq is going international.  You can't deny it.    They're getting ready to do something and we can see that...We're in a really good spot...

There are a lot of projects that are very expensive and they need to have an investment budget to go along with that.  

Why has it been delayed?

  Probably because there's something they're not quite yet ready to expose or they're just about ready to expose.  They're going to have to have an International currency...exchange rate and the country needs to have that final step to sovereignty.

Iraqi Dinar VND Zim Dollar How and Where to Purchase #iqd #vnd BY SANDY INGRAM

Revival of Kirkuk-Kurdistan Oil Pipeline: A Boost to Iraqi Oil Exports, 5 OCT

 Revival of Kirkuk-Kurdistan Oil Pipeline: A Boost to Iraqi Oil Exports, 5 OCT

The oil pipeline connecting the Kurdistan Region and Kirkuk is now fully operational, announced Turkish Energy Minister, Alparslan Bayraktar. This development signals Turkey’s readiness to recommence oil shipments, marking a significant milestone in the global oil industry.

Origins of the Dispute

The dispute over independent Kurdish oil exports has been a contentious issue between Ankara and Baghdad for nearly a decade. A 2014 agreement between Ankara and Erbil allowed oil pumped in landlocked Iraqi Kurdistan to be independently sold via Turkey’s Mediterranean port of Ceyhan. This move was met with resistance from Iraq, which argued that Turkey had violated a 1973 pipeline agreement by enabling oil exports from Iraqi Kurdistan without its consent. The disagreement led Iraq to file an arbitration case with the International Chamber of Commerce (ICC).

Further tensions arose when Kurdish supporters clashed with protesters following the evacuation of the Iraqi military’s Joint Operations Command headquarters in Kirkuk. The fallout resulted in heightened security interventions, a citywide curfew, and four tragic deaths. The decision to evacuate the headquarters was part of a broader political bargain to secure the backing of the Kurdish Regional Government (KRG) for a government under Mohammed Shia al Sudani in Baghdad.

Kirkuk: A Key Player in Energy Security

The Kirkuk-Ceyhan oil pipeline, which stretches between Iraq and Turkey, symbolizes the significant partnership between the two nations. However, control and revenue distribution from this pipeline have been contentious, especially during periods when the KRG has attempted to bypass Baghdad and export oil directly to Turkey. These actions have been perceived by the Iraqi central government as breaches of its sovereignty, leading to political disputes.

Ankara-Erbil Bond: Overlapping Interests in Kirkuk

Since 2014, the central government in Baghdad has consistently maintained that Iraqi Kurds have been exporting Iraqi oil through Turkey, a transaction carried out without the requisite approvals from the central authorities. This issue was escalated to an international forum, where the Paris-based International Chamber of Commerce ultimately ruled in favor of Baghdad, imposing a significant penalty of $1.5 billion on Turkey. In retaliation, Turkey halted the transport of approximately 400,000 barrels per day of Kurdish crude oil, along with an additional 75,000 barrels per day originating from the Kirkuk fields.

Resumption of Oil Pipeline Operations

Turkish Energy Minister Alparslan Bayraktar recently announced the reoperation of the oil pipeline, signaling Turkey’s readiness to recommence oil shipments. Amid ongoing financial pressures on both Baghdad and the Kurdistan Region, the resumption of the pipeline operation represents a significant breakthrough in the global oil industry and a vital step towards enhancing the flow of Iraqi oil to international markets.

"IRAQ BOOTS ON THE GROUND REPORT" BY FIREFLY, 5 OCT

 Frank26 (KTFA)

Now they will only use the auctions for the GOI to run its businesses from now on making it very difficult for Iran to steal dinars through the auctions because that’s where they used to steal the dollar through the auctions but there are no more dollars and that’s why your security and stability is so strong right now.

  That’s why we believe your article VIII and the whole world is pouring in right now because they know that.

[Iraq boots-on-the-ground report]

FIREFLY: They’re saying in two weeks it will be the first step of the electronic transformation.  

FRANK:  That would be the digital electronic international transformation. {Mic drop}

Baghdad Currency Exchange Businesses Protest Against Sanctions, 5 OCT

 Baghdad Currency Exchange Businesses Protest Against Sanctions, 5 OCT

In a recent turn of events, dozens of currency exchange business owners took to the streets in Baghdad to make their voices heard. The protest occurred in front of the Central Bank on Rashid Street and was largely driven by the lifting of sanctions imposed on their businesses due to financial transactions that were deemed to have violated the law. An estimated 80 individuals participated in the protest, demanding that the bank’s management revoke the administrative and financial sanctions that have been placed on their businesses.

Iraq’s Push to Curb Financial Crimes

As of January 1, 2024, Iraq has plans to halt cash withdrawals and transactions in U.S dollars. This decision follows a series of measures intended to curb the misuse of hard currency reserves in financial crimes, and to prevent the evasion of U.S. sanctions on Iran. Mazen Ahmed, director-general of investment and remittances at the Iraqi central bank (CBI), stated that this move is aimed at stamping out the illicit use of approximately 50% of the $10 billion that Iraq imports in cash from the New York Federal Reserve each year.

In addition to this, the initiative is part of a broader effort to de-dollarize an economy that has seen the greenback preferred over local notes by a population weary of recurring wars and crises following the 2003 U.S. invasion. People who deposit dollars into banks before the end of 2023 will continue to be able to withdraw funds in dollars in 2024, but dollars deposited in 2024 could only be withdrawn in local currency at the official rate of 1,320.

Further Measures to Address Misuse

The CBI has already set up a platform to regulate wire transfers that make up the bulk of its dollar demand. This platform was established in conjunction with authorities in the U.S., where Iraq’s $120 billion in reserves from oil sales are held. Ahmed stated that this system was now almost airtight, providing dollars at the official rate to those engaged in legitimate trade such as imports of food and consumer goods. However, cash withdrawals continued to be misused, including by would-be travellers receiving a state quota of $3000 who found ways to game the system.

The Impact on Iraq’s Economy

Many local banks have already been limiting dollar cash withdrawals in recent months, contributing to a shortage that has seen the parallel market exchange rate continue to rise. The CBI expects the dinar to lose more value as the new measures are implemented, but it views this as an acceptable side-effect of formalising the financial system. Amid all these changes, signs have emerged that the CBI’s plans will not be met with open arms. Footage circulated on social media recently showed a depositor at a Baghdad bank threatening to burn it down if he did not receive his deposit in cash dollars, a scene reminiscent of steps depositors have taken amidst Lebanon’s banking crisis.