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Iraq: Fears of 'Collapse' If Trump Freezes Oil Revenues

Iraq: Fears of 'Collapse' If Trump Freezes Oil Revenues

Tuesday, 14 January, 2020 - 06:15
Iraqi officials say around $35 billion of the country's oil revenues are held at the US Federal Reserve, which means Washington's threat to restrict access could be a major problem. AFP

Iraqi officials expressed fear of an economic "collapse" if the US imposes threatened sanctions, including blocking access to a US-based account where Baghdad keeps oil revenues that feed 90 percent of the national budget.


US President Donald Trump was angered by the Iraqi parliament voting on January 5 to oust foreign forces, including some 5,200 US troops, who have helped local soldiers beat back terrorists since 2014.


If troops were asked to leave, Trump threatened, "we will charge them sanctions like they've never seen before."


The US then delivered an extraordinary verbal message directly to Prime Minister Adel Abdel Mahdi's office, two Iraqi officials told AFP.


"The PMO got a call threatening that if US troops are kicked out, 'we' -- the US -- will block your account at the Federal Reserve Bank in New York," one official said.


Parliament's vote to oust the troops was triggered by outrage over a US drone strike on Baghdad two days earlier that killed top Iranian general Qasem Soleimani and the deputy chairman of the Popular Mobilization Units, Abu Mahdi al-Muhandis.


The Central Bank of Iraq's account at the Fed was established in 2003 following the US-led invasion that toppled ex-dictator Saddam Hussein.


Under United Nations Security Council Resolution 1483, which lifted the crippling global sanctions and oil embargo imposed on Iraq after Saddam's invasion of Kuwait, all revenues from Iraqi oil sales would go to the account.


Iraq is OPEC's second-biggest crude producer and more than 90 percent of the state budget, which reached $112 billion in 2019, derives from oil revenues.


The Central Bank of Iraq's account at the Fed was established in 2003 following the US-led invasion that toppled ex-dictator Saddam Hussein.


Under United Nations Security Council Resolution 1483, which lifted the crippling global sanctions and oil embargo imposed on Iraq after Saddam's invasion of Kuwait, all revenues from Iraqi oil sales would go to the account.


Iraq is OPEC's second-biggest crude producer and more than 90 percent of the state budget, which reached $112 billion in 2019, derives from oil revenues.


To this day, revenues are paid in dollars into the Fed account daily, with the balance now sitting at about $35 billion, Iraqi officials told AFP.


Every month or so, Iraq flies in $1-$2 billion in cash from that account for official and commercial transactions.


"We're an oil-producing country. Those accounts are in dollars. Cutting off access means totally turning off the tap," the first Iraqi official said.


The second official said it would mean the government could not carry out daily functions or pay salaries and the Iraqi currency would plummet in value.


"It would mean collapse for Iraq," the official said.


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