Iraq decided to stop using the Chinese yuan for financial transactions following a directive from the US Federal Reserve.
The country cited concerns about possible manipulation and other problems with some transfers, Moeen Al-Kadhimi, a member of the parliamentary finance committee, reported on 11 July.
The US Federal Reserve has mandated Iraq to cease dealing in the Chinese yuan, alleging irregularities and certain problems in transactions. Many decisions by the Central Bank of Iraq are imposed by the US Federal Reserve.
Al-Kadhimi explained that Iraq’s oil revenues of 3.5 million barrels per day were kept with the US Federal Reserve. The funds are not transferred to Iraq in cash, but are managed through transfers initiated by the Central Bank of Iraq. The Federal Reserve must approve these transfers and related commercial transactions before transferring the funds to designated Iraqi entities.
A member of the parliamentary committee noted that the operations of the Central Bank of Iraq were strongly influenced by US directives and that those reasons were politically motivated to put pressure on the Iraqi government.
Al-Kadhimi also stated that the parliamentary finance committee would call on the Central Bank to address the problem and diversify its currency basket to provide more opportunities for both the bank and Iraqi traders.
Iraq strengthens its yuan-denominated assets through the Singapore Development Bank to finance trade and imports with China totalling about $12 billion a year.
Additionally, Iraq is increasing its UAE dirham assets, negotiating to increase its euro-denominated assets for trade with the European Union, and opening Indian rupee bank accounts for several Iraqi banks.
