Iraq, Iran to possibly use new payment means to settle commercial transactions
The director of the Iraqi Prime Minister’s Office, Ihsan Yassin Al-Awadi, and the Iranian Ambassador to Iraq, Mohammad Kazem Al Sadeq, during a ceremony held to sign an agreement to barter oil for gas. Photo: AFP
Baghdad (IraqiNews.com) – The financial advisor to the Iraqi Prime Minister, Mazhar Salih, confirmed on Thursday that a possible agreement could be reached with Iran to use foreign currencies other than the US dollar to settle commercial transactions between the two countries.
Saleh said that the use of an international means of payment other than the US dollar and a transparent trade flow with Iran within the international trading system will undoubtedly contribute to the stability of the exchange rate in Iraq.
The financial advisor illustrated that the step would help achieve stability in trade movements with no negative impacts on the Iraqi economy.
The Iraqi Prime Minister, Mohammad Shia Al-Sudani, revealed last Monday that Iran requested the use of any currency other than the US dollar in commercial deals with Iraq.
Al-Sudani further explained that the Central Bank of Iraq (CBI) and the Central Bank of Iran are working on a mechanism to regulate trade between the two countries.
Iraq is the first destination for Iranian exports, as the value of Iranian exports to Iraq between March 2022 and March 2023 reached $10.23 billion.
Iran currently aims to raise the volume of trade with Iraq to $20 billion.
Earlier in August, the spokesperson for the US Department of State, Matthew Miller, revealed that Washington is working closely with Iraq to ensure Iran’s energy payments are managed in a manner consistent with US sanctions and cannot be diverted for illicit means.
Gas imports from Iran are extremely important for Iraq to generate electricity. However, US sanctions imposed on Iran make it difficult for Baghdad to pay for the Iranian gas.
Tehran is putting Baghdad under pressure to get US permission to disburse funds by stopping Iranian natural gas exports to Iraq, reducing Iraq’s ability to generate electricity, and forcing the country to cut off electricity during the hot summer, according to Reuters.
The US sanctions imposed on Iran force Iraq to pay for Iranian electricity only through restricted bank accounts in Iraq, which Iran can use to purchase its humanitarian needs after obtaining permission from the United States.
Iraq heavily relies on gas imports from Iran but has recently invested in many projects to start taking advantage of flared gas and using renewable energy to generate electricity.