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BRICS: 8 Banks Ban U.S. Dollar Transactions

In a strategic move echoing the philosophy of the BRICS alliance, Iraq has recently prohibited eight banks from engaging in transactions using the U.S. dollar. This bold step comes on the heels of Iraq’s prior decision to cease all cash withdrawals in the U.S. currency, signalling a concerted effort to minimise reliance on the dollar in the region.

The eight local banks affected by the ban are Ashur International Bank for Investment, Investment Bank of Iraq, Union Bank of Iraq, Kurdistan International Islamic Bank for Investment and Development, Al Huda Bank, Al Janoob Islamic Bank for Investment and Finance, Arabia Islamic Bank, and Hammurabi Commercial Bank. These institutions will no longer have access to the daily U.S. dollar auction conducted by Iraq’s Central Bank, consequently cutting off their access to the country’s U.S. dollar reserves.

The move aligns with the BRICS playbook, where the alliance has a shared objective of reducing the influence and dominance of the U.S. dollar in global trade. It also follows Iraq’s ongoing struggle to curb black market transactions of the U.S. dollar, which has been adversely affecting the nation’s native economy.

One of Iraq’s primary goals in implementing these measures is to gain control over the fluctuating black market exchange rates that have plagued the country for an extended period. However, this move is not without challenges, as Iraq heavily depends on imports for its main source of hard currency, making it susceptible to U.S. crackdowns on currency smuggling to neighbouring Iran.

By adopting the BRICS-style ban on U.S. dollar transactions, Iraq aims to fortify its local currency, the Iraqi Dinar. This shift is expected to enhance the stability of the Iraqi financial system and protect it from potential abuses. A Treasury spokesman remarked to Reuters, ‘We commend the continued steps taken by the Central Bank of Iraq to protect the Iraqi financial system from abuse, which has led to legitimate Iraqi banks achieving international connectivity through correspondent banking relationships.’

As the geopolitical landscape continues to evolve, Iraq’s decision to align with the BRICS philosophy signifies a nuanced approach to economic autonomy and resilience in a global financial context.

Monika Shanmugam