Shafaq News/ A call by US Republican Congressman Joe Wilson to imposesanctions on Iraq’s state-owned Rafidain Bank has sparked concerns amongfinancial and banking experts over potential repercussions for the country’sbanking sector.
Wilson claimed in a post on X on Jan. 30 that “under Biden and BrettMcGurk, the US treasury allowed Rafidain Bank, the largest in Iraq, to becomethe money laundering machine for the Iranian regime and its puppets to obtainUS$,” stressing that sanctions must be imposed on the bank, and that “Trumpwill fix it.”
Experts warn that such sanctions could lead to a shortage of US dollarsin Iraq, push up exchange rates, and isolate the country from the globalfinancial system. The worst-case scenario, they say, would be severe andcomprehensive measures that could disrupt salary payments and developmentprojects.
"If sanctions are imposed on Iraq’s banking system, the impactwould be significant and far-reaching," said Nawar Al-Saadi, professor ofinternational economics. "Iraq relies heavily on the US financial systemfor international transactions, including transfers and reserves held at the USFederal Reserve. Any restrictions could create a liquidity crisis, drive demandfor dollars on the black market, and lead to a sharp depreciation of the Iraqidinar."
Al-Saadi told Shafaq News Agency that sanctions targeting Rafidain Bankor other institutions handling foreign reserves would complicate financialtransfers, affecting both foreign trade and remittances from Iraqis abroad."This would harm the private sector, which depends on imports, forcingIraqi businesses to seek costlier and less efficient alternatives, such asintermediaries or informal financial networks," he added.
Moreover, Al-Saadi highlighted potential political consequences because,according to him, the sanctions would strain US-Iraq relations and could pushBaghdad to explore alternatives outside Washington’s influence, such asincreased dealings with China or Russia. However, “shifting away from theWestern financial system is neither easy nor swift, given Iraq’s deep economicties with it," he said.
In a worst-case scenario, severe and comprehensive sanctions couldtrigger an economic crisis, making it difficult for the government to fundsalaries and infrastructure projects, leading to higher unemployment anddeclining foreign investment, he warned. "This could escalate into broadersecurity and political instability."
Al-Saadi suggested that partial or targeted sanctions could limit theimpact but still send a message that Iraq must reassess its financial dealings,particularly regarding its ties with Iran. "Regardless of their scope,sanctions would compel Iraq to rethink its financial policies and considerreforms to reduce its dependence on US-controlled financial channels," hesaid.
Wilson has previously criticized the Biden administration for itshandling of Iraq and Iran, arguing that Iraq continues to send $10 billionannually to Iran for oil and electricity purchases due to a US waiver. Hecalled for the waiver’s revocation, asserting that Iraq should source energyfrom the Arab world instead.