On January 5, 2020, the Iraqi Parliament passed a non-binding resolution demanding American troops withdraw from Iraq. Trump was angered by the vote to oust all US forces following Washington’s assassination of Iran’s General Qassem Soleimani and Iraq’s Abu Mahdi al-Muhandis. He promptly responded with a threat warning Iraq that if it moved to enforce the resolution Washington would shut down Baghdad’s access to a key account Iraq’s central bank holds with the Federal Reserve Bank of New York—an account that is crucial to the management of Iraq’s oil reserves and its overall financial stability—an account that belongs to Iraq.
More than 200 central banks, government and international official institutions hold accounts with the New York Fed, thanks to the oversized role the US dollar plays in global financial transactions. The Central Bank of Iraq’s account at the Fed was established in 2003 following the US invasion that toppled Saddam Hussein and is currently estimated to be $35 billion.
The US has repeatedly used the dominant position of the dollar as a preferred currency and medium of exchange to force other countries to toe the line on its policies, essentially using the dollar as a weapon in US economic terrorism against other countries.
Iraqi officials warned of economic collapse if the US made good on its threat to cut off its access to its US-based bank account. In a call to the office of the Iraqi Prime Minister Trump warned he would charge the Iraqis “sanctions like they’ve never seen before,” and would block Iraq’s $35 billion “right now sitting in an account in the US.”
Iraq is the second largest oil producer of OPEC and its oil revenues which are paid in dollars into the Fed account daily, fund ninety percent of Iraq’s national budget. An Iraqi official said “Iraq is an oil-producing country. Those accounts are in dollars. Cutting off access means totally turning off the tap. It would literally mean the collapse of Iraq and the government would not be able to carry out daily functions or pay salaries. Such a move would prompt the Iraqi currency to fall in value.”
Trump told the Iraqi Prime Minister it “should pay back the United States for its investments in the country over the past several years or the American military will stay there.”
The State Department said that Washington would not hold discussions with Baghdad regarding troop withdrawal. “At any time, any delegation sent to Iraq would be dedicated to discussing how to best recommit to our strategic partnership, not to discuss troop withdrawal, but our right to an appropriate force posture in the Middle East.”
Trump is also considering other options. One would be refusing to renew a temporary waiver that Washington had granted to Iraq in 2018 that allowed Baghdad to import gas from Iran to feed its gutted power grid, despite US sanctions on Tehran’s energy sector. If Washington does not renew the waiver in February, then the Trade Bank of Iraq which buys the gas, could face secondary sanctions for dealing with blacklisted Iranian entities. Iraqi officials insist such threats would eventually push Iraq into the arms of Russia, China and Iran. “We’d have to form a separate economy with those countries in order to survive.”
More and more the US is relying on illegal unilateral coercive measures in place of war or as part of a build-up to war. Economic sanctions are an act of war that kills tens of thousands of people each year through financial strangulation. Currently, the US’s economic sanctions effect a third of humanity with more than 8,000 measures in thirty-nine countries. As a result, nations are challenging the US dollar domination. They are seeking to conduct trade without the dollar and are no longer treating the dollar as the world’s reserve currency. Ultimately, the de-dollarization of the global economy will seriously weaken the US economy and lead to the demise of the US empire.
Cathy Sultan has written five books on the Middle East. Her books can be found on Amazon.