What currency will Iraq use to pay Iran?

Iraq will not be part of the sanctions regime against Iran, Prime Minister Adil Abdul Mahdi stressed on Wednesday. Abdul Mahdi made the comment during a meeting with the head of Iran’s Central Bank, Abdul Naser Hemmati, Governor of the Central Bank of Iraq Ali al-Allaq and the accompanying delegations. As Asharq Al-Awsat writes in the article Iraq PM: We Will not be Part of Iran Sanctions Regime, the Iraqi people have “suffered from embargo and realize the damage that peoples incur from its consequences,” according to a statement from the PM’s office.

“Iraq won’t be part of the sanctions system against Iran or any other people.” However, a source familiar with the meeting between Hemmati and Allaq said that the latter rejected the Iranian request to pay Iraqi debts in US dollars because of US sanctions. He told Asharq al-Awsat that the Iranian delegation came to agree on Iraqi debts to Iran of over one billion dollars. He added that Iraq suggested paying the debts in any way within the framework of what is approved by the US sanctions.

Economic expert Zuhair al-Hasani told Asharq Al-Awsat that every dollar transfer is subject to the approval of the US Federal Reserve, saying any violation leads to undesirable results for Iraq. But he explained that Iraq could pay off the Iranian debt using Euro or Chinese yuan. Hasani concluded that Iraq and Iran need to establish other methods to avoid “US anger.”

Meanwhile, according to Tasnim news agency, Tehran and Baghdad agreed to no longer use the US currency in the bilateral trade. From now on, the Central Bank of Iran should have accounts in euro and dinars for the relevant trade settlements. These accounts will be used in the oil and gas deals.

In addition to the Iranian delegation, Italian Prime Minister Giuseppe Conte and Jordanian Speaker Atef Tarawneh visited Baghdad Wednesday. According to analysts, the repeated visits to Baghdad in recent weeks indicate the growing regional and international interest in the Iraqi market, especially after improved security conditions.

However, economic visits, especially from Iran and Jordan, were subject to criticism namely in the southern province of Basra, the country’s only marine crossing.
 Border Crossings Committee in Basra Council expressed concern about the “possible negative effects” of the facilities Iraq provides to Jordan on the activity of the southern border crossings.
 Head of the Committee Murtada Karim al-Shahmani reported that the Iraqi agreement with Jordan will have negative effects. Al-Sumaria News reported that Shahmani also indicated that some traders and importers could use Trebil port instead. Tomato growers in Basra rejected the government's recent agreement with Jordan and accused Iran of "killing Iraq's food basket." The growers told local media that Iran continues to send its crops illegally to Iraq, and instead of lifting the embargo on local market, the Iraqi government agreed with Jordan on exporting 400 tax-exempted goods.

Experts believe Jordan does not pose a direct threat to Basra ports, since the volume of annual trade with Iraq is modest, around $400,000, compared to the volume of exchange with Turkey and Iran.

But economic expert Alaa al-Fahd thinks Jordan is planning to increase its trade exchange with Iraq to $8 billion, and this will affect the rest of the ports.