Experts warn of the risks of lifting the Federal Reserve’s protection on Iraqi funds.
Experts warn of the risks of lifting the Federal Reserve’s protection on Iraqi funds.
2026/09/13
Economic experts have warned of the risks of canceling the Iraqi account at the US Federal Reserve and lifting protection on oil export revenues at the present time, stressing that the sudden move away from American protection may cost Iraq economic and financial losses, which will be reflected in the dinar, the exchange market and the financing of imports.
Economic expert Mustafa Faraj confirmed that Iraq, theoretically, can manage its oil revenues and reserves without American protection, but practically in the current situation, a sudden transition would be highly risky, explaining that the issue is not simply about transferring funds from one American bank to another, but is linked to the dollar system, correspondent banks, foreign trade settlement, and the central bank’s ability to manage the exchange market.
global financial system
He added that Iraq does not rely solely on the United States to protect its funds, but depends to a large extent on the global financial system, a significant portion of which passes through the dollar.
American financial institutions.
Faraj pointed out that instead of focusing heavily on the dollar, the share of the euro, gold, and convertible Asian currencies could be increased, while managing liquidity risks. He stressed that moving the entire reserve away from the dollar is not a solution because most of Iraq’s oil and import trade is linked to the dollar.
International banking network
He explained that one of the alternatives is to build a multilateral international banking network, by expanding Iraq’s relations with European, Asian and Gulf banks, so that the Iraqi banking system is not dependent on a single channel.
He pointed to the possibility of increasing the use of the euro and local currencies in trade, through clearing agreements with countries such as China, Turkey, India and the Gulf States, explaining that this requires deep markets, a convertible currency and reliable settlement mechanisms.
Strong Iraqi banks
Faraj stressed that strengthening the Iraqi banking sector represents the real alternative, not just replacing the dollar with the yuan or the euro, noting that Iraq needs strong Iraqi banks, internationally audited, committed to anti-money laundering and counter-terrorism financing standards, and connected to a wide network of correspondent banks.
He stated that Iraq can reduce its dependence on American protection in the future, but cannot replace it with a political decision alone at present. He stressed that what is required is to build an alternative financial system first, and then to transition gradually, warning that the greatest danger will not be to the oil money itself, but rather to the dinar, the exchange market, import financing, and the confidence of the banking sector.
Previous financial claims
Economic expert Ahmed Eid said that lifting US protection on Iraqi funds “without creating an alternative legal and financial umbrella may open the door to risks related to legal claims and attempts to seize some Iraqi assets abroad, especially if there are previous rulings or financial claims,” indicating that this “may increase the degree of uncertainty surrounding the management of state funds and its external revenues.”
Official and parallel prices
He added that the most sensitive economic risk is the pressure on the dinar and the decline in its monetary value, and the disruption to the smooth flow of oil and dollar revenues to Iraq, explaining that the economy depends to a large extent on oil revenues to finance public spending.
He added that any disruption in external flows could put pressure on the exchange market, widen the gap between the official and parallel rates, and be reflected in the prices of imported goods, inflation, and purchasing power.
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