A US report exonerates “dollar shipments” from Iraq’s crises: they have no connection to salaries.

A US report exonerates “dollar shipments” from Iraq’s crises: they have no connection to salaries.

2026-08-01

Shafaq News – Translation
The United States’ decision to suspend cash dollar shipments to Iraq for about three months, before resuming them at the beginning of July, sparked a wave of questions and interpretations that linked the move to restricting Baghdad’s access to its oil revenues, or threatening its ability to pay salaries and finance the economy.

However, a report by the Atlantic Council , prepared by Middle East program researcher Ahmad Tabakhjali and translated by Shafaq News Agency, argues that these perceptions are based on an inaccurate understanding of the nature of Iraqi accounts at the Federal Reserve Bank of New York, and the mechanism through which oil revenues and central bank reserves are managed.

According to the report, the suspension of cash dollar shipments did not deprive the Iraqi government of its oil revenues, nor did it affect its ability to finance salaries and public expenditures, nor did it leave a clear impact on the dollar exchange rate within the parallel market.

Two separate accounts

The report explained that Iraq has two separate accounts with the Federal Reserve Bank of New York, despite their connection to the process of converting oil revenues from dollars to dinars.

The first account is designated for depositing Iraqi oil export revenues, while the second account represents the Iraqi Central Bank’s foreign currency reserves.

Cash dollars are withdrawn from the reserves account and flown to Iraq in periodic installments, before being deposited in the Central Bank’s vaults and distributed to meet the demand for the US currency.

Thus, suspending cash shipments does not mean freezing oil revenues or preventing the government from accessing them, as oil revenues are managed within a different financial track than the funds allocated for cash shipments.

Billions haven’t changed the landscape

The report indicated that the percentage of reserves held in cash has declined significantly over the past years, from about 7.9% of total reserves at the end of 2014, to about 1.5% by the end of 2025.

According to the report’s estimates, the United States withheld at least two cash shipments during the period between the first US-Israeli strikes against Iran in late February and the resumption of shipments in early July, including one shipment worth $500 million.

He estimated that the total amount of money whose transfer was suspended ranged between one billion and one and a half billion dollars, but he considered this amount to have a limited impact when compared to the size of the Iraqi economy and government financial flows.

According to data from the Ministry of Finance and the Central Bank of Iraq, oil revenues during the period from March to May amounted to about $10.9 billion, which were deposited by oil buyers into the oil revenue account at the Federal Reserve in New York.

The Ministry of Finance sold approximately $8.1 billion to the Central Bank in exchange for Iraqi dinars to finance budget expenditures, which amounted to approximately $22.2 billion during the three months, while the remaining portion was financed from non-oil revenues and domestic borrowing.

The report added that the Ministry of Finance sold approximately $1.1 billion in additional revenue to the Central Bank during June, from that month’s oil revenues.

Salaries and exchange rate

During the period from March to June, the Central Bank of Iraq sold approximately $18.3 billion of its reserves to companies and individuals through banks, to finance imports and cross-border transactions.

The report explained that these funds came from the same reserve account from which cash dollar shipments are financed, meaning that the suspension of shipments did not restrict the central bank’s ability to finance foreign trade or meet the economy’s import-related needs.

The report also stated that the government was not prevented from converting its oil revenues into dinars and using them to finance salaries and public expenditures.

The report noted that the dollar’s price in the parallel market remained almost stable between March and July, despite the halt in cash shipments, which it considered an indication that there was no exceptional demand or panic in the market.

The report compared the current situation to what happened in 2015, when the United States suspended dollar transfers due to concerns that the currency would reach ISIS and Iranian banks, which at the time led to the dollar’s price rising in the parallel market by about 11% as a result of increased demand for the US currency.

However, during the last suspension, no similar effect appeared, in light of the changing nature of the Iraqi financial system and the decline in reliance on cash dollars compared to previous years.

According to the report, the only potential effect of continuing to halt shipments was to reduce the amount of cash dollars available to travelers through airports, while the possibility of using bank cards to cover expenses abroad remained.

He noted that during the suspension period, the Central Bank continued to provide travelers, especially those heading to perform the Hajj pilgrimage, with cash dollars, as it provided about $600 million of the funds available in its vaults during the period between March and June.

A broad banking transformation

The report noted that the Iraqi economy has undergone significant changes since 2003, with a gradual shift from a cash-based and informal economy to a more organized banking system.

This shift accelerated after the Central Bank of Iraq updated, in November 2022, the mechanisms for providing dollars for foreign transfers, in line with international standards.

He explained that the new system came after two years of planning and coordination between the Federal Reserve Bank of New York, the US Treasury Department, the Central Bank of Iraq, and the Ministry of Finance.

He noted that the new measures constituted a major shift in an economy where informal sectors and cash transactions dominated a large part of its activity, but the initial shock, along with subsequent measures taken by the government and the central bank, contributed to accelerating the transition towards banking activity and the formal economy.

He explained that international transfers are increasingly concentrated in the strongest Iraqi banks, which have banking relationships with major international banks, and whose transactions are subject to audit by an international risk management body nominated by the Federal Reserve in New York.

The share of these transfers increased from about 40% in 2023 to 95% during the period from January to May 2026, at the expense of the previous transfer system.

The share of cash transactions in total cross-border payments has also declined, including dollars provided by the central bank to travelers through airports, which is the channel most affected by the halt in cash shipments.

Strict control

The report confirmed that the cash dollar distribution system, which was approved after November 2022, has become one of the most regulated cash distribution systems.

Although the ability to track cash remains limited compared to bank transfers, the system documents detailed information about dollar seekers, including passport numbers, travel destinations, frequency of trips, and amounts received.

This data allows authorities to investigate the activities of travelers and those associated with them, when suspicions or indications arise that warrant scrutiny.

The report concluded that the Iraqi economy, particularly the financial sector, has undergone a major transformation over the past two decades, and that current financial risk assessments cannot be based on outdated assumptions dating back to the period of economic chaos that followed 2003.

The Atlantic Council’s report concluded that the halt in recent dollar shipments revealed the continued circulation of outdated perceptions about the Iraqi financial system, despite the transformations witnessed in the banking sector, stressing that media coverage needs to keep pace with these changes and understand the nature of the relationship between oil revenues, central bank reserves, and cash dollar shipments.

shafaq.com