Iraq is caught between the hammer of the Federal Reserve and the anvil of politics… Has the dollar become a weapon to extract concessions?
Iraq is caught between the hammer of the Federal Reserve and the anvil of politics… Has the dollar become a weapon to extract concessions?
1-28-2026
Information/Report…
The Iraqi dinar’s exchange rate crisis is no longer merely a supply and demand imbalance within the “Al-Kifah Exchange,” but has, in the view of observers, transformed into a reflection of the heated political clash between Baghdad and Washington. Behind the fluctuating figures lie fundamental questions about the Iraqi state’s ability to break free from American monetary hegemony, which now brandishes the threat of financial pressure whenever political and security issues become intractable.
The economy held hostage… Fragile structure and financial blackmail.
Economist Haitham Al-Anbaki believes that the current situation transcends the notion of “natural fluctuations.” In a deeper analysis of the situation, Al-Anbaki points out that the “structural imbalances” in the Iraqi economy—being a rentier economy entirely dependent on oil sales—have made the country an “open arena” for financial blackmail.
According to Al-Anbaki, American threats and regional tensions not only affect the dollar but also strike a fatal blow to “food security,” as the prices of basic commodities in local markets fluctuate immediately upon the issuance of any political messages from the US Treasury. This “conditional link” between politics and bread puts the government in a precarious position under public pressure.
The Federal Reserve’s weapon: A reading of the January 2026 figures.
Looking at the data, the gap between the official exchange rate and the parallel market rate (which reached 15% in January 2026) appears to be a “thermometer” of the relationship between Baghdad and New York. The US Treasury’s restrictions on money transfers are not merely technical procedures for auditing remittances; analysts see them as a technical “veto” controlling the pace of development and liquidity.
The Ministry of Planning indicates a 6% increase in inflation, which analysts interpret as a “sovereignty tax” paid by citizens as a result of the struggle over hard currency flows. Iraq, whose funds are deposited in the Central Bank’s accounts in New York, finds itself in a legal and historical paradox: it possesses the money, but lacks the freedom to dispose of it without a US “green light.”
The politicization of currency: From the military to the banks.
Politically, MP Ahmed Al-Sharmani goes even further, arguing that Washington has moved from “direct military intervention” to “soft monetary intervention.” Al-Sharmani confirms to Al-Maalomah that economic pressure is being used today as a tool to shape the political landscape, particularly in sovereign matters such as the selection of the prime minister and the government’s foreign policy.
This assertion reflects a direct accusation against previous governments for neglecting “economic fortification,” leaving Iraq without “financial buffers” to protect it from the vagaries of political mood in Washington. The dollar here is not merely a currency, but a “carrier of political messages” aimed at imposing specific agendas on the formation of the next government.
The implications… Does Iraq have the option of “monetary rebellion”?
The current crisis presents complex scenarios. While national forces call for “unity” and reducing reliance on hard currency, the technical reality clashes with the Iraqi banking system’s connection to the global SWIFT system and the absolute American control over oil sales.
It is noted that Iraq faces the necessity of “redefining” its financial relationship with the world.Will it succeed in building a parallel economy that reduces dependence, or will the dinar remain hostage to the US Treasury, manipulated according to the compass of geopolitical interests in the region?
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