Iraq-US review: Assessing Iran’s financial obligations

Iraq-US review: Assessing Iran's financial obligations

Iraq is allegedly authorized by the United States to settle its $2.7 billion debt to Iran, however it is unclear how the funds would be disbursed. According to Reuters, an anonymous senior Iraqi source said that Iraqi Foreign Minister Fuad Hussein received the go-ahead at a meeting with US Secretary of State Antony Blinken outside the Riyadh Conference.

Significance of the review

The money will be transmitted through the Commercial Bank of Iraq, according to a source in the Iraqi foreign ministry, and Iranian authorities have confirmed that the monies would be utilized for the costs of the Hajj pilgrims and for Iranian-imported food. According to Iranian sources, there might be up to $10 billion or more in money in Iraqi banks. 

The head of the Iran-Iraq Chamber of Commerce, Yahya Al-e Eshaq, was quoted by the local media on Saturday as stating that although the Iraqi debt is estimated to be between $7 and $8 billion, only $2.7 billion has been agreed to be released. He further stated that a portion of the funds have been set aside for pilgrims, while another portion has been used to buy necessities. Hassan Norouzi, an Iranian politician, asserted that the funds will be given to the pilgrims of the Hajj in the form of subsidies, allowing them to purchase dollars at a little cheaper price than on the open market. He disagreed with the decision, claiming that the funds belong to all Iranians, not just a select few wealthy people who can first afford to travel to Hajj.

Challenges and considerations

Noting the nation’s poor economic circumstances, Norouzi the vice-chairman of the parliament’s Judicial and Legal Committee called the plan “a definitely wrong move.” He declared, “This money belongs to the entire nation and should be used for Iranians’ sustainable goals.” In order to prevent capital inhabitants from having to drink nitrate-contaminated water, it is preferable “to spend the money on Tehran’s water.” 

For all adult Muslims who are financially and physically competent, making the yearly Islamic pilgrimage to Mecca, Saudi Arabia the holiest city for Muslims is an obligatory religious duty that they must perform at least once in their lives. The Hajj rituals this year are scheduled for late June or early July, and the cost for Iranian pilgrims to go there is typically $5,000, which is determined by Saudi Arabia, the host nation. The candidates’ financial and physical capacity is a prerequisite for the pilgrimage. It’s hardly a true pilgrimage if the government is meant to pay for the trip.

Pathways for resolution

The Hajj is planned and overseen by the Iranian government, which also gives pilgrims US money to spend while they are on their way and pays Saudi Arabia for each pilgrim’s costs. However, it offers these dollars at a low preferential rate, subsidizing the trip, as opposed to charging each pilgrim the entire sum based on a high free market exchange rate. Nevertheless, given that there would only be 80,000 pilgrims, the entire subsidy would still represent a very small portion of the $2.7 billion that is purportedly set to be released. This year, the government will subsidize pilgrims with a total of almost $200 million. How Iraq intends to disburse the $2.7 billion, including any funds set aside for pilgrims, is the question. Regarding the matter, representatives of the three nations remain mute. Would several hundred million dollars designated for pilgrims be sent to Saudi Arabia to cover costs? Alternatively, the Iranian government will get cash payments, which would go against the original intent of the US financial restrictions.

Multilateral involvement

Iran International said that in exchange for Tehran being more accommodating on matters pertaining to its nuclear program and the release of American dual citizens who were being held captive in Iran, the US was promising to free Iran’s cash that were kept in South Korea and Iraq. In exchange for Iran restricting future production of highly-enriched uranium, the United States offered to release $20 billion in frozen Iranian cash that are now held by South Korea, Iraq, and the International Monetary Fund. 

Although Iranian and American officials have denied the accusations, there are still doubts about whether an agreement can move forward without formal language or notice to Congress, as needed by current law, according to The Foundation for Defense of Democracies (FDD). “The Biden administration hopes that Tehran will be more amenable to a ‘longer and stronger’ deal after getting major nuclear and economic concessions in exchange for a shorter and weaker arrangement,” states Mark Dubowitz, the president of the FDD. It’s an illusion, this. Iranian authorities are more adept at using leverage and power than President Biden and his associates. The worst bargain of all is the new “less for more” agreement.

Conclusion

In conclusion, Without a formal agreement or public acknowledgement, the administration may be trying to avoid congressional approval by giving Iran billions of cash in exchange for a temporary halt to further enrichment. Iran will continue to build nuclear weapons if it is paid to wait patiently on the nuclear threshold, but doing so will encourage assaults on Americans, Israelis, Ukrainians, and Iranians.

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