by HUSSEIN ASKARI
Washington has maintained control over Iraq’s oil revenues since its illegal 2003 invasion – a financial and economic subjugation that undermines Iraqi sovereignty and denies it access to its own national treasure.
In July, the Iraqi Central Bank halted all foreign transactions in Chinese Yuan, succumbing to intense pressure from the US Federal Reserve to do so. The shutdown followed a brief period during which Baghdad had allowed merchants to trade in Yuan, an initiative intended to mitigate excessive US restrictions on Iraq’s access to US dollars.
While this Yuan-based trade excluded Iraq’s oil exports, which remained in US dollars, Washington viewed it as a threat to its financial dominance over the Persian Gulf state. But how has the US managed to exert such total control over Iraqi financial policies?
The answer lies in 2003, with mechanisms established following the illegal US-led invasion of Iraq.
A legacy of ‘Operation Iraqi Freedom’
Since the signing of Executive Order 13303 (EO13303) by President George W Bush on 22 May 2003, all revenues from Iraq’s oil sales have been funneled directly into an account at the Federal Reserve Bank of New York.
EO13303, titled “Protection of the Development Fund for Iraq and Other Property in Which Iraq Has an Interest,” has been renewed annually by every US president, including Joe Biden in 2024. This executive order essentially places control over Iraq’s oil revenues under the discretion of the US President, leaving Baghdad with limited control over its resources and earnings.
The roots of Iraq’s financial dependence on the US stretch back to the 1990s. Following Iraq’s invasion of Kuwait in 1990, UN Security Council Resolution 661 imposed severe economic sanctions to isolate Iraq from international trade. These sanctions, exacerbated by former president Saddam Hussein’s refusal to comply with withdrawal demands, crippled the Iraqi economy.
Control over Iraq’s finances
UNSC Resolution 687, passed in 1991 after the Persian Gulf War, extended these sanctions while introducing the controversial “Oil for Food” program. Although it allowed Iraq to sell oil in exchange for humanitarian goods like food and medicine, the sanctions resulted in immense human suffering, with over one million Iraqis, half of them children, dying during this period. Then-US secretary of state Madeleine Albright infamously defended the sanctions in a 1996 interview, stating that the deaths were “worth the price.”
Following the invasion of Iraq, the US occupation of the country became a reality after the collapse of Saddam’s government. Faced with a fait accompli, the UN Security Council had to accept the new status quo.
According to International Humanitarian Law, occupation forces – in this case, the US and UK – become responsible for the well-being of the populations they occupy. So, UNSC Resolution 1483 was issued on 22 May 2003 to establish the US-led Coalition Provisional Authority (CPA) as Iraq’s administrator and create the Development Fund for Iraq (DFI) to manage Iraqi oil revenues.
Note that Resolution 1483 did not mention the US Federal Reserve as the depositary of Iraqi funds, nor did it assign a location for the DFI headquarters or account. In fact, the resolution specifically states directed that the DFI should “be held by the Central Bank of Iraq.” It was the CPA, led by Paul Bremer, that decided unilaterally to house the account at the Federal Reserve Bank of New York.
This decision allowed the US government to maintain tight control over Iraq’s oil revenues. From that point until today, the Iraqi Ministry of Finance has had to submit requests for funds to the US Treasury, which then approves or denies these requests based on its own criteria.
This monthly transfer of US dollars – which are literally flown into Baghdad in pallets of hard cash – determines Iraq and its 40-million-population’s ability to pay for basic needs like salaries, food, and medicine.
Blackmailing Iraq
Whenever Washington feels that Iraq is not compliant with US regional goals, these fund transfers can be delayed or reduced. In January 2020, for instance, after the Iraqi Parliament voted to expel US troops following the assassination of Iranian Quds Force General Qasem Soleimani and Iraqi Popular Mobilization Units (PMU) Deputy Commander Abu Mahdi al-Muhandis, the Trump administration threatened to freeze Iraq’s access to its oil revenues.
Today, Iraq’s financial situation remains dire. Despite having oil revenues piling up in the Federal Reserve Bank of New York – estimated today at around $120 billion – Iraq is burdened with a growing debt that matches this amount.
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