NEW YORK, Jan 12 (APP):The United States has warned Iraq that if its troops — numbering 5,300 — are expelled, the US could cut off access to a key Iraqi bank account held at the Federal Reserve Bank of New York that holds billions in oil revenues, The Wall Street Journal reported Sunday, citing Iraqi officials.
The warning to Iraq is the latest in the fallout from the US missile strike on Iraqi soil last week that killed top Iranian general Qasem Soleimani, inflaming political tensions in the region, the newspaper said.
More than 200 central banks, governments and international official institutions hold accounts with the New York Federal Reserve Bank, thanks to the outsized role the US dollar plays in global financial transactions.
Experts say shutting off the spigot to Iraq could squeeze the country’s access to cash, gumming up its financial system and wreaking havoc on its economy.
The Bank provides these foreign account holders with a range of banking services to facilitate cross-border payments, manage dollar reserves, and access banking channels to help stabilize markets during times of acute financial stress.
Following the attack, the Iraqi parliament passed a non-binding resolution to oust the US military presence from the country, which earned backing from Prime Minister Adel Abdul-Mahdi.
President Donald Trump responded by threatening sanctions on Iraq if it follows through on the reprisals.
Amid Abdul-Mahdi’s support for the troop expulsion, US officials also reportedly warned the prime minister in a call on Wednesday of the potential fallout with the New York Federal Reserve Bank and ensuing economic damage, WSJ said.
Representatives for the Bank, as well as the State and Treasury departments, declined to comment to the WSJ, according to the report. Spokesmen for Iraq’s prime minister, central bank, and embassy in Washington did not respond to requests for comment, it said.
The move to freeze Iraq’s assets at the Federal Reserve Bank wouldn’t be unprecedented, it was pointed out.
The Federal Reserve has the power to cut off access to funds for countries facing sanctions or if it suspects the money could violate US law, the WSJ reported.
It did just that in 2015, halting Iraq’s access to its funds at the Federal Reserve Bank for several weeks amid suspicions the money was being funneled into the coffers of Iranian banks as well as ISIS.
It isn’t clear how much of Iraq’s money the Bank currently holds, but it had $3 billion in overnight deposits from the country’s central bank at the end of 2018, according to WSJ.