Iran’s central bank chief on Monday announced an agreement has been reached with Iraqi officials to unlock Iranian funds frozen in Iraqi banks as part of United States sanctions to buy humanitarian goods.
The announcement follows in the wake of Washington’s decision last week to blacklist Iran’s entire financial sector – a move critics contend will further hamper Tehran’s ability to buy vital food and medicines as it battles the worst COVID-19 crisis in the Middle East.
CBI governor Abdolnasser Hemmati led an Iranian banking and business delegation to Baghdad on Monday and met with the Iraqi central bank chief, finance minister and prime minister.
“During these negotiations, especially in trilateral talks with the heads of the central bank and the Trade Bank of Iraq, we reached good agreements to free [Iranian] central bank funds and use them to import essential goods to our country,” Hemmati wrote in Instagram, his preferred social media platform.
The bilateral agreement comes weeks after Iraqi Foreign Minister Fuad Hussein completed a two-day diplomatic trip to Tehran to boost political and economic ties and met with top Iranian officials, including President Hassan Rouhani.
This summer, Iran-Iraq Chamber of Commerce member Hamid Hosseini estimated up to $5bn in Iranian funds are frozen in Iraq’s banks as a result of United States sanctions targeting Iran’s economy.
The frozen funds have primarily come from Iran’s exports of electricity and natural gas to its neighbour.
Iran’s economy has been hit with a relentless barrage of economic sanctions by Washington after US President Donald Trump unilaterally withdrew from a nuclear deal signed between Iran and world powers.
After the US imposed sanctions on exports of Iranian energy in November 2018, Washington has extended 45-day or 90-day waivers that allow Iraq to import Iranian energy and natural gas.
The US State Department has said on multiple occasions Washington continues to work with Iraq to end its dependence on Iranian natural gas and increase its energy independence.
On Monday, Hemmati said Iraqi Prime Minister Mustafa Al-Kadhimi welcomed the agreement and will monitor its implementation on a weekly basis.
“Within the framework of this agreement, the Islamic Republic plans to withdraw from these financial resources based on its needs,” Hemmati wrote.
The news comes days after the US imposed a fresh round of sanctions on 18 Iranian banks, effectively blacklisting the entire Iranian financial sector.
The move raised concerns that imports of medicine and food to Iran could further be affected in the country battling the worst coronavirus outbreak in the Middle East since some of the sanctioned banks specifically facilitated humanitarian trade transactions.
Following the new sanctions, the Iranian national currency hit a new all-time low open-market rate of 310,000 rials per $1 on Sunday.
Iran recorded its highest single-day coronavirus death toll of 272 and the highest single-day infections rate of 4,206 on Monday. Almost 29,000 Iranians have lost their lives to the disease.
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