President Donald Trump is angered by the Iraqi parliament voting on January 5 to oust all US forces following Washington’s assassination of Iran’s General Qassem Soleimani and Iraq’s Abu Mahdi al-Muhandis.
Trump has said if US troops were asked to leave, he would charge the Iraqis “sanctions like they’ve never seen before.” On Friday, he suggested blocking some $35 billion of Iraqi money “right now sitting in an account” in the United States.
Agence France-Presse quoted two unnamed Iraqi officials as saying that Washington had delivered an extraordinary verbal message directly to the office of Prime Minister Adel Abdul-Mahdi.
The office “got a call threatening that if US troops are kicked out, ‘we’ — the US — will block your account at the Federal Reserve Bank in New York,” one official said.
Iraq is the second largest oil producer of OPEC and its oil revenues –which are paid in dollars into the Fed account daily– fund 90 percent of the national budget.
“We’re an oil-producing country. Those accounts are in dollars. Cutting off access means totally turning off the tap,” the first Iraqi official said.
The second official said, “It would mean collapse for Iraq.” He said the government would not be able to carry out daily functions or pay salaries, adding that such a move would prompt the Iraqi currency to fall in value.
The Central Bank of Iraq’s account at the Fed was established in 2003 following the US invasion that toppled ex-dictator Saddam Hussein. According to Iraqi officials the balance now is sitting at about $35 billion.
Trump said Friday he had told Abdul-Mahdi that Iraq “should pay back the United States for its investments in the country over the past several years or the American military will stay there,” Fox News reported.
“If we leave … you have to pay us for the money we put in,” the US president said.
Asked how he planned to collect money from Iraq, Trump said: “Well, we have a lot of their money right now. We have a lot of their money. We have $35 billion of their money right now sitting in an account.
A third top Iraqi official acknowledged that Washington was mulling “restricting” cash access to “about a third of what they would usually send.”
“You can imagine why, if troops were expelled, banks might be nervous about sending lots of… cash to Baghdad,” the official said.
The US threat comes even as the Federal Reserve Bank is supposed to be independent of foreign policy.
“The attempt to politicize dollar shipments has the Bank worried because it affects its prestige and integrity in dealing with clients,” the State Department official said, adding “Trump is obviously willing to politicize everything.”
According to AFP, the measure has been considered by Washington for months even before the vote.
A senior US diplomat at the Baghdad embassy told AFP in July that the US was looking at “limiting the cash that comes into Iraq.”
“That would be the nuclear option,” the diplomat added back then.
US to ‘lose Iraq’
Iraqi officials said the US threat to deny access to oil revenues had been met with shock, outrage and near-disbelief.
“The PM was pissed and insulted,” one official said, while another warned that the US would then irreversibly “lose Iraq.”
“They’d push us towards Russia, China, Iran. We’d have to form a separate economy with those countries,” the official added.
The US, backed by the UK, invaded Iraq in 2003 under the pretext that the former regime of Saddam Hussein possessed weapons of mass destruction. No such weapons were ever found in the country.
The invasion, however, plunged Iraq into chaos and led to the rise of terrorist groups across the region.
About 5,200 American forces are currently deployed across Iraq.