KTFA Members “Auctions or No Auctions?” and more 1-5-2024
KTFA:
Kimberly: Imo question so confused have the cbi auctions stopped? Or is the cbi running on a different system? Not understanding what is going on
Harlequin3: IMO- Yes, the auctions have stopped. There is a currency window (the auctions) that was started in 2003. That window is closed. In those auctions the CBI directly sold dollars for dinars to the local banks INSIDE Iraq only -- basically, they traded money back and forth to each other, and that is how the CBI controlled the rate (what is called a programmed rate.)
The ForEx we watch only reflects those internal auctions because the dinar is not internationally tradable. This is what makes the ForEx curve look like castle walls, up, sideways, down, up, sideways, down, instead of a floating line like a heartbeat.
Harlequin3 cont……..The problem is, this is how the Iranian-backed banks would get USD and launder it through their fronts (money exchangers on the street) and it would get funneled into Iran. These auctions were supposed to only be a temporary thing for a couple years, but the crooks enjoyed skimming and laundering the dollars.
In 2023, America said enough's enough. On Dec 30 the official announcement came to stop these currency auctions, on Dec 31 the final auction stopped. Now in Jan 2024, these metamorphosized (Frank's term) from out and out cash sales -- here's a dollar on the table for sale for real IQD on the table -- and switched to mostly an electronic platform (that's Saleh's 95% thing)
On Jan 1, the auctions stopped and became foreign reinforcements -- the CBI has nothing to do with this other than monitor and approve the transactions (with the UST, Ernst & Young, and K2 auditing the transaction BEFORE it happens, and ensures it goes where it's supposed to go -- not Iran -- and when it arrives.)
The CBI is NOT selling money to the banks anymore -- the banks MUST go get their money from OTHER banks outside the country (currency swaps, which is the essence of ForEx.)
So Bank A in Iraq is connected to Bank B in England, let's say, and they need foreign currency to cover their deposits, they request XYZ euros from Bank B -- for XYZ dinar at 1310 -- the money is ELECTRONICALLY wired back and forth.
There is a basket of currencies the banks can choose from: Euros, Yuan, Dirhams, Rubles, Jordanian Dinar, etc., etc. All the CBI is doing is watching this now, making sure it's legit.
On Jan 2, notice 7 banks in Iraq said, hey we need foreign currency! And 283m dinars' worth of that foreign currency electronically changed hands. No auction. This is how all banks all over the world operate. International standards.
It's audited on both ends, the request, and the completion. Today's exchange, had 279m dinar in the exact same fashion -- EXCEPT USD ARE allowed to be purchased (not in auction from CBI but from their international counterparts) from 5 (I think it's upped to 7 now) banks currently -- this dollar cash is permitted in Iraq for 3 purposes only: travelers request USD because they are traveling to the USA. They can't physically have the dollars until they've gone through airport security with their ticket, and they pick it up as they board the plane.
Second, the GOI IS allowed to use dollars for financing government approved projects -- audited by E&Y. (Building a bridge with an American company that requires American dollars, something like that.)
Or third, major medical procedures for citizens that require dollars -- that money is audited as it goes to the hospital for the procedure only.
Those are the only three legal uses for the dollar in Iraq. (Parliament wants a fourth for buying cars, so far Sudani says no, because that would be easy to launder.)
This is effectively drying up dollars on the streets -- Parliament (who skims it) says, whoa, that will raise the demand for the dollar in the black market and the exchange rate will skyrocket -- Saleh/Alaq say no, this is a temporary inflationary bubble that is NOT real -- there IS no black market, you are pirates operating illegally with illegal currency -- there is only ONE currency in Iraq, the dinar, and it has an official rate of 1320 -- anything other than this is against the law.
Saleh says "this bubble" will burst -- which is why we're hoping to see a new rate by then, one higher than the dollar -- because then the citizens won't be looking for dollars illegally -- they'll have strong local national currency.
Without the auctions -- there is NOTHING manipulating and propping up the 1320 rate -- so.... what are they going to do? Raise the value.
Eventually, the dinar will float in this basket, and ForEx will look like a heartbeat. But all that goes to say the auctions HAVE stopped. What you are seeing is "foreign currency reinforcements" not an auction -- the CBI has NOTHING to do with this money, it's between the two correspondent banks, and CBI is only auditing the transaction.
************
Clare: Economist: New steps by the Central Bank regarding dollar transactions
1/5/2025
Information / Baghdad..
Economic expert Safwan Qusay revealed today, Sunday, that there are new steps by the Central Bank to enhance transparency and global openness.
Qusay said in a statement to Al-Maalouma Agency that “the Central Bank of Iraq and the US Federal Reserve are moving towards authorizing Iraqi banks to contract with international auditing companies, instead of relying on the dollar selling platform alone, with the aim of auditing credits and transfers before implementing them.”
He explained that "this measure is in the interest of the Central Bank, as it contributes to avoiding the risks of money laundering cases and international sanctions," noting that "this step is a turning point that contributes to drawing a clear map for the work of Iraqi banks on the global stage, as they will deal with international correspondents and financial guarantees in addition to instant transfers, which enhances their position in global markets.”
He pointed out that "it is possible to rehabilitate banks facing current restrictions, which will lead to greater stability in the exchange rate," indicating that "the Central Bank attaches special importance in the next stage to increasing foreign currency reserves, which contributes to facilitating trade operations and supporting economic activity.” LINK
************
Clare: Al-Sudani: The Development Road Project will enhance Iraq's power in the region
1/5/2025 Baghdad
Prime Minister Mohammed Shia al-Sudani confirmed today, Sunday, that the development road project will enhance Iraq's strength in the region, politically and economically.
During his reception of the Director of the Iraqi Institute for Dialogue, Abbas Radhi Al-Amiri, according to a statement from his office received by "Al-Eqtisad News", Al-Sudani was briefed on the work of the organizing committee for the Seventh Baghdad International Dialogue, whose activities will start on February 22-23, 2025 under the slogan "The Path to Iraqi Development... Alliance of Interests and Geopolitical Stakes", noting that choosing this topic falls within the great Iraqi interest in the project, which gives the country a pivotal role in the regional system as an important point of communication between the East and the West.
According to the statement, Al-Sudani expressed his "sponsorship of this annual international gathering hosted by the capital, Baghdad, which hosts an elite group of the most important decision-makers in the region and the world." LINK
Clare: Retrospectively.. Details of an agreement between Baghdad and Erbil to resume the region’s oil exports revealed
1/4/2025 Special
The Parliamentary Oil and Energy Committee revealed, on Saturday, the details of an agreement between Baghdad and Erbil to resume exporting oil extracted from the fields of the Kurdistan Region of Iraq.
Committee member Nahro Mahmoud said in an interview with Al-Rabia, "There was an agreement between the government delegation in the federal government and the Kurdistan Regional Government of Iraq," indicating that "the main dispute was over the cost of extracting and transporting the oil produced in the region and then exporting it."
He added, "The agreement stipulates amending the three-year budget law and allocating $16 as a temporary cost until one of the international consulting companies in this field is hired and given a period of 60 days." LINK
************
Clare: Al-Sudani receives a "special" message from Trump: Syria, Iran and the factions
1/4/2025
An informed political source reported on Saturday that the Iraqi Prime Minister received a message from US President-elect Donald Trump.
The source told Shafaq News Agency that Al-Sudani received a message from Donald Trump through a special envoy on an unannounced visit, which included several axes.
The source pointed out that the most prominent axes are the necessity of containing and controlling weapons outside the framework of the state, stopping the activity of factions linked to Iran, in addition to Iraq not interfering in the Syrian file and supporting the formation of the new Syrian government.
Meanwhile, a government source told Shafaq News Agency that Iraq is working diligently to establish security in the region, and that the Prime Minister will present Iraq's vision in this regard during a visit to Iran.
On December 30, an informed source revealed that Prime Minister Mohammed Shia al-Sudani will begin a visit to Iran at the end of next week to discuss developments in the region.
The source told Shafaq News Agency that Al-Sudani will discuss several files with Iranian leaders, most notably the recent developments in Syria.
Al-Sudani had made several visits to countries in the region after the fall of Bashar al-Assad's regime, including Jordan and Saudi Arabia, where he discussed security issues with the leaders of these countries. Iraq also participated in the Aqaba Conference held in Jordan, with the participation of several countries, including the United States.
Iranian President Masoud Pezeshkian visited Iraq on September 11, and made a three-day tour that included Baghdad, Erbil, Sulaymaniyah, Najaf, Karbala and Basra.
On May 22, Al-Sudani also visited Tehran to participate in the funeral of Iranian President Ebrahim Raisi, who was killed in a plane crash. LINK