In order to improve the structure of foreign exchange reserves and alleviate the shortage of US dollars, the Central Bank of Iraq stated on February 22 that it will settle import trade with China in RMB.
At the same time, Iraq has implemented restrictive measures on the import of some commodities. Starting from June, Iraq will impose additional tariffs ranging from 15% to 200% on various imported commodities such as cigarettes and dyes.
Iraq imposes additional tariffs on various goods
Recently, according to the Economic and Commercial Office of the Chinese Embassy in the Republic of Iraq, on February 20, the Iraqi Cabinet Secretariat approved a list of additional import taxes aimed at protecting domestic manufacturers:
1. Impose an additional tariff of 65% on “epoxy resins and modern dyes” imported into Iraq from all countries and manufacturers for a period of four years, without relief, and monitor the local market while imposing additional tariffs.
2. Impose an additional tariff of 65% on laundry detergent used for washing colored, black and dark-colored clothes imported into Iraq from all countries and manufacturers for a period of four years, without relief, and monitor the local market during this period.
3. Impose an additional tariff of 65% on floor and laundry fresheners, fabric softeners, liquids and gels imported into Iraq from all countries and manufacturers for a period of four years, without relief, and monitor the local market during this period.
4. Impose an additional tariff of 65% on floor cleaners and dishwashing liquids imported into Iraq from all countries and manufacturers for a period of four years, without relief, and monitor the local market during this period.
5. Impose an additional tariff of 100% on cigarettes imported into Iraq from all countries and manufacturers for four years, without relief, and monitor the local market during this period.
6. Imposition of an additional 100% tariff on corrugated or plain cardboard in the form of boxes, trays, printed or unprinted dividers imported into Iraq from all countries and manufacturers for a period of four years, without relief, and to monitor the local market .
7. Impose an additional tariff of 200% on alcoholic beverages imported into Iraq from all countries and manufacturers for a period of four years, without relief, and monitor the local market during this period.
8. Impose an additional tariff of 20% on plastic pipes and accessories PPR & PPRC imported into Iraq from all countries and manufacturers for a period of four years without exemption and to monitor the local market.
This decision will come into effect 120 days from the date of issuance.
The Cabinet Secretariat separately mentioned the imposition of an additional tariff of 15% on galvanized and non-galvanized metal pipes imported into Iraq from all countries and manufacturers for a period of four years without reduction and monitoring of the local market.
It is worth noting that on March 4, the Iraqi Customs Administration ordered all customs centers to ban the entry of all types of alcoholic beverages. The new decree imposes fines of 10 million to 25 million dinars (approximately $7,700 to $19,000) for violations.
Iraq is stuck in its money bag
It is understood that Iraq is the second largest oil producer in OPEC, and crude oil export revenue accounts for more than 90% of the country’s fiscal revenue.
Like many countries, the Central Bank of Iraq opened an account at the New York Fed to store foreign exchange earnings such as oil exports, with an amount of up to 103 billion U.S. dollars. The country withdraws a large amount of U.S. dollar cash from the account every month.
But in November last year, the New York Fed began to implement stricter controls on international U.S. dollar transactions at Iraqi commercial banks in order to curb money laundering and illegal transfers of U.S. dollars to Iran and other Middle Eastern countries under severe sanctions.
Since the procedures took effect, 80% or more of daily U.S. dollar wire transfers in Iraq have been blocked due to insufficient information about the funds’ destination or other errors, according to official data from U.S. and Iraqi officials and the Iraqi government.
Iraq, which was already in deep economic crisis, was “stuck in the money bag”, causing the country’s currency to continue to depreciate against the US dollar.
Iraq allows import of Chinese goods in RMB
“Stay away from the U.S. dollar, Iraq allows RMB trade with China.” The U.S.-based Middle East news website “Al-Monitor” reported on February 23 that the Iraqi central bank said it would settle import trade with China in RMB.
On February 22, the Central Bank of Iraq issued a statement stating that it would allow trade from China to be settled directly in RMB. Iraq has stipulated two options for preparing RMB transactions with China:
The first is to increase RMB reserves through the RMB accounts opened by the country’s banks in Chinese banks; the second is to increase the country’s bank’s U.S. dollar reserves through the Central Bank of Iraq’s accounts at JPMorgan Chase and Singapore’s DBS Bank for the exchange of RMB.
Information from the Ministry of Foreign Affairs shows that China is Iraq’s largest trading partner, and Iraq is China’s third largest trading partner among Arab countries. China is Iraq’s largest crude oil export destination, and Iraq is China’s third largest source of crude oil imports.
According to my country’s customs data, the bilateral trade volume between China and Iran exceeded US$53.7 billion in 2022, an increase of approximately 44% compared with the trade volume in 2021 (US$37.3 billion). In 2022, China will import approximately 55.487 million tons of crude oil from Iraq.
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