Iran is exerting considerable pressure on the Iraqi government to compel it not to abide by the US sanctions that have been imposed on Tehran in order for it to change its policies in the Middle East and abandon its nuclear program. These pressures include using the Iraqi dinar and Iranian rial in the trade exchange between the two countries.

Iraq serves as Iran’s economic lifeline, and Iran has great influence in the political and economic decision-making process. In addition, it uses the Iraqi territory to achieve its interests in the Arab region by supporting fighters loyal to Bashar al-Assad’s regime in Syria. This comes despite reservations expressed by some Shiites who recently set the Iranian Consulate ablaze in the city of Basra. During demonstrations against the rampant financial and administrative corruption, protesters chanted slogans calling on Iran to stop its interference in Iraqi affairs.

The Central Bank of Iran is struggling to reach an agreement with Iraq on the use of the dinar or the Iranian rial for trade with Iraq, but Iraq needs the approval of the United States, which is still determined to allow Iraq to only import natural gas from Iran for electricity supply for only a short time.

A source in the Central Bank of Iraq told Al-Monitor on condition of anonymity, “An Iraqi delegation that visited the United States in December and that included executives from the Central Bank of Iraq and several ministries such as the Ministries of Oil and Electricity discussed the exclusion of Iraq from the US sanctions on Iran.”