The Trump administration this week warned Iraq that it could lose access to its central bank account at the Federal Reserve Bank of New York if Baghdad expels American troops from the region, Iraqi officials told The Wall Street Journal.
The State Department’s warning follows the U.S. airstrike that killed Maj. Gen. Qasem Soleimani, Iran’s top military commander and the face of the Islamic Republic’s interventions across the Middle East.
The strike led to Iraq’s parliament voting to force out American troops — a move some officials argued would hurt Iraq — and a counterstrike by Iran on two bases housing U.S. troops in Iraq last week.
Shutting down Iraq’s account at the Federal Reserve Bank of New York could be detrimental to its financial system. The country puts its revenue from oil sales there, and takes out that money to pay government salaries and contracts.
The Fed held almost $3 billion in overnight deposits at the close of 2018, according to the most recent financial statement from the Central Bank of Iraq.
President Trump threatened to place economic sanctions on Iraq after parliament voted to request that Prime Minister Adel Abdul-Mahdi oust about 5,300 American troops. Those sanctions would also extend to Iran.
The White House could also end waivers that allow Iraq to buy Iranian gas to fuel generators that supply a large portion of the country’s power, placing another pressure on the prime minister over addressing U.S. troops without enduring economic and financial loss.
Mahdi has argued that forcing out American troops is the only way to avoid conflict in Iraq. He was warned about the central bank account in a call on Wednesday, an Iraqi official told The Journal.