Bank Melli Iran allowed to resume Iraq operations

By bne Tehran bureau March 9, 2024

Bank Melli Iran (BMI) has been given the go-ahead to resume its operations in Iraq by the Central Bank of Iraq, as reported by IBENA on February 9. This decision comes after a temporary suspension of BMI's activities in the country a few weeks earlier.

In a letter addressed to BMI officials, the Iraqi central bank conveyed its decision, which was reached through mutual negotiations.

Back in January, the Iraqi central bank announced the suspension, saying that it was due to the due to the impact of American sanctions on BMI, the bank's challenges in expanding its business, significant losses incurred, and the limited scale of operations conducted by its branches.

Yahya Al Es’haq, the head of the Iran-Iraq Joint Chamber of Commerce, elaborated on the development, stating that BMI now faces no restrictions on its operations in Iraq. He noted that while Iranian banks have been less active in recent times due to sanctions and currency transaction restrictions, their increased participation could be beneficial for bilateral trade relations.

Al Es’haq pointed to the importance of creating opportunities for BMI and other Iranian banks to enhance their activities in Iraq, an initiative currently under discussion between the central banks of both countries. He also highlighted that the private sector plays a significant role in trade transactions between Iraq and Iran, facing no obstacles in clearing trade bills at present.

Hamid Hosseini, a businessman, attributed the suspension of BMI's branches in Iraq to pressure from US officials. He defended BMI and Parsian Bank, the two Iranian banks with branches in Iraq, stating they are not operating at a loss or engaging in illegal activities.

Hosseini welcomed the Central Bank of Iran's plans to utilise the offshore rial in transactions with Iraq, seeing it as a means for Iranian banks to establish a stronger presence in the Iraqi market. The Iranian central bank has announced that it is working on creating an offshore version of rial, to be used for trade settlements with Iraq and Afghanistan. No further details have been released about the project.

Bank Melli Iran had previously operated multiple branches across Iraqi cities for several years, including in key religious tourism destinations such as Najaf and Karbala, as well as in Baghdad and Basra.

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