US threatens Iraq with crippling sanctions if it demands that US troops withdraw

Iraqi officials warn that the country would face almost immediate economic collapse should US President Trump impose sanctions on Iraq and freeze oil revenues because Iraq demanded US troops leave.

In early January the Iraqi parliament voted 170 to 0 to expel all foreign troops.

Trump's response

Trump said that Iraq could be hit with massive sanctions and also the freezing of Iraq's New York Federal Reserve bank account where all Iraq's oil revenue is deposited.

Joe Kaeser, the chief executive of the German firm Siemens noted: "The US threat of sanctions against Iraq following the recent escalation in tensions between Washington and Tehran "was not helpful", said Siemens chief executive Joe Kaeser, who affirmed the company's commitment towards power rehabilitation in the war-torn country."We need to deal with what we need to deal with. I think putting sanctions on something just because you don't get your will is maybe also not always helpful," he told The National in an interview in Abu Dhabi."

Siemens has a $15 billion electricity development contract with Iraq. There is a risk for the company along with all others working in Iraq that US sanctions and freezing of revenues could leave Iraq with no money to pay contractors working for the government.

Oil revenue is almost all of Iraq's budget

Oil revenues are 90 percent of the Iraqi government so freezing these funds would be even more disastrous for the Iraqi economy than even severe sanctions.

A recent article says of the account: " That account holds substantially all oil trade revenue, and that is a substantial part of Iraq’s government’s entire revenue. The US is now threatening to block Iraqi access to this account, and with it virtually their entire treasury, if they expel US troops. The US froze this account very briefly in 2015 and it did major damage to the Iraqi economy, causing a panic. This freeze is a threat of a more permanent type, and would all but bankrupt Iraq overnight."

Iraqi bank officials said they doubted that the US would freeze the US Federal Reserve account as it would result in a permanent break in US-Iraqi relations. However, the US has done it before and Trump seems anxious to ensure that the US military stays in Iraq in spite of his presidential campaign promise that the would withdraw US troops from foreign wars.. But now he is threatening economic ruin on Iraq that is requesting US troops to withdraw. Trump is not even willing to discuss the issue with Iraq.

The US can hardly claim that it respected the sovereignty or Iraq when it refuses to even discuss with the Iraqis a mechanism to carry out the Iraqi parliament demand that their troops withdraw from Iraq. Earlier, a letter indicating that the US would withdraw from Iraq was said to be a draft only that was unsigned even though it was received by Iraqi authorities with a signature.

Previously published in the Digital Journal