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Report: Iraq Helping Iran To Skirt Sanctions

A U.S. newspaper reports that Iraq has been helping Iran skirt economic sanctions.

“The New York Times” said on August 18 that Iraq has been using oil-smuggling operations and a network of financial institutions that are providing Tehran with a flow of dollars.

Citing current and former American and Iraqi officials along with banking and oil experts, the report said Iraqi government officials were “turning a blind eye to the large financial flows, smuggling, and other trade with Iran.”

In some cases, it added, other officials in Baghdad were directly profiting from the activities, including some close to Prime Minister Nuri al-Maliki.

The United States acknowledged the problem last month when it barred an Iraqi bank, the Elaf Islamic Bank, from any dealings with the American banking system.

At the time, President Barack Obama said the bank had “facilitated transactions worth millions of dollars on behalf of Iranian banks that are subject to sanctions for their links to Iran’s illicit proliferation activities.”

And yet “The New York Times” quoted Iraqi banking experts as saying last week that the bank was “still allowed to participate in the Iraq Central Bank’s daily auction” at which commercial banks can sell Iraqi dinars and buy dollars.

Through these auctions, Iran is able to bolster its reserve of dollars that are used to stabilize its exchange rates and pay for imports.

The U.S. newspaper also said Iranian organizations apparently had gained control over at least four Iraqi commercial banks.

This would give Iran direct access to the international financial system, from which they are barred by the economic sanctions imposed because of its nuclear program.

The paper also said large-scale smuggling of oil and oil products was increasing, with Baghdad doing little to stop the "highly organized" effort.

The report said Iraqi fuel oil obtained at “extremely low prices” through government subsidies is being smuggled to Iran through Kurdistan.

Some of the fuel is then smuggled once again to Afghanistan to be sold at a significant profit.

And “The New York Times” quoted American and Iraqi oil experts as saying they believe that some Iranian oil was shipped to Iraqi ports for sale.

Iraqi government spokesman Ali al-Dabbagh insisted that Iraq was "not intending to break any rules." However, he added: "We also have good relations with Iran that we do not want to break."

According to the report, trade between Iran and Iraq has rapidly increased since the 2003 U.S.-led invasion, reaching an estimated $11 billion a year.

Based on reporting by "The New York Times," Reuters, and AFP