The Central Bank of Iraq officially canceled the operating license of Bank Melli Iran due to international sanctions and the bank’s limited operations inside Iraq (Al Jazeera)

The Central Bank of Iraq has officially canceled the operating license of Bank Melli Iran - the largest Iranian bank operating in Iraq - due to international sanctions and the bank's limited operations inside Iraq, according to a document obtained by Reuters and verified by two bank officials.

The document, dated January 31, said: “In light of the losses incurred by your branch in Iraq, its limited activities, its inability to implement or expand banking activities, and its inclusion in the international sanctions list, it was decided to cancel your license.”

Bank Melli Iran did not respond until Thursday to a Reuters request for comment on what was stated in the document.

The decision to cancel the license stems from the sanctions imposed by the US Treasury in 2018 on Bank Melli Iran, on the grounds of its involvement in distributing funds to Iraqi Shiite armed groups through the Revolutionary Guard. The document indicates that the bank's operations in Iraq were part of this alleged scheme.

Iraq, despite being a rare ally of both Washington and Tehran, relies heavily on maintaining access to its reserves of more than $100 billion located in the United States.

Baghdad is counting on maintaining a good faith relationship with Washington to ensure the continued flow of oil revenues and financial transactions.

Iraq relies heavily on maintaining access to its reserves of more than $100 billion located in the United States (Al Jazeera)

Iraq's recent actions further indicate its alignment with American interests.

The central bank prevented 8 local commercial banks from engaging in US dollar transactions, with the aim of combating fraud, money laundering and other illegal uses of the currency, a step welcomed by the US Treasury Department.

This comes after a similar campaign in July 2023, when Baghdad prevented 14 banks from conducting dollar transactions, in response to a request from Washington as part of an attempt to limit the smuggling of dollars to Iran through the Iraqi banking system, as Washington described it.

The cancellation of Bank Melli Iran's license adds to the ongoing complexities of geopolitical and financial relations in the region, as Iraq navigates a delicate balance between US interests and its relationship with Iran.

Source: Reuters