2026-02-06T07:39:11+00:00
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Shafaq News
The Iraqi Central Bank’s decision to process US dollar
transfers owed to oil-sector contractors by converting them into Iraqi dinars
has sparked widespread debate in economic circles over the potential
consequences for companies operating in the country’s oil industry,
particularly regarding foreign obligations and operating costs.
Economic specialists interviewed by Shafaq News believe the
continued application of this mechanism could impose additional financial
burdens on companies that conduct their transactions in dollars, especially
amid exchange-rate fluctuations and the requirements of the oil market. Some
warn that similar conditions have previously led to company bankruptcies due to
disparities between official and parallel exchange rates.
In a post on Facebook, economist Nabil Al-Marsoumi said that
more than 200 Iraqi companies contracted with oil licensing firms, employing
over 50,000 Iraqi workers, are facing the risk of significant financial losses
and layoffs, adding that the Central Bank’s directive to convert dollar
transfers into dinars at the official rate threatens these companies, as their
contracts and expenses are denominated in dollars, while losses stem from the
wide gap between the official and parallel exchange rates.
Mahmoud Hassan, a representative of an oil company who spoke
to our agency during a demonstration organized by several Iraqi subcontractors
working with a global oil firm, pointed out that Iraqi oil companies have been
facing an ongoing crisis for more than a year without reaching solutions.
Hassan said companies employing more than 40,000 Iraqi
workers have come under severe financial pressure after the state began
settling their dues at the official rate of 131,000 dinars per 100 dollars,
while the parallel market rate stands at around 155,000 dinars. “This causes
direct losses for companies.”
He criticized the authorities for pushing companies to scale
back operations instead of supporting them, warning that the continuation of
this situation would force firms to lay off workers and could lead to a
complete shutdown. “Most companies contracted with international oil firms are
Iraqi, and many are already unable to pay workers’ salaries,” he added.
Hassan called on the Central Bank to intervene urgently and
find a solution that takes into account the nature of these companies’
operations and obligations, cautioning that the continuation of the crisis
would negatively affect the oil sector and the labor market.
Iraq’s oil sector relies on numerous secondary companies
that vary from project to project and carry out services, supplies,
maintenance, construction, and transport under contracts with oil companies or
international firms linked to oil agreements.
From a legal perspective, economist Hamza Al-Jawahiri said
that as long as contracts stipulate payment in dollars, payments must be made
in that currency. He said settling dues in any other currency constitutes a
violation of contractual terms, and that affected companies have the right to
file complaints with competent courts, as “contracts are binding on the
contracting parties.”
Energy expert Ahmed Sabah said the Central Bank’s policy
could lead to the gradual exclusion of some foreign companies, in favor of
local firms or those willing to deal in dinars. He explained that many Western
and foreign companies rely on external supply chains that require dollar
payments to secure equipment and services.
Sabah added that the measure is not sustainable in the long
term, particularly given that Iraq’s current government is operating in a
caretaker capacity, limiting its ability to cement strategic decisions with
long term implications for the oil sector, suggesting that major foreign
companies may refrain from expanding or entering new contracts if the policy
continues.
The decision, according to him, could be temporary and
subject to change in the coming period, especially if negative effects emerge
on the investment environment or the pace of work in oil fields. “The measure
does not represent a political reaction as much as it is a transitional regulatory
step.”
Read more: Dinar slides: Why Iraq’s oil billions aren’t buying currency stability
The economists warned that the loss or collapse of secondary
oil companies contracted with international and local oil firms would disrupt
operational activities in oil fields, particularly maintenance, logistics, and
supply operations. They cautioned that this could negatively affect production
stability and lead to the loss of tens of thousands of jobs, given these
companies’ heavy reliance on Iraqi labor.
Within the Central Bank’s broader effort to curb the
parallel dollar market, economists say the burden of these measures has fallen
unevenly across sectors.
Economist Dhargham Mohammed Ali said efforts to prevent the
emergence of a parallel dollar market have driven the Central Bank to adopt
several measures aimed at strengthening confidence in the dinar, but argued
that these steps have not been fair in light of the continued gap between the
official and parallel exchange rates.
He also called on the Central Bank to reconsider its
mandatory currency conversion policy, citing the losses incurred by market
participants and the loss of a legitimate channel for injecting dollars into
the market away from illegal currency trading. “There is a need either to
convert funds at a realistic and fair rate or to establish a different
mechanism for dealing with foreign companies.”
Written and edited by Shafaq News Staff.
