A delegation from the Central Bank of Iraq has arrived in Washington to negotiate with US officials about lifting sanctions that were previously placed on several Iraqi banks, according to a source from the Arab nation's central financial institution, as reported by Sputnik on Friday.

Earlier this month, the head of the Central Bank, Ali Mohsen Al-Alaq, told Iraqi media that bank representatives would be meeting with the US Federal Reserve and Treasury Department in late August. The discussions are intended to address the unblocking of dollar transfers and the removal of sanctions on certain banks within Iraq.

"A delegation of the Central Bank of Iraq has been staying in the United States since Monday to meet with the US Federal Reserve and Treasury. The delegation will discuss several issues, primarily external dollar transfers from Iraq, support for the Iraqi banking system as well as ... the lifting of US sanctions imposed on some Iraqi banks," the source said.

In July 2023, the US imposed a ban on 14 Iraqi banks from conducting transactions in US dollars. This measure was reportedly taken to prevent the transfer of dollars from Iraq to Iran and other countries that are under US sanctions.

Read more: Iraqi airline fires back at OFAC over lack of evidence for sanctions

At the time, Iraqi Prime Minister Mohammed Shia Al-Sudani strongly criticized the US Treasury's decision to ban dollar transactions for certain Iraqi banks.

He argued that the US Treasury had no authority to impose such restrictions, as the affected banks were operating under permits issued by the Iraqi government in accordance with national law.

Al-Sudani said that these sanctions were impacting Iraq's financial stability and were seen as an overreach by the US authorities, infringing on Iraq's sovereignty and ability to manage its own financial affairs.

Targeting Iran?

The situation is partly owed to Iraq's closer relations with Iran, which has caused frustration on the part of the US. Relations between Iraq and Iran have improved significantly in recent years due to several key factors.

First, the two countries share multiple security agreements along their borders to counter terrorist activities and maintain stability in the region. These agreements have led to coordinated efforts to manage border security and combat terrorist organizations.

Second, Iraq has become an important economic partner for Iran. Iraq serves as a crucial market for Iranian goods, electricity, and gas exports. In 2023, it was estimated that Iranian exports to Iraq would exceed $9 billion.

Third, Iran has maintained a strong influence in Iraq's political and security situation, particularly through its alliances with various Resistance groups that played a crucial role in fighting ISIS. 

Read more: Iraq, Iran discuss enhancement of 2023 Security Pact