From the archive, originally posted by: [ spectre ]
Think We’re Losing Iraq? Take a Look at the Dinar
BY YOUSSEF IBRAHIM
January 19, 2007
War rages in Iraq. America is preparing to launch an offensive in
Baghdad, Iranians are infiltrating the country, and, according to the
United Nations, civilians in Iraq are dying at a rate of 100 people a
Yet the Iraqi currency is rising in value.
Tuesday, the rate of exchange had reached 1,308 dinars to the American
dollar – up from 1,470 last November. Money changers in Baghdad say
cannot keep up with the demand and that Iraqis who used to hang on to
their American dollars for dear life are rushing to exchange them.
The answers are as murky as anything in Iraq, and the actions of both
good and bad guys seem to be helping the dinar.
On the good guys’ side, the Iraqi Central Bank is getting its act
together after having built foreign currency and gold reserves of at
least $16 billion, up from a mere $5 billion in 2005. That is serious
enough to create a strong backbone for the local currency. On its Web
site, the central bank noted that it has increased its main interest
rate to 16% from 12% – a move that has boosted the dinar, too.
For its part, the American Army, or some units of it, is beginning to
pay contractors in “dinar checks” instead of dollars. That has the
double benefit of reviving the moribund banking system – you’ve got to
go to a bank to cash it – while boosting the local currency.
Bad guys are doing their bit too, interestingly.
Corruption is said to account for perhaps as much as 500,000 barrels
of daily oil production “disappearing,” which means stolen. Even when
disposed of at a discount, this stolen oil would fetch a minimum of
$20 million American dollars a day for those corrupt officials
siphoning it off. Experts are certain that not all of this leaves the
country, however. At least half the money ends up being “recycled”
into the Iraqi black economy to buy loyalties, services, arms,
protection, and villas with swimming pools. In the end, this money
creates jobs and demand for more dinars.
Ironically, both Iran and Syria, which are working hard to undermine
Iraq, are boosting the dinar too. By pumping millions of dollars to
support Shiites and Sunni insurgents, buy arms, and make bombs, they
are also ratcheting up demand for dinars, since the fighters, the
militias, and the secret cells all need to be paid in local currencies
instead of dollars so as to keep a lower profile.
The biggest spender in town, the American Army, seems to be
deliberately helping with the new pay-in-dinar policy, as noted by
Major Richard Santiago, commander of 3rd Finance Company, 3rd Soldier
Support Battalion, Division Support Brigade. “Issuing dinar check
payments improves the economic and financial stability of Iraq by
promoting the Iraqi banks while using their local currency. It also
decreases the cash requirements our finance offices need in order to
meet mission requirements,” Major Santiago told the defense-oriented
Web site GlobalSecurity.org in 2005.
Of course, the dinar has a long way to go against the dollar. In its
heyday in the 1980s, one dinar fetched almost three dollars compared
to the present – reverse – ratio of one dollar to more than 1,300
How long this is going to last is anyone’s guess.
It could be argued that, in a sinister way, everything terrible that
could have happened in Iraq has happened, so what else could sap
confidence in the dinar – short of an abrupt American withdrawal? A
good point indeed.
The same logic applies to oil, which has been falling in price like a
rock even though demand has not diminished. As with oil, the dinar was
pushed by psychological factors that attached a monetary premium
devaluing it. As Iraqis get used to the fear, the premium lifts.
Should a whole new batch of catastrophes hit the country, though, the
dinar may tumble again, as other experts firmly believe.
“It is a major train wreck waiting to happen,” co-director of the
Institute for Applied Economics and the Study of Business Enterprise
at Johns Hopkins University in Baltimore, Steve Hanke, told Fox News.
“Santiago, whose unit was formerly known as the 24th Finance
Battalion, said the company consists of a little more than 130
soldiers and is composed of six finance detachments geographically
dispersed throughout Iraq.
In addition to the Marne soldiers, Santiago said the company is
augmented by troops from three units outside the division, including
Detachment A, 10th Soldier Support Battalion, Fort Drum, N.Y.;
Detachment C, 177th Finance Battalion, 2nd Infantry Division in Korea;
and Detachment 3153, 83rd Troop Command, Florida Army National Guard.
“Our soldiers flawlessly maintained accurate accountability of more
than $122 million weekly while supporting contracting, developmental
funds for Iraq, Commander’s Emergency Response Program, paying agent
and cashier operations at nine remote locations with no loss of
funds,” said Santiago.
“During this deployment, our soldiers processed timely deployment
entitlements for more than 98 percent of the 3rd Infantry Division’s
soldiers and other supported units within 30 days after arrival into
theater,” said Hall.
Additionally, Santiago said, they provide basic check cashing
services, as well as casual pay for soldiers needing ready-available
Military customers are allowed to draw up to $350 of casual pay per
calendar month, said the native of Ocala, Fla. Once the customer’s
withdrawal history is verified and the casual pay is approved, the
clerk enters the pay request into the Deployable Dispersing System,
and the customer is on their way to the cashier’s cage.
The DDS is another first for the company. The system assists in
tracking customer transactions accurately. Working long hours, the
soldiers have successfully implemented the new system in all of their
remote locations, said Santiago.
Additionally, they simultaneously introduced the use of U.S. Treasury
Checks into the finance operations.
Continuing to streamline the automated pay process, Santiago said the
Treasury checks are very helpful for contractors. This optional form
of payment keeps them from having to carry around large sums of cash.
Santiago said they also plan to have an electronic fund transfer
system in place in the near future and hope to disperse Iraqi dinars
for local contractors before redeploying.”
FISHING IN TROUBLED WATERS:
Iranian Involvement in the Iraqi Civil War
VIDEO (Part 1, Part 2)
Wednesday, January 24, 2007
Speaker: Mounir Elkhamri
Middle East Military Analyst, Foreign Military Studies
On January 24, The Jamestown Foundation hosted Mounir Elkhamri, a
Middle East Military Analyst from the Foreign Military Studies Office
in Fort Leavenworth, Kansas. Having recently returned from an 18-month
tour in Iraq where he worked with a logistics brigade, a maneuver
battalion and a Special Forces ODA team and having native fluency in
Arabic, Elkhamri brought a unique and first-hand perspective to Iran’s
growing involvement in Iraq. His lecture summarized Iran’s
contribution to Iraq’s civil unrest. Tracing Tehran’s influence back
before the U.S.-led invasion, Elkhamri’s talk examined some key points
about the critical players in Iraq’s growing sectarian conflict and
elucidated Iran’s greater regional ambitions:
– Iran initiated military, political and social relations with various
tribes, groups and parties in Iraq prior to the U.S.-led invasion in
2003. Among these groups were the Badr Corps, the Patriotic Union of
Kurdistan and the Da’wa Party.
– After the U.S.-led invasion, Iran moved to strengthen its ability to
influence events in Iraq. It infiltrated the Ministries of Defense and
Interior and the Department of Immigration, moved Iraqis living in
Iran back to Iraq, and increased financial ties to Iraq through
various front companies.
– Tehran’s ultimate objective is to ensure that a post-Saddam Iraq is
friendly to the Islamic Republic by courting the Shia populations in
the oil-rich south and Baghdad and making inroads with the Kurdish
– If Tehran is able to secure control over the Shia in southern Iraq,
it will have influence over 20% of the world’s oil reserves.
– The re-introduction of the Sunnis into the Iraqi political process
and the sidelining of the Shia militias are important steps that the
U.S. can take to counter Iran’s regional ambitions and are more
realistic alternatives to military confrontation with Iran.
Mounir Elkhamri began with a brief historical backdrop of Iran’s role
in not only Iraq but also the greater region starting after the
Islamic Revolution in 1979. Under Grand Ayatollah Khomeini, the idea
of a Greater Iran was fostered. This area would encompass a “Shia
Crescent” stretching from Bahrain to the Arabian Peninsula and from
Lebanon to Iraq. Since then, Iran has done its best to advance
friendly political parties and create Shia-based groups in other Gulf
countries that were receptive to its goal. Elkhamri gave the examples
of Hezbollah in Lebanon, Hamas in Palestine and, more importantly, the
Da’wa party and the Supreme Council of the Islamic Revolution in Iraq.
The meetings between Kurdish political party leaders, such as Jalal
Talabani of the Patriotic Union of Kurdistan and Massoud Barzani of
the Kurdistan Democratic Party, were evidenced in recently de-
classified Iraqi intelligence documents found after the invasion.
Elkhamri emphasized how events after the U.S.-led invasion provided
key opportunities for Iran to increase its influence in Iraq. The de-
Baathification process sidelined Sunnis from the political process and
as a result allowed Iranian-backed politicians and groups to gain
sensitive positions in the new government, specifically in the
Ministries of Defense and the Interior and the Department of
Immigration. Elkhamri attached specific notice to the latter
governmental body because it was largely responsible for allowing
Iraqis living in Iran to become citizens and Iranians living in Iraq
to become naturalized. In addition, the departments permitted pro-
Iranian propagandists to flood the northern Kurdish and southern Shia
populated areas, manipulating the outcome of the elections. He claimed
that this led directly to the passing of the federalism referendum in
the Kurdish north as some individuals cast multiple votes in different
cities. Elkhamri presented two maps of Kurdistan–one prior to the
elections and one current–to display the enlarged size of the Kurdish
controlled areas. Such an increase in area of Kurd-controlled land
could only come from concentrated military, political and social
support, much of which came to pass through the actions of the
Ministries of Defense and Interior and Department of Immigration.
According to Elkhamri, a strong Kurdish north, let alone an
independent Kurdistan, under the federalism referendum is in the
interests of Tehran as it assures not only a friendly border state but
also a fragmented and weak Iraq.
Presently a very hot topic in the current civil war, the rise of Shia
militias is in part a response to the Sunni insurgency, but more
importantly a vehicle of Iranian influence. Elkhamri pointed to a
tactical refocusing of the armed Shia militias–they are now hiring
Iraqi and Iranian females to gather intelligence. This was evidenced
by the latest arrests of females who were found scouting U.S. and
Iraqi military posts while posing as homeless and carrying advanced
tracking technology, GPS instruments and other intelligence gathering
tools in and around Baghdad. Additionally, members of Moqdata al-
Sadr’s Mehdi Army, an Iranian-supported militia, were recently
arrested in Saudi Arabia during the period of the Hajj carrying books
that espoused a Sunni-Shia confrontation, an idea that Iran would
support as it destabilizes the region and provides them a chance to
gain control in the pursuant power vacuum. Iran’s meddling has spilled
over the Iraqi-Saudi border and into the Arabian Peninsula with the
recent phenomenon of the Mecca Brigade, a Shia militia stationed on
the border ready to enter and defend the Shia minority in the Kingdom.
Elkhamri concluded his lecture with several suggestions for the
continued U.S. effort in Iraq. In view of the fact that a civil
resolution in Iran is unlikely and military engagement with Iran is
undesirable, it is essential for the United States to be careful with
which parties it aligns itself in Iraq and in what manner it executes
its missions. For instance, Elkhamri highlighted the recent meetings
between leaders of the Da’wa party, Supreme Council for the Islamic
Revolution in Iraq, Kurdish parties and even several Sunni groups that
were aimed at creating a strategy to overcome the sectarian violence
by sidelining al-Sadr’s bloc. The danger of this development, however,
is that these groups may be using U.S. forces on the ground to achieve
their own political agenda, which in this case involves weakening al-
Sadr. This development may not necessarily be in the best interests of
the United States. Therefore, the careful, immediate elimination of
the armed Shia militias in Iraq will reduce Tehran’s power and its
tools of manipulation.
The Jamestown Foundation
1111 16th St. NW
Washington, DC 20036