BAGHDAD/LONDON: Iraq’s central bank has ordered private banks to close branches in the Kurdistan region within a week to avoid a ban on dollar sales, Iraqi banking sources said Thursday.
Kurdistan has meanwhile made its full monthly payment of around $100 million to oil producers working on its territory, despite a big drop in oil exports amid a political crisis roiling the semiautonomous region.
The central bank’s deadline expires on Nov. 14 and all banks must report back with confirmation they have closed their branches to avoid penalties, the sources said.
The new measures are part of financial restrictions imposed by Baghdad in retaliation for a Kurdish referendum held on Sept. 25, in which the region voted overwhelmingly for independence.
Iraqi banking sources said the new measures are intended to control the flow of hard currency into the Kurdish region.
“The central bank seeks to reorganize relations with the Kurdistan regional banking industry,” said a government financial adviser who is close to central bank policy. Central bank sources said a decision in October to stop selling dollars to four leading Kurdish banks was still effective.
Separately, a source close to the Kurdistan Regional Government told Reuters that full monthly payments had been made to oil producers such as Genel, DNO, Gulf Keystone, Gazprom and Taqa. The news will be a relief to producers, who had been used to years of non-payments by Kurdistan until the region ramped up exports last year and promised to switch to timely payments on the back of large loans it obtained from oil buyers.
Kurdistan has presold a large part of its future oil output to trading houses such as Vitol, Glencore, Petraco and Trafigura as well as Russian state oil major Rosneft in exchange for $4 billion in loans guaranteed by exports. The export-backed loans allowed the region to cover some old debts and avoid a budget crisis.