The U.N. sanctions committee on Iraq is scheduled to meet on October 30th to consider Baghdad’s request that its customers under the oil-for-food program pay for their crude in Euros instead of dollars.
Iraq had decided at a cabinet meeting on September 14th to drop the use of the dollar in order to confront “daily American-Zionist aggression.”
In early October, Baghdad asked the U.N. to open a separate escrow account from the one at the Banque Nationale de Paris (BNP) in New York used for the deposits of its proceeds under the oil-for-food program that would be paid in Euros.
The account currently holds around $10 billion. Iraq announced that, from November 1st, all letters of credit for oil exports must be in Euros, but BNP cannot issue a new, standard Euro format for letters of credit without the permission of the U.N. The U.N. Treasury and the Office of the Legal Advisor are studying whether U.N. procedures would allow for such a move and whether the transfer from dollars to Euros would have a negative impact on the oil-for-food program, which provides aid to 22 million people in Iraq.
Since oil is traded internationally in dollars, Iraq would have to lower its prices in order to compensate for the transaction fees its customers would incur from the conversion.
Changing the escrow account into euros would also require transaction charges, as would converting payments to suppliers of humanitarian goods into other currencies.
Some diplomats question how the transaction costs would be paid and suggest that the move is the latest attempt by Baghdad to politicize the oil-for-food program.
The sanctions committee is to discuss the matter after the U.N. Treasury and the Office of the Legal Advisor make their reports. According to the Iraqi state news agency INA on October 25th, Jordan has decided to replace the dollar in trading with Baghdad with the Euro or another European currency.