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Iraqi businessmen shy away from Iranian currency
by Staff Writers
Baghdad (AFP) Feb 7, 2012

Huge numbers of Iranian pilgrims visit Shiite holy places in Iraq each year but businesses have grown wary of transactions in the Islamic republic's rial as it declines in value under sanctions.

In Kadhimiyah in northern Baghdad, restaurants and shops that sell gold and clothes around the two shrines of Shiite imams Musa Kadhim and Mohammed Jawad are crowded with visitors.

Ali Mohammed, a 42-year-old who owns a money exchange shop, said the rial's value has declined sharply.

"This decline has caused losses for us," he said, seated behind a glass barrier and holding paper money bearing a picture of the late Iranian supreme leader Ayatollah Ruhollah Khomeini.

"A month and a half ago, I was dealing with around 20,000 dollars of Iranian rials every day, but now I am only dealing with 1,000 dollars" a day, the trader said.

"I will stop buying (rials) gradually, and if it keeps declining, I will stop dealing with it completely.

Iran has been hit by sanctions imposed by the United States and Europe over its controversial nuclear programme, and its currency has suffered.

Jassem al-Amli, 55, who also owns a money exchange shop in Kadhimiyah, said that "the value of the rial is now around 18,000 for one dollar," while "two months ago, the value was 10,000 rials per dollar."

At the border with Iran, the value of the rial is even lower, with a dollar trading for 20,000 rials at the Zurbatiya border crossing to Iran.

One of the officials at the crossing told AFP that "dozens of Iranian (currency) traders are working on a daily basis to buy dollars."

"Before the collapse of the Iranian rial, they were ... not looking for dollars," the official said.

Amli, who has worked in money exchange for 10 years, said: "I knew this from the beginning and I stopped dealing with large amounts of (Iranian) money because I knew there would be pressures and more sanctions ...

"We feel sorry for the Iranian visitors because they came to Iraq holding a specific amount of money, and then suddenly, they were taken by surprise by the decline of their local currency."

In the central shrine city of Najaf, visited by two million Iranians a year, the decline of the Iranian currency is frustrating for the money exchange shops and also for hotel owners who depend on Iranian visitors.

Hussein Ikhwan, a 36-year-old who works for an exchange firm in Najaf, said that "the price of exchanging the Iranian (rial) is starting to be a problem for us," due to a lack of profit in dealing with the currency.

Uday Bahash, 35, who owns a shop in Najaf's main market, said that prices in rials for goods have doubled without any additional profit for shopowners.

Iraqi Tourism Minister Liwaa Smaisim told AFP that: "The decline of the Iranian currency has had only a slight impact on religious tourism, but even so, this has not much changed the number of Iranian visitors."

Khaled Abu al-Hijaj, 40, who owns a hotel in central Najaf, said: "Travel agencies are starting to lose money and trying to recover these losses by paying us with Iranian (rials), while they used to pay with dollars."

The shortage of foreign currency in Iran is pushing its traders to try to buy from outside sources, and Iraq, which has billions of dollars in trade with Iran per year, is a potential source.

Iraq's central bank has since February 1 enacted measures to identify those who buy dollars, as some are believed to be frontmen, Mudher Mohammed Saleh, deputy governor of the central bank, told AFP.

Banks that buy dollars from the central bank must now provide the identity of whoever placed the order and "prove that they have an account in the bank and the origin of their income," Saleh said.

"We are concerned that some people buy dollars on behalf of others," he said, without elaborating.

Asked if Iranian and Syrian traders were trying to buy dollars, Saleh said: "This increase in demand for dollars, while the region has serious problems, led us to put the new procedures in place."

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