US Officials Outline "Secret" Summer Operation To Stop Flow Of Dollars To ISIS

Tyler Durden's picture

Over the last five or so weeks, Washington has been in panic mode with regard to America’s “fight” against ISIS. Once the Russians arrived at Latakia and began to provide air cover for Iranian ground troops operating in Syria it was clear that the clock was ticking on the strategy of using Sunni extremists to overthrow the Assad regime. 

That was bad news for Washington and its regional allies for a number of reasons. First, it meant that Iran was set to preserve the “Shiite crescent” and therefore Tehran’s supply line to Hezbollah. Second, it meant that the installing a “friendly” puppet government in Damascus was no longer in the cards and that doesn’t bode well for lucrative energy deals like the Qatar-Turkey natural gas pipeline. Third, it raised the possibility that the public would begin to get wise to the rather peculiar arrangements in place between Saudi Arabia and Qatar and the various Sunni militias fighting in Syria - including ISIS. 

That last point is critical. If the US electorate ever gets anything that even looks like definitive evidence that Washington is knowingly supporting the group that’s been held up as the scourge of humanity they’ll be a public outcry the likes of which America hasn’t seen since Vietnam. So, Washington has done its best to suggest that the US is set to step up the fight. The campaign began with helmet cam footage depicting a successful raid on an ISIS prison in northern Iraq and swiftly morphed into an announcement from the Obama administration that America would soon put boots on the ground in Syria, presumably to be embedded with the Kurdish YPG.

Well, in the latest example of Washington playing catch up, “officials familiar with the matter” have told WSJ about a concerted effort to cut off the flow of dollars to ISIS. Allegedly, the US became concerned about the amount of hard currency being shipped to Iraq over the summer. The problem: the requested amounts didn’t seem to be consistent with the country’s economic fundamentals and so, the US cut off Iraq’s access to dollar funding, nearly plunging the the country into crisis. Here’s more:

The previously unreported move to stop the cash shipments pushed the Iraqi financial system to the brink of crisis and marked a climactic moment in efforts to avert the flow of dollars to U.S. foes.


The situation sheds light on an important facet of the long-running U.S. battle against terror: Just as military officials worry about U.S. weapons getting to enemies, finance officials are on a global hunt to keep dollars from getting into the hands of adversaries who could use it to finance their activities.


The spread of Islamic State set off alarms among U.S. officials about the potential for the currency shipments to be exploited by terrorists. The Sunni extremist group controls about a third of the war-torn country, including the second-largest city, Mosul, and is already well-funded from tax collections, oil sales and a range of other activities.


The problem dates to last December when Fed and Treasury officials called a secret meeting in an Istanbul hotel conference room with Iraqi officials. The Americans were alarmed by the rising volume of dollars being shipped into Iraq and the lack of clarity into where the cash was ending up, the people said.


Since the U.S. overthrew Saddam Hussein and helped establish the Central Bank of Iraq in 2004, the U.S. dollar has largely become the country’s chief currency because so much of the economy runs on cash. When Iraq needs more paper currency, the money is drawn from the country’s account at the Fed, funded largely by oil reserves, and flown to Baghdad.


The amounts have been soaring. In 2014, annual U.S. dollar cash flow from the Federal Reserve Bank of New York to Iraq was $13.66 billion, more than triple the $3.85 billion in 2012, according to data compiled by Iraq’s parliament and reviewed by The Wall Street Journal.


That spike doesn’t mesh with the sluggish Iraqi economy of late, and as a result U.S. officials suspected the dollars were being hoarded rather than circulated.


The system for distributing dollars within Iraq works like this: Foreign central banks hold dollars and can call on the Fed for currency distribution. The new $100 notes are flown to Baghdad after leaving a Fed facility in East Rutherford, N.J. In Baghdad, the bills are moved to the Iraqi central bank, where they are sold in daily auctions in which Iraqi financial firms request dollars that they pay for largely using dinars, the country’s currency.



Early on, U.S. concerns centered on roughly 2,000 financial firms called exchange houses, which are active participants in these auctions.


U.S. officials believe several of these Iraqi firms have ties to Islamic State and have deep concerns the exchange houses are being used as conduits of dollars to the group, said a U.S. official and another person familiar with the matter. While the U.S. inevitably loses control at some point over the dollars it sends abroad, the Fed is barred from sending cash to entities it knows will distribute it to U.S. enemies.


Around June, Iraqi officials working under the enhanced information-sharing agreement reported to their U.S. counterparts that three sanctioned Iranian banks—Islamic Regional Cooperation Bank, Bank Melli and Parsian Bank—had obtained at least millions of dollars through the auction. Like other Iranian banks, those were operating under international sanctions, and it was illegal for the Fed to knowingly ship dollars to them.


U.S. officials around that time had concerns that Islamic State had gained access to dollars through the auctions,

U.S. officials and people familiar with the matter said. The Iraqi officials believe the money has definitely gone to Islamic State through these auctions.


Exchange houses in the northern, Kurdish-controlled city of Kirkuk—outside of Islamic State control but close to extremist front lines—are among the most active in allowing dollar flows into Islamic State-controlled territory and to Islamic State militants, Iraqi officials said. In addition, Islamic State in 2014 stole about $100 million from a Central Bank of Iraq-run vault in Mosul, said a person familiar with the theft.


Based on the new information, U.S. officials sent a written demand around July to Iraqi officials that the Iranian banks be cut off and separately conveyed to Iraqi officials that the Fed wouldn’t approve cash requests until the overall situation improved.


The decision was delivered just as Iraq’s central bank was running out of cash. Many Iraqis panicked after large withdrawal requests were denied, and the exchange rate fluctuated much more than usual.

Right. Ok, so this is another one of those scenarios where we’ll probably never know what the actual story is or was nor will we ever be able to gauge how accurate any of the above is in terms of depicting real events, but there are a couple of key takeaways. 

First, to the extent that the bit about Iranian banks accessing dollars through the FX auctions is true, it shouldn’t come as a surprise. Tehran is deeply embedded in Iraqi politics and one certainly imagines that it would be exceptionally easy for Iran’s financial institutions to tap into auctions where record keeping is poor, especially if there are a few bribes exchanged. 

Second, we find it particularly amusing that the US is apparently so concerned about supplying Sunni extremist groups with dollars that Washington is willing to push Baghdad to the precipice of crisis in order to cut off the flow. After all, supplying Sunni militants with money and weapons is the whole strategy in Syria and has been from the beginning. Sure, the Kurds are involved on both sides of the border, but generally speaking, the Saudis and Qatar, with the tacit support of the US, have been arming and funding Sunni extremists in Syria for years and so if the Fed is concerned about the flow of dollars to those groups, they may want to consider... oh, we don’t know, not funding those groups and making sure Washington’s regional allies don’t either. 

Even more amusing is this line: "...just as military officials worry about U.S. weapons getting to enemies." Yes, the US is so worried about that possibility that the Pentagon embarked on a $500 million effort to arm "properly vetted" fighters earlier this year and has now resorted to paradropping hundreds of tons (literally) of ammo and weapons into the middle of the desert and hoping the Kurds pick them up. Meanwhile, the CIA has funneled a completely unknowable amount of money and arms to a mishmash of Syrian Arabs battling the regime. Needless to say, there's absolutely no telling where those weapons will end up and where those fighters' loyalties will lie in the future.

Obviously, this is just the latest piece of propaganda in what has become a truly epic farce. We'd also note that if the US is interested in stopping ISIS from robbing central bank vaults , Washington may want to consider giving some of the ammo and weapons the Pentagon is dropping into the desert in Syria to the Iran-backed Shiite militias operating in Iraq. Unlike the US-trained Iraqi regulars, they don't tend to run away when they're getting shot at. 

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RawPawg's picture

i call it...Not Fair

to collapse Iraq before the collapse of USA

and after all the money(taxes) i gave them

USA not dancing with the ones who brought them(American tax payer)


Son of Captain Nemo's picture

After reading this I feel like "Regan" in the Exorcist complete with a spinning head and projectile pea green puke!

silverer's picture

I don't see how anybody in the middle east could ever have any respect or trust for the US.

VW Nerd's picture

As Iraq tells the US no thanks to our offer to assist fighting ISIS and they pivot toward Russia, this happens.  How Ironic...

TeaClipper's picture

Someone at Langley having their bitcoin wallet confiscated? 

Hannibal's picture

Report: Israel Bombs Syrian Missile Base

  BY: Morgan Chalfant Israel reportedly bombed a missile base used by President Bashar al-Assad’s regime in Syria near the country’s border with Lebanon on Sunday, destroying multiple missile warehouses. “Israeli planes breached Lebanese and Syrian airspace and bombed the Syrian regime’s 155th Brigade [base] in

Nov 03, 2015 

SimplePrinciple's picture

"The base was reportedly one of the primary ones from where Syrian government forces had been firing Scud missiles at areas controlled by rebels combatting the regime, meaning the alleged airstrike would deal a blow to Assad’s fight against insurgents."

That is important news, if true, showing Israel to be in the war against Syria and its Assad government.  That puts Israel at war with Syria's ally Russia.

HowdyDoody's picture

Israel is trying to keep Syria away from the resource-rich (oil, water, fertile land) parts of south-west Syria that Israel covets for itself.

I think we are still at the 'give them enough rope' stage of this aspect.



SimplePrinciple's picture

Israel is trying to bring down Assad for multiple reasons. Think in terms of incrementalism, though.  The Israeli strike ratchets it up a notch.  If Russia were to retaliate by bombing the base from which the Israeli bombers flew, we would be getting very close to WWIII.  For that reason, I think Russia will not follow that route, but I expect Russia to do something.  Shoot down an Israeli jet over Syria perhaps?

Hannibal's picture
Civil war erupts in Sweden as irate Swedes burn nine Muslim refugee centers to the ground

You Go Sweden

The Swedes have had it with the Muslim invasion currently underway in their country. Nine refugee centers have been burnt to the ground to get the message across – NO MORE MUSLIMS!

Kina's picture

I doubt the TPTB give a fuck about what the American public think.


USSA bankrupting themselves as USSR in its military spending.

Ghordius's picture

the American public? isn't it generally speaking... too distracted to notice?

MrBoompi's picture

Even if ISIS is able to convert oil to US dollars, what do they do with the dollars?  Do they head down to the local WalMart to buy food and ammo?  This is a bunch of psychobabble.  The oil they control will get onto the market but this probably benefits the purchasers of the oil more than the "sellers".  ISIS needs supplies, not dollars.  And the US and its allies are supplying ISIS either directly or by supplying "moderate" groups who disperse the supplies accordingly.  If you watch network news or get your news from sites like HuffPost, you will only hear propaganda and you will believe ISIS is the enemy.  This fits nicely into the preconceived belief that our government would never lie to us.  Ever since the false flag sarin attack failed to lead to public support for the overt overthrow of Assad, we've witnessed the rise of ISIS and the supposed need to fight them and Assad at the same time, while in reality we are fighting only Assad.  We are a gullible, stupid, clueless, oblivious, apathetic, and pathetic society led by a bunch of fucking psychopaths.

dogismycopilot's picture

All of Iraq runs on dollars. You talk in IQD but you demand USD for payment. Suppliers outside of Iraq require wire transfers in USD.

dogismycopilot's picture


The Iraqi Dinar is a bitch to deal with. Most calculators can't even hand that many fucking zeros. Everyone pretty much uses $100 bills for any transaction over a $1,000. Funny enough, in Iraq, I PERSONALLY AM ALWAYS FUCKING AMAZED AT HOW NEW, CRISP AND FRESH THE BENJAMINS ARE. I CAN'T EVEN GET SUCH NICE VIRGINAL $100 NOTES IN THE US! So yes, the Iraqis deposit all of their oil payments in the Bank of Mellon in NYC. From there the Iraqi goverment is 'privalleged' to buy greenbacks and the Iraqi dinar continues to become toiletpaper. Funny how that works. Quit lying. Of course you want the Iraqis hooked on that greenback dope. Be honest about that at least. If you want them off the smack, give them a peg.

You want ISIS to stop getting money? Easy: Donald Trump is right. Bomb the ISIS oilfields and pipelines. Turn them into big as night flares. ISIS doesn't worry about environmental standards and there are enough burn pits and VOCs that bombing might actually help stop the environmental havoc ISIS is creating. I mean there are convoys of tanker trucks going up north and coming back with humvees stuffed full of cash.

Who is buying the oil? NATO partner Turkey up North. That's easy enough to stop. Tell Recap to stop buying ISIS oil or he can get the fuck out of NATO. Easy peasy.

Or maybe stop sending free guns and ammo into Syria and Iraq where they end up with ISIS. Just to give you an idea of how much money ISIS is making in gun trading: Right now, a basic M4 in Iraq has a street value of $6,000 - add a nice scope and furniture and it goes up to $8k. That should give you an idea of the ARBITRAGE that ISIS is able to take in based on the "Free Guns" that Obama is sending to the Literal "Free Shit/Syrian Army".

But only the US Tresury would gin up some bull shit article about Iranian banks buying at the Iraqi currency auctions a few months before the sanctions are getting ready to be lifted. "Oh yes, those bad naughty Iranians! Blame them for everything!"

And yes, USD were in short supply in Iraq about a month ago - why? Because the US decided to show them who was boss by limiting the dollars Iraq could buy. Some of the fucking banks in Iraq couldnt even send out USD wires because they didn't have enough USD in their balance sheets. People couldn't get paid, you had everyone scrambling for USD and hundreds of people at the exchanges trying to get money out of the country. Nice move there UST

With 'friends' like the US, who needs enemies. I swear, Obama & Co are like than a bipolar girlfriend coming after you with a meat cleaver after she forgot her lithium.


Lorca's Novena's picture

So THIS is why all of the Iraqi Dinars Ive bought years ago arent worth shit!!??  whaaaa whaaaaa whaaaaa!!


Kina's picture

Even the Devil's skin crawls at the mention of Cheney.

Kina's picture

Time Syria used some Russian anti-aircraft missiles against those Israeli planes bombing the place.


Israel is well past getting a lesson handed to them.

Manipulism's picture

GHB. said it: 


if the American people knew what we have done, they would string us up from the lamp posts


dogismycopilot's picture

I remember when the WSJ used to be the world's best newspaper. Shit stories like this make me think we need to rename it WallPravda. They didn't even mention the GCC donations that ISIS is still getting.

samsara's picture

How about leaving a bank with money in it for them to have?

Along with all the equipment with the keys in the ignition?

ISIS just stole $425 million, Iraqi governor says, and became the ‘world’s richest terrorist group’


As insurgents rolled past the largest city in northern Iraq, an oil hub at the vital intersection of Syria, Iraq and Turkey, and into Tikrit, several gunmen stopped at Mosul’s central bank. An incredible amount of cash was reportedly on hand, and the group made off with 500 billion Iraqi dinars — $425 million.



udopia's picture

Iraq requests Russian help to fight ISIS and suddenly US money stops flowing.  Maybe unrelated.  Maybe not.

Kina's picture

Singapore has an elected government, the chances of the 'opposition' winning power in that 'democracy'...

Kina's picture

Didn't Assyria whip Israel's arse 2500 years ago? Israel still pissed?

PoasterToaster's picture
PoasterToaster (not verified) Nov 3, 2015 10:30 AM

They are pretty good at keeping cash out of the hands of Americans, so this should br child's play for them.

I Write Code's picture

LOL.  If they really want paper money, US hundreds, can't they get it from North Korea at a big discount?

theallseeinggod's picture

another great plan to undermine the few actors that are actually trying to fight daash. and the propaganda machine is doing its work.