Irked US squeezes Iraq with cash delays, short waivers

BAGHDAD, Feb 15 (AFP) - Irked by Iraq's close ties to neighbouring Iran, Washington has begun following through on threats to squeeze Baghdad's fragile economy with delays to crucial cash deliveries and slashed sanctions waivers.

This week, the US granted Iraq last-minute leave to import Iranian gas for its crippled power grids, despite American sanctions on Tehran.

But Washington's patience seems to be running out: the latest waiver was hacked from the usual 90 or 120 days to just 45.

“This is the beginning of death by a thousand cuts,” warned financial analyst Ahmed Tabaqchali, of the Iraqbased Institute of Regional and International Studies.

“The shorter the waiver, the more we can't afford for things to go wrong in that time.” Iraq is at a crucial crossroads. Its new premier is struggling to form a cabinet, massive anti-government protests are filling the streets and skyrocketing tensions between its two main allies, Tehran and Washington, have already spilled blood on its territory.

While Iran enjoy tremendous political and military sway in Iraq, the US still holds a major trump card: the economy.

Every month or so, Iraq's Central Bank flies in $1-$2 billion in cash from the Federal Reserve in New York, where all its oil revenues are kept, to pay for official and commercial transactions.

But the mid-January shipment was more than a week late, a top Iraqi official and an oil industry source said, citing “political reasons” for the White House decision.

“We are on a knife's edge,” the Iraqi official said.