Tuesday, September 10, 2024

Delta Farm Press

U.S. rice sales to Iraq resume after banking issues resolved

Good news for Midsouth rice farmers as U.S. Rice sales to Iraq have resumed.

By Forrest Laws

U.S. rice sales to Iraq have resumed after months of delays due to newly-placed financial restrictions imposed by the U.S. government on Iraqi banks that would normally provide dollars for U.S. rice shipments to the country.

Earlier this month, Archer Daniels Midland's Rice Division completed a sale of 80,000 tons of U.S. rice, which was expected to be loaded and shipped to Iraq in early fall. Another 40,000 tons was sold by Supreme Rice, according to the USA Rice Federation.

"This news couldn't have come at a better time," said Keith Glover, president and CEO of Producers Rice Mill and the newly installed chair of USA Rice, referring to the onset of the bulk of what is expected to be one of the best harvests of U.S. rice in recent years. Farmers are expected to bring in 220.8 million hundredweights of rice.

Iraq became the second largest market for U.S. milled long grain rice after USA Rice signed a 2021 Memorandum of Understanding with Al Awees, the organization that buys rice on behalf of the Government of Iraq, for the sale of 200,000 metric tons of rice per year.

Halted sales

Sales were halted in April when the U.S. Treasury Department's Office of Foreign Assets Control banned eight commercial banks in Baghdad from buying U.S. dollars as part of a crackdown on currency smuggling, according to Reuters. The ban, in effect, limited the amount of dollars Al Awees can use to buy U.S. rice.

The United States has control of more than $100 billion in Iraq's reserves from oil revenues and other financial transactions. According to reports, the current Iraqi government has been supported by Iranian-backed political parties with links to banks seen as involved in money-laundering or currency smuggling schemes,

The OFAC action was believed to be aimed at preventing any Iraqi banks from participating in such activities.

Members of Congress from the major rice-growing states wrote a letter to Andrea Gacki, director of the Office of Foreign Assets Control, on April 15, asking her to "work quickly and cooperatively" with at the U.S. Departments of Agriculture and State to find a resolution for the financing restrictions impasse.

"For the past several years U.S. rice has been part of the food basket providing approximately 41 million Iraqis with a nutritious, healthy food staple commodity," the letter said. "The Iraqi people are import dependent for much of their food, and without access to a staple of their diets, middle- and low-income families will quickly move into a food insecure situation."

Rice sales

U.S. merchants had sold 80,000 metric tons of rice to Iraq in the marketing year that ended in July. Whether the other 120,000 metric tons to be sold under the 2021 MOU would be carried forward into the new year wasn't clear at press time.

"We commend OFAC and the Department of Treasury for working with banks around the world to curb transactions related to fraud, money laundering and other illegal uses of U.S. currency," the congressional letter said. "However, there must be other compliance steps that can be taken to thread the needle and provide support to banks that play a commercial role in financing substantial U.S. exports."

Glover thanked "all those that assisted in restoring this market for us, including many in Congress who took an interest in finding a solution to this problem."

He said news of the sales came after Senators John Boozman of Arkansas, Bill Cassidy of Louisiana and Cindy Hyde-Smith of Mississippi met with Iraqi Ambassador Nazar Al Khirulla in Washington to discuss the sales delay.

USA Rice has also had meetings with officials from the U.S. Department of Agriculture, U.S. Department of State, the U.S. Treasury Department and the Office of the U.S. Trade Representative to try to find banking solutions to facilitate new business, USA Rice officials said.

"While we anticipate some medium to long-term challenges on the banking side for Iraq, this promises to be a positive step in the right direction at a critical time for our industry," said USA Rice President and CEO Peter Bachman. "We're going to stay engaged with the skilled team of interagency players to ensure we can fulfill the 2024-25 MOU commitments as well as those in future years."

For more information on the Office of Foreign Assets Control and the Iraqi situation visit https://ofac.treasury.gov/sanctions-programs-and-country-information/iraq-related-sanctions.