A millionaire!? Hardly, because this is Iraq, where currency questions abound. One 250 Saddam dinar note slipped from the wall of bills on Qasim Hassan's desk in Irbil would fetch 12.5 U.S. cents. Saddam dinar notes, printed in the early 1990s and widely not accepted abroad, trade in the streets of northern Iraq at a relatively high rate: 2000 to an American dollar. The so-called Swiss dinar, which was actually printed in England, trades at a more reasonable 6 to 1. "The best solution is to change the currency," Hassan said. (Kevin Dougherty / S&S)
A millionaire!? Hardly, because this is Iraq, where currency questions abound. One 250 Saddam dinar note slipped from the wall of bills on Qasim Hassan's desk in Irbil would fetch 12.5 U.S. cents. Saddam dinar notes, printed in the early 1990s and widely not accepted abroad, trade in the streets of northern Iraq at a relatively high rate: 2000 to an American dollar. The so-called Swiss dinar, which was actually printed in England, trades at a more reasonable 6 to 1. "The best solution is to change the currency," Hassan said. (Kevin Dougherty / S&S)
Some Iraqis jokingly refer to this avenue in downtown Irbil as their "Wall Street." Since the end of combat operations, both Swiss and Saddam dinars remarkably have held their value, while the dollar has decreased in value since the pre-war days. (Kevin Dougherty / S&S)
The Central Bank of Kurdistan in northern Iraq only sanctions money transactions in Irbil and Dahuk, though it is done illegally elsewhere. On a street in Irbil, a trader runs a wad of bills through an old counting machine. (Kevin Dougherty / S&S)
IRBIL, Iraq — In late March, as coalition forces advanced on Baghdad, a team of U.S. officials left Kuwait and made a beeline for the oil fields in southern Iraq.
Iraqi oil workers near Basra were encouraged to work the fields in exchange for U.S. currency. Not yet convinced the Baath Party was finished, they declined the greenbacks, opting for indigenous notes.
The workers worried that heads would turn if they were seen spending U.S. dollars in the public market. Not long afterward, when workers met with U.S. officials again, they seemed to have a change of heart.
That whole experience with the oil workers helped trigger a reassessment of the coalition force’s post-war currency plan for Iraq, a plan that is still being refined, said an official with the Pentagon’s Office of Reconstruction and Humanitarian Aid.
Ultimately, the matter will be settled in Washington and London.
U.S. officials are “working with the Iraqi people on what is going to be the easiest way to do this without the economy collapsing because of some issue we’ve done with the currency,” said Bruce Moore, ORHA’s director in northern Iraq. “So it’s a major issue.”
To wade into the wacky Iraqi world of money takes time and mental dexterity.
“We are also confused,” Qasim Hassan said through an interpreter. “Nobody knows what is going to happen. Even the experts don't know what will happen to this money.”
Hassan knows his notes. The 40-year-old owns a thriving currency exchange shop on Shekala Borse, the Wall Street of Irbil, one of two cities in northern Iraq authorized by the autonomous Kurdistan government to issue licenses to moneymen, such as Hassan.
In the north, dominated by Iraqi Kurds, the preferred currency is the so-called Swiss dinar. (Never mind that it actually was printed in England, not Switzerland.) Hold a note up to the light, and a hologram and security strip appear, similar to the dollar and euro. Its production was ceased about a decade ago.
Its chief competitors are the U.S. dollar and something called the Saddam dinar, featuring the deposed Iraqi leader’s mustachioed mug. Saddam’s currency holds sway in central and southern Iraq. It first rolled off the presses in the early 1990s, when the Iraqi economy went into a severe tailspin following the first Gulf War.
There are some important and interesting differences between the two currencies.
The Swiss dinar was internationally recognized, and, even today, holds value in some Middle East nations. For the most part, Saddam money doesn’t circulate outside of Iraq.
Much of the older currency is wrinkled and torn. The newer notes often look hot off the presses.
One dollar equates to about 6 Swiss dinars. In contrast, that same dollar fetches about 1,500 Saddam dinars. Strangely, both have appreciated in value against the dollar, a promissory note backed by the most powerful nation on Earth, which, also won the war. For instance, the Saddam dinar was trading at 2,000 to a dollar just a few days ago.
“I’m not happy with the dollar because its value is going down,” said Saleh Sahdi Ahmed, another currency czar on Shekala Borse.
A recent conversation with Nawzad Rajab Botany, the director of planning for the Central Bank of Kurdistan, turned into a mind-numbing, two-hour-plus marathon. The economist works closely with the region’s ministry of finance, advises several councils and even publishes a quarterly economics magazine.
In excruciating detail, the 50-year-old economist retraced the roller-coaster ride of the national currency back to 1958, when Iraq’s constitutional monarchy was overthrown in favor of a republic and Saddam became a hit man for the up-and-coming Baath Party.
Back then, the bills included likenesses of the Iraqi king. The look eventually changed to bridges, buildings and palm trees, but the value of the Iraqi dinar remained high.
“The Swiss [original Iraqi] dinar is old, very old,” he said, speaking through an interpreter, “but it is strong.”
In 1970, it was even stronger. A single Iraqi dinar was valued at about $3.30, Botany noted.
The Baath Party seized power in a coup two years before that often-cited benchmark. At the beginning of the decade, military-related imports accounted for 20 percent of the government’s overseas purchases, Botany said. By 1984, at the height of the Iran-Iraq war, that number had jumped to about 80 percent.
Without going into great detail, the 1980s were a financial disaster, due to the shift in priorities fueled by the war and massive loans to the tune of $14 billion. Botany said inflation in 1980, a year after Saddam assumed absolute power, was high: 95 percent. By 1989, the inflation rate was a whopping 400 percent.
After Iraqi forces were driven out of Kuwait in 1991, international sanctions crippled the country’s economy causing hyperinflation, Botany said. For three years, until the government found a way to circumvent a trade embargo, little if any oil was sold abroad.
A 110-pound bag of sugar that sold for $30 in 1970 rose to $250 in 1992, he said.
It was at this point that Saddam created his own indigenous currency.
Though it continued to carry the Central Bank of Iraq moniker, the notes came to be known as “Saddam dinars.”
“This marked the beginning of Iraq’s currency problems,” Botany said, referring to the dual — and dueling — currencies.
“In Kurdistan, we refused this money because it was not backed by any other country.”
The Kurds, who by now were insulated from large-scale Iraqi attacks due to Operation Northern Watch, used the Swiss dinar in trade with Iran, Turkey and Syria, Botany said.
But the currency that held such great value a generation earlier was significantly weaker. In August 1992, Botany said, $1 could buy 33 dinars.
The Swiss dinar, which was no longer being printed, bottomed out in May 1994 when the per-dollar rate reached 78 dinars. Reconstruction in Iraqi Kurdistan and Saddam’s success in sidestepping sanctions helped fuel a recovery. By August of last year, the value of the dinar had risen to nearly 15-to-1.
Meanwhile, dollars began flooding into the market following the Sept. 11, 2001, terror attacks, Botany said. Worried that U.S. officials might freeze their stateside accounts, Middle East nations and other Asian nations began withdrawing huge sums of dollars, about $250 billion, according to Botany.
As the latest war neared, the dinar-to-dollar rate had dropped to 9 to 1. Botany said he and other economists in the north figured a long-term conflict could bump the rate back up, but only by a few dinars. A short-term war would tilt equally in the opposite direction. The war was short, and the exchange rate now hovers around 6 to 1.
The strong Swiss dinar, the plentiful U.S. dollar and the ubiquitous Saddam dinar all make for an interesting dynamic as U.S. officials lay the groundwork for an interim Iraqi government and figure out how to manage the money until a new currency is introduced.
If you pay in U.S. dollars, Moore said, “a person out here in these little villages, they have a hard time converting the money. So that's probably not the perfect solution.”
Neither is the Swiss dinar, which is strong but literally in tatters. The money can last awhile longer, but its days are doomed unless the old printing plates are pressed into service to boost the supply.
The Saddam dinar, while popular in some quarters, is just too prevalent, cheaply made, from a security standpoint, and features the face of a vanquished tyrant. Botany can barely bring himself to utter the fallen leader’s name, preferring to say the “copy” dinar.
Moore said the currency issue ranks high on the list of things to do because it’s so closely linked to getting the economy going again and paying government salaries, something that is beginning to happen.
“At some point, though, those [two currencies] will all be replaced,” Moore said.
Back on Shekala Borse, Hassan’s small shop further illustrates the challenge ahead.
On his desk is a cooler-size block of Saddam dinars, which amounts to a few thousand dollars. His staff had just finished counting Swiss dinars. On the floor are numerous bits of bills, mostly torn corners. Outside his door, dollars are being bought and sold.
“There is no value,” he said, waving his hand at the Saddam wad parked on his desk.
The dollar, he said, is showing signs of a rebound, but that could change overnight.
“We think they should change the currency,” Hassan said. “The money that we have, the Swiss-made, it’s all torn. The best solution is to change the currency.”
