BAGHDAD, Jan. 17 (UPI) -- Iraq's new currency started off with strength as it is being dealt with more widely in international money changing markets. But this start is shrouded with high speculation, and scandals of forgery and smuggling of large quantities of the new dinar to Arab and Gulf countries, including Lebanon, Egypt, Jordan, Iran and Kuwait.
Dealings with the old Iraqi bank notes, bearing the pictures of deposed president Saddam Hussein, ended officially on Thursday. And the new dinar, introduced to the market last Oct. 15 by the U.S. command in coordination with the Iraqi Central Bank, became Iraq's official and sole currency.
The new currency comprises bank notes from several denominations, namely bills in 50,000 dinars, 250,000, 25,000, 10,000 and 5,000 dinar bills. Piles of the old bank notes were destroyed, mostly burned, in the past few months.
The Lebanese authorities on Wednesday arrested three people in the capital, Beirut, for smuggling 1.5 tons of Iraqi currency in a private plane from Iraq to Lebanon, via Jordan, estimated at more than 19 billion new Iraqi dinars (around U.S. $12 million).
Investigations might reveal the political or security conditions behind transporting this amount, which required permission from Lebanon's Central Bank so as not to be accused of money laundering.
They could also reveal the possibility of involvement by American parties in a large money laundering operation conducted secretly, since landing and take-off at Baghdad Airport only take place with permission from the U.S. occupation forces in Iraq.
The political implications in the smuggling operation could become known as the Lebanese look into the motives behind trafficking such an amount, especially at a time when Beirut and Damascus face growing U.S. pressure.
Meanwhile, the Egyptian authorities in Cairo said Thursday that the authorities at the Red Sea port of Nuwaibeh arrested 32 Egyptian passengers arriving from Jordan who carried 650 million new Iraqi dinars. They were believed to be traded it on the black market in the hope that its value would rise when the conditions in Iraq stabilized in the future.
The incident came as a fever swept other Arab countries in creating a black market for the Iraqi currency. Arab and Iranian merchants have been rushing to buy the new Iraqi dinars at low prices in their countries, or at 1,200 dinars to the U.S. dollar and less.
An official at the Iraqi Central Bank told United Press International that some Iraqi employees might be involved in the smuggling operations, adding that initial investigations showed involvement by bank employees with money traffickers. He said the Central Bank provided special facilities to several bank tellers due to the extraordinary conditions Iraq is passing through.
The official, speaking on condition of anonymity, added that a special committee would be formed to investigate cases of forgery and smuggling. He stressed the "need to protect the Iraqi economy from money laundering that takes place in developing countries, including neighboring Arab countries."
He said that "gangs of quick fortune are very active in these countries, and some of their members are Iraqis."
The source also revealed that the authorities have found foul play in some of the banks when the Iraqi currency was being renewed, in which the authorities seized forgeries of more than one billion old dinars, the ones with the picture of Saddam.
He said that most Arab and Asian countries have begun dealing with the new Iraqi dinar "because of its difficulty in forging, and because it is directly supported from the Iraqi oil exports."
The U.S. dollar exchange rate dropped to a new low at the end of last week, registering 1,400 dinars to the dollar in Baghdad, the lowest in eight years. The dollar rate began to gradually drop on a daily basis since the beginning of last December, falling from 2,000 dinars to 1,500 by the end of the month. The drop continued in the past two weeks.
The Central Bank official said the decline in the exchange rate was due to the availability of the U.S. dollar in Iraq by the growing number of foreign investors in the country. He said that led to wide scale movement of the new Iraqi dinar to outside countries, mainly Jordan, Kuwait and Iran.
An Iraqi financial expert expected the value of the Iraqi dinar to continue rising, but insisted that the increase had nothing to do with the hike in prices of commodities in the Iraqi market.
He said the price hikes "are not justified because they did not happen as a result of hard currency entering the country through oil revenues or through trade growth. They did not happen because the there has been no strong return of the Iraqis abroad, but which is expected to happen when stability is restored in Iraq."