Iraqi lawmakers voted to lift sanctions imposed on banks in the Kurdistan region, a move that may take the two sides towards reconciliation after the latter's independence referendum.
Politicians in Baghdad said on Monday that the embargo "had fulfilled its objective" by enforcing federal control on the Kurdish banking industry.
The parliament decided that Baghdad's central bank "will resume work with Kurdish banks but will continue to monitor their activities", Abdel Al Malik Husseini, spokesman for the speaker of the Iraqi parliament, told The National.
“The central bank has requested monthly reports regarding the banks' operations and practices."
Last October, Iraq’s central bank imposed financial restrictions that included the suspension of dollar and foreign currency exchange on four Kurdish-owned banks.
Iraq imposed the sanctions after the autonomous region held an independence referendum in September. That resulted in an overwhelming result in favour but was deemed illegal by the central government.
In response, Iraqi forces dislodged Kurdish fighters from several disputed areas, including the oil-rich city of Kirkuk.
Baghdad also imposed a ban on direct international flights to and from the Kurdish region. That is still in place.
Since the fall of Saddam Hussein, the two sides have argued over land and oil revenue sharing.