• The U.S. Treasury is poised to sanction Iraq's deputy oil minister, Ali Maarij Al-Bahadly, for facilitating the sale of Iranian crude in violation of sanctions.
  • Officials allege he authorized the blending of Iranian oil with Iraqi crude to disguise its origin, enabling large-scale smuggling.
  • This rare action against a sitting senior Iraqi official underscores Washington's push to curb Tehran's revenue streams and pressure Baghdad over economic ties to Iran.

A Rare Move Against a Sitting Official

The United States is preparing to impose sanctions on Iraq's deputy oil minister, Ali Maarij Al-Bahadly, accusing him of helping to direct Iranian oil sales through Iraq, according to people familiar with the matter. The move marks one of the first times the U.S. has targeted a senior sitting Iraqi official over such activities, signaling an escalation in its campaign to choke off Iranian oil revenues.

Officials allege that Al-Bahadly authorized the diversion of Iraqi crude and its blending with Iranian oil to mask its origins, allowing it to be sold as Iraqi petroleum. This scheme, they say, relied on regional networks and shell companies to smuggle the product through Iraq's energy infrastructure. Efforts to reach Al-Bahadly and the Iraqi oil ministry for comment were unsuccessful.

Broader Sanctions Campaign

The Treasury's action is part of a broader push to dismantle illicit Iranian oil networks that have exploited Iraq's complex regulatory environment. In recent months, the U.S. has added multiple Iraqi-adjacent individuals and entities to its sanctions list, targeting ships and companies allegedly involved in disguising Iranian crude. The focus on Iraq reflects its role as a key conduit for Iranian oil, given the two countries' shared border and deep economic ties.

Baghdad has repeatedly denied involvement in such smuggling, but analysts say the sanctions could disrupt oil flows and revenue streams. "This sends a clear message to Baghdad: compliance with sanctions is non-negotiable," said a former U.S. official familiar with the matter. Iran's oil trade has been severely constrained by sanctions, prompting it to seek alternative routes through intermediaries like Iraq.

Implications for Iraq

The sanctions could have immediate repercussions for Iraq's energy sector, potentially triggering personnel changes or operational disruptions. In the longer term, they may push Baghdad toward greater regulatory alignment with international sanctions regimes. However, the move also risks straining U.S.-Iraq relations, as Iraqi authorities balance domestic political pressures and ties to Tehran. For now, the focus remains on enforcement, with the Treasury expected to unveil the sanctions formally in the coming days.

Correction: An earlier version of this article incorrectly stated that the sanctions had already been announced. They are still in the planning stages.