The U.S. government imposed sanctions on Iraq's deputy oil minister and associated militia groups for diverting Iraqi oil to support Iran [1, 2].
The move targets the financial conduits that allow the Iranian regime and its proxies to bypass international restrictions. By restricting the flow of diverted oil, the U.S. aims to degrade the funding available for regional destabilization and terrorist activities.
U.S. Treasury Department officials announced the sanctions on Thursday, May 7, 2026 [2, 3]. The measures specifically target Ali Maarij al-Bahadly, the deputy oil minister based in Baghdad [1, 2]. According to officials, al-Bahadly used his government position to facilitate the illicit trade of oil to the Iranian regime [1, 4].
"He abused his government position to divert Iraqi oil in support of the Iranian regime and its terrorist proxies," Tommy Pigott said [2].
In addition to the deputy minister, the U.S. targeted two militia groups [3]. While some reports suggest several groups were involved, the Treasury's specific designations focus on these entities as facilitators of the oil trade [3].
A U.S. Treasury spokesperson said, "These sanctions target individuals and entities that facilitate Iran's illicit oil trade" [3].
The sanctions are part of a broader strategy to tighten the economic grip on Tehran. The U.S. maintains that the diversion of Iraqi state resources to foreign powers undermines the sovereignty of the Iraqi state, and violates existing trade agreements [1, 2].
According to an analyst from Al-Monitor, the move underscores Washington's resolve to cut off revenue streams to Tehran [5].
“"He abused his government position to divert Iraqi oil in support of the Iranian regime and its terrorist proxies."”
These sanctions signal a heightened U.S. effort to disrupt the 'shadow fleet' and illicit procurement networks that Iran uses to fund its regional proxies. By targeting a high-ranking Iraqi official, the U.S. is not only pursuing the money but is also highlighting the infiltration of Iraqi state institutions by Iranian-aligned actors, potentially complicating Baghdad's diplomatic balancing act between Washington and Tehran.
