US Treasury sanctions target Iraq’s deputy oil minister for allegedly aiding Iran in bypassing restrictions on oil exports.

The United States Treasury Department has sanctioned Iraq’s Deputy Minister of Oil, Ali Maarij al-Bahadly, for allegedly helping Iran to sell its oil.

The Treasury’s Office of Foreign Assets Control (OFAC) said it was taking action to increase economic pressure on Iran as negotiations for a deal between Washington and Tehran are showing timid signs of progress, with Iranian officials saying they are reviewing a US proposal.

In a statement on Thursday, OFAC said it was also designating three leaders of the Iran-backed armed groups, Kata’ib Sayyid al-Shuhada (KSS) and Asa’ib Ahl al-Haq (AAH).  Together with the Kataib Hezbollah group, Washington holds them accountable for attacking US personnel and civilians, OFAC added.

“Like a rogue gang, the Iranian regime is pillaging resources that rightfully belong to the Iraqi people,” said Treasury Secretary Scott Bessent. “Treasury will not stand idly by as Iran’s military exploits Iraqi oil to fund terrorism against the United States and our partners.”

According to OFAC, al-Bahadly has for years used his official positions – first as head of the Iraqi parliament’s oil and gas committee, then within the Iraq Ministry of Oil – to facilitate the diversion of Iraqi oil products to benefit an alleged Iran-affiliated oil smuggler, Salim Ahmed Said and AAH.

The US Treasury sanctioned Said last year for running a scheme of companies selling Iranian oil falsely declared as Iraqi oil to avoid sanctions. The smuggler, according to US officials, obtained favoured access to Iraqi oil and procured forged documentation from Iraqi government officials, legitimising illicit oil.

Iraq’s Oil Ministry did not immediately respond to Al Jazeera’s request for comment.

‘Tough signal’ by the US

The sanctions come as Iraqi Prime Minister-designate, Ali al-Zaidi, works to form a new government. Some Iraqi legislators and media reports have suggested that al-Bahadly is one of the frontrunners to lead the Oil Ministry.

The penalties against Iraq’s deputy oil minister mark rare sanctions by Washington against members of Iraq’s government as the US tries to limit the influence of Iran-backed groups.

Earlier this year, Trump openly rejected the potential return of former Prime Minister Nouri al-Maliki to power. The Wall Street Journal, quoting Iraqi and US officials last month, said the US had halted shipments and paused some security cooperation programmes with the Iraqi military. The US has been pushing to exclude Iran’s closest allies from power in Baghdad.

Victoria Taylor, a former US State Department official who oversaw relations with Iraq during the Joe Biden administration, says the move is a “tough signal by the Trump administration in the midst of the ongoing cabinet deliberations in Baghdad”.

“Likely meant to ensure Ali Maarij did not emerge as a contender for Minister of Oil, but also sends a definitive message that the Trump team is serious about keeping militias, and those affiliated with militia finance/business, out of key positions,” Taylor said on X.

Iran and the US have been at war since joint US-Israel strikes in late February. Since the shaky ceasefire was agreed on April 8, the confrontation has morphed into a struggle over who applies most pressure in the Strait of Hormuz. About a fifth of global energy exports pass through the narrow waterway during peacetime.

Iranian forces have effectively gained control of the strait by hitting, or threatening to attack, vessels attempting to transit. In response, US forces have imposed a naval blockade on Iranian ports, making oil exports impossible.