By al-Fassel | 2026-06-11

A single US Treasury action in May 2026 exposed Iran's deep grip on Iraq's most vital sector.

The Office of Foreign Assets Control (OFAC) increased economic pressure on Iran and its proxy militias by designating individuals and businesses exploiting Iraq's oil sector.

That action sanctioned Ali Maarij al-Bahadly, Iraq's Deputy Oil Minister, for allegedly facilitating oil diversions that benefit Iran and its proxies.

This is not a routine corruption case; it is a test of whether Iraq can reclaim its sovereignty and restore its credibility on the world stage.

The penalties against al-Bahadly mark a rare set of sanctions by Washington against a sitting member of Iraq's government.

OFAC simultaneously designated three senior leaders of Iran-aligned terrorist militias, Kata'ib Sayyid Al-Shuhada (KSS) and Asa'ib Ahl al-Haq (AAH).

Together, these designations underscore a pattern of unchecked militia influence within Iraq, where oil revenues fuel attacks on civilians and create violence across the region.

When a deputy Minister serves foreign interests over his own country's public interests, the Iraqis suffer, and the country's reputation with international partners is impacted.

Iraq's prosperity hangs in the balance

The Washington Institute warns that Iran-backed groups are now developing new threat financing schemes worth billions of dollars each year through Iraq's energy sector.

US Treasury Secretary Scott Bessent said, "Iraq cannot become a safe haven for terrorists."

The US Economic Fury campaign has disrupted billions in projected Iranian oil revenue and frozen nearly $500 million in regime-linked digital assets.

Iraq's exposure to that risk could damage its standing with investors and international financial institutions alike.

In 2025, BP committed to invest up to $25 billion over 25 years to revitalize Iraq's Kirkuk oil fields.

Sustaining that confidence requires a government that demonstrably controls its own institutions.

When senior officials divert oil revenues to sanctioned militias, global investors see an oil sector that lacks full sovereignty.

Broader sanctions risks could eventually extend beyond individuals to affect entire sectors of the Iraqi economy, deepening fiscal strain.

The international community expects Iraq to assert long-term sovereignty against Iran-backed armed groups, and some Iraqi political voices have begun calling for militia disarmament.

Aligning with international norms and asserting genuine control over its own resources is Iraq's clearest path to restored credibility and long-term prosperity.