The United States has sanctioned Iraq’s deputy oil minister and several Iran-aligned militia leaders, stepping directly into a part of the oil trade that has been operating in the gray since the war began.
The Treasury Department accused Deputy Oil Minister Ali Maarij Al-Bahadly of facilitating the diversion of Iraqi crude to benefit Iran and affiliated militias. The move also targets senior figures tied to Kata’ib Sayyid Al-Shuhada and Asa’ib Ahl Al-Haq. Any U.S. assets are frozen, and Americans are barred from doing business with them.
The market is already reeling from the Strait of Hormuz crisis. Iraqi flows have been constrained, rerouted, and in some cases dependent on arrangements with Iran just to export its oil, which the Iraqi government depends on.
Baghdad has already been offering steep discounts on Basrah crude, as much as $30 per barrel below official selling prices, to compensate for the risk and logistical mess tied to Hormuz-linked shipments.
Washington has been scrambling to alleviate pressure elsewhere to keep oil supplies from collapsing. Sanctions waivers have allowed some Russian and Venezuelan barrels to move, while Iraqi exports have continued under complicated conditions. The result? A system where enforcement is tightening in one place and loosening in another.
The allegation that Iraqi documentation has been used to move Iranian crude is not new. Iraqi officials said earlier this year that tankers stopped in the Gulf were carrying forged Iraqi paperwork. Tehran denied it. The U.S. action suggests Washington is now treating that issue as an enforcement priority rather than a side problem.
The market is already short on oil, and Iraq remains one of the few producers with scale that is still trying to maintain exports through the now-broken system. Targeting officials tied to that flow risks tightening supply even further.
The U.S. and Iran continue to move toward at least a temporary agreement to halt the war. These sanctions seek to choke off oil revenue before any deal is reached, signaling that even if the fighting is paused, enforcement around the flow of oil is not going away.
By Julianne Geiger for Oilprice.com
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