The U.S. Department of the Treasury announced new Iran oil sanctions on May 7 targeting Iraqi oil officials, Iran-backed militia leaders, and associated companies accused of facilitating oil smuggling and terrorist financing operations. The measures, issued through the Treasury Department’s Office of Foreign Assets Control in Washington, aim to increase economic pressure on Iran-linked networks operating inside Iraq’s energy sector.
The sanctions package expands the Trump administration’s “Economic Fury” campaign against Iran while increasing scrutiny of Iraqi oil exports allegedly linked to sanctioned militia groups. The Treasury Department said the action targets corruption, illicit energy transactions, and regional militant financing tied to Iran-backed organizations.
Treasury Expands Economic Pressure on Iran
The U.S. Department of the Treasury said the latest sanctions were issued through the Office of Foreign Assets Control under Executive Order 13902 and Executive Order 13224. The measures target Iran’s petroleum sector and organizations designated under U.S. counterterrorism authorities, including Foreign Terrorist Organization and Specially Designated Global Terrorist classifications previously issued by the State Department and Treasury.
Treasury Secretary Scott Bessent said the sanctions are designed to disrupt financial networks allegedly supporting Iran-backed militias operating across Iraq. According to Treasury the broader “Economic Fury” campaign has already disrupted billions of dollars in projected Iranian oil revenue and frozen hundreds of millions in regime-linked cryptocurrency assets.
OFAC Authorities and Legal Basis
| Indicator | Recent Movement | Context |
|---|---|---|
| Sanctions Authorities | Expanded designations issued | Treasury’s OFAC used Executive Orders 13902 and 13224 to target oil networks and militia financing operations |
| Militia Designations | Existing FTO and SDGT status reinforced | The U.S. State Department designated Asa’ib Ahl Al-Haq as an FTO in 2020 and Kata’ib Sayyid Al-Shuhada in 2025 |
| Economic Pressure Campaign | Broader enforcement escalation | Treasury said the “Economic Fury” strategy targets Iran’s oil exports, shadow banking networks, and sanctions evasion systems |
The Treasury Department also warned foreign financial institutions and shipping operators about potential secondary sanctions exposure. However, the agency stated that sanctions enforcement remains focused on entities facilitating illicit oil trade, covert shipping operations, and financial transactions involving designated groups.
Iraqi Oil Sector Corruption Allegations
The Treasury Department accused Iraqi Deputy Oil Minister Ali Maarij Al-Bahadly of facilitating oil diversion schemes benefiting Iran-linked networks and militia organizations. According to OFAC, Al-Bahadly allegedly used positions within Iraq’s Ministry of Oil and parliament’s oil and gas committee to authorize exports connected to sanctioned smuggling operations.
Treasury officials alleged that oil from Iraq’s Qayarah oil field was transported to facilities in Khor Zubayr, where Iranian and Iraqi oil products were reportedly mixed before export. According to OFAC, forged documentation was allegedly used to disguise the oil’s origin and avoid sanctions scrutiny.
Oil Smuggling Network Operations
The Treasury Department linked the operation to previously sanctioned oil smuggler Salim Ahmed Said and Dubai-based VS Oil Terminal FZE, which Treasury sanctioned in June 2025. OFAC stated that Iraqi government officials allegedly enabled access to export rights and falsified documentation supporting illicit transactions.
- Treasury Allegation: OFAC said Iraqi officials allegedly facilitated millions of dollars in daily oil movements connected to sanctioned networks.
- Regional Security Concern: Treasury linked oil revenue flows to financing channels benefiting Iran-backed militia organizations operating inside Iraq.
- Sanctions Enforcement: The Treasury Department warned companies and shipping operators that involvement in covert oil trade may trigger secondary sanctions exposure.
The sanctions are intended to pressure networks accused of exploiting Iraq’s oil sector while limiting Iran’s access to regional revenue channels. However, the agency did not announce direct restrictions on Iraq’s broader state oil export system.
Iran-Backed Militias and Financial Operations
The Treasury Department designated multiple figures connected to Asa’ib Ahl Al-Haq and Kata’ib Sayyid Al-Shuhada, both Iran-aligned militia groups operating in Iraq. Treasury officials alleged the organizations were involved in oil smuggling, financial coordination, and weapons procurement activities tied to the Islamic Revolutionary Guard Corps-Qods Force.
According to Treasury statements, militia-linked economic officials allegedly used businesses, government contracts, and transport operations as fronts for financial activity supporting militia operations. Treasury warned, some officials of coordinating weapons purchases and logistics with Hizballah-linked finance operatives.
Militia Leaders Named in Sanctions
The sanctions package included Mustafa Hashim Lazim Al-Behadili, identified by Treasury as an Asa’ib Ahl Al-Haq economic official involved in oil smuggling and transport operations in southern Iraq. Treasury also designated Ahmed Khudair Maksus Maksus and Mohammed Issa Kadhim al-Shuwaili for alleged involvement with Kata’ib Sayyid Al-Shuhada and weapons procurement activities.
Treasury officials stated that several Iraqi energy and transport companies linked to Al-Behadili were also sanctioned under Executive Order 13224. The agency said these measures are intended to disrupt commercial structures allegedly used to finance militia activity and evade U.S. sanctions enforcement.
Economic Fury and Maximum Pressure Strategy
The sanctions package forms part of the Trump administration’s wider “maximum pressure” approach targeting Iran’s oil exports, shipping networks, and overseas financial systems. Treasury officials said the campaign also focuses on shadow banking operations, cryptocurrency transfers, and foreign entities facilitating Iranian commerce.
Treasury warned that foreign companies, airlines, shipping operators, and financial institutions may face sanctions risks if they knowingly support transactions involving designated individuals or entities. The agency specifically referenced concerns involving oil shipments connected to independent Chinese “teapot” refineries.
Secondary Sanctions and Global Risks
| Indicator | Recent Movement | Context |
|---|---|---|
| Secondary Sanctions Risk | Expanded warning issued | Treasury cautioned foreign banks and companies about transactions involving sanctioned oil networks |
| Oil Revenue Disruption | Billions in projected revenue affected | Treasury stated the Economic Fury campaign disrupted major Iranian oil-related financial flows |
| Cryptocurrency Enforcement | Nearly $500 million frozen | Treasury linked enforcement efforts to regime-connected digital asset operations |
Treasury officials said the broader strategy seeks to reduce Iran’s ability to project regional influence through proxy organizations and overseas financial operations. However, the department also stated that sanctions programs remain designed to encourage behavioral change rather than permanent economic isolation.
Implications for Iraq and Regional Security
The sanctions target Iraq-linked oil networks and militia financing operations connected to Iran-backed groups. The action highlights continued U.S. concern over militia financing networks operating alongside official state institutions and commercial infrastructure.
The Treasury Department said Iran-backed militia groups have conducted attacks against U.S. personnel, diplomatic facilities, and businesses in Iraq. The agency stated that sanctions enforcement will continue against organizations or companies allegedly supporting illicit oil trade and militia-linked financing operations.
Stakeholder Comments
Treasury Secretary Scott Bessent described the sanctions campaign as an effort to prevent Iranian networks from exploiting Iraqi resources and financing militant operations. OFAC officials emphasized that sanctions enforcement will continue against entities facilitating covert oil transfers, financial concealment structures, and sanctions evasion systems.
The Treasury Department also reiterated that sanctioned entities may petition for removal from the SDN list if they demonstrate compliance with U.S. legal requirements and sanctions regulations.
The latest Treasury sanctions expand U.S. efforts to target Iranian financial networks, Iraqi oil-sector corruption allegations, and militia-linked commercial operations. The measures reflect continued use of counterterrorism authorities and energy-sector sanctions as part of Washington’s broader regional pressure strategy.
Treasury officials said enforcement actions will continue against organizations and individuals accused of supporting illicit oil trade, sanctions evasion, and financing operations linked to Iran-backed militant groups.
Sources: U.S. Department of the Treasury, Office of Foreign Assets Control, U.S. Department of State.
Prepared by Ivan Alexander Golden, Founder of THX News, an independent news organization delivering timely insights from global official sources.
Research combines AI-assisted analysis with human-edited accuracy and context.
