Tensions within Iraq's political landscape have intensified following leaks from government sources, including the Ministry of Foreign Affairs, regarding potential US sanctions. These anticipated measures are expected to target financial institutions, investment companies, banks, and individuals or groups accused by the United States of connections to Iran, sanctions evasion, or human rights violations.

Three Iraqi political and government officials informed Al-Araby Al-Jadeed, The New Arab's Arabic-language sister website, about recent developments. According to these officials, US representatives visiting Baghdad recently indicated that the new sanctions would target individuals and groups engaged in money laundering and financial activities benefiting Iranian or Iran-aligned actors in the region.

Over the past seven years, the United States has imposed sanctions on Iraq on multiple occasions, particularly since 2018. Officials observe that the newly discussed sanctions coincide with a sensitive period, as Iraq forms a government and faces increasing pressure from Washington to limit Iranian influence and control armed groups.

These revelations have contributed to a further decline in the value of Iraq's national currency against the US dollar in parallel markets. The Iraqi government is already experiencing liquidity constraints and has not yet introduced the 2026 budget bill to parliament.

The anticipated sanctions follow Iraq's recent reversal of a controversial decision that had temporarily designated Lebanon's Hezbollah and Yemen's Houthis as "terrorist organisations". Their inclusion in Iraq's official Gazette prompted significant domestic criticism.

Two senior officials from Iraq's Justice Ministry and the Central Bank of Iraq, contacted by TNA, declined to comment on delisting the two groups, stating that the matter was outside their authority and that their roles are limited to implementing decisions.

Iraq's Anti-Money Laundering and Counter-Terrorism Financing Office, established in 2007 within the CBI and reconstituted under Law No. 39 of 2015, functions as an independent entity with its own legal and administrative framework.

A recent official Iraqi document indicated that the Committee for Freezing Terrorist Organisations' Assets removed two paragraphs that had temporarily designated Hezbollah and the Houthis as "terrorist groups", citing incomplete and non-compliant information.

Prime Minister Mohammed Shia' al-Sudani described the listing as an administrative error and stated that those responsible are under investigation. However, political parties and armed groups have accused the government of succumbing to US pressure and question whether the incident was merely a bureaucratic mistake.

A Foreign Ministry official informed Al-Araby Al-Jadeed that the US sanctions may include "prominent names in armed factions that now hold seats in the new parliament." Washington is expected to employ several Treasury measures against specific Iraqi militia groups believed to be responsible for repeated attacks on oil and gas sites in the Kurdistan Region and for smuggling US dollars to Iran.

Another political source questioned whether the leaks represented "genuine warnings or just ongoing American pressure."

Senior political figure Aed al-Helali, an ally of the prime minister, stated that there is significant anticipation in Baghdad regarding "a new US sanctions package targeting political, economic, and private entities and individuals accused of dealing with Iran."

He indicated that leaked information suggests Washington has completed its review of financial and security files concerning political figures, businesspeople, militia leaders, and companies in the transport, energy, and logistics sectors. He further stated that the United States seeks to "reset the Baghdad–Washington relationship" and counter what it perceives as Iran's increasing influence within Iraqi state institutions.

Analysts suggest that the forthcoming sanctions could be the most comprehensive in recent years and may be implemented incrementally to prevent abrupt political or economic disruptions. Iraqi officials are considering direct negotiations with Washington to address technical challenges and mitigate risks, particularly for companies that may be identified.

In July, measures were enacted against an Iraqi business network alleged to have facilitated the smuggling of Iranian oil under legal cover. Businessman Salim Ahmed Saeed reportedly operated this network.

Additionally, the latest draft of the US National Defence Authorisation Act links future security assistance to Baghdad's efforts to diminish the influence of Iran-aligned militias operating outside state control. The draft also enhances the prime minister's authority and mandates accountability for militia members or security personnel involved in attacks on US or Iraqi forces.

The draft permits the US defence secretary to waive these restrictions for up to 180 days if such action is considered to serve US national security interests.

Following the 2003 US-led invasion of Iraq, Washington has played a significant role in rebuilding Iraq's military and continues to support counter-ISIS operations. The United States previously maintained approximately 2,500 troops in Iraq, although the current number is uncertain. Washington has agreed to withdraw its forces by 2026 at Baghdad's request, while troops stationed in the Kurdistan Region are expected to remain until the end of the following year.

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