The U.S. Treasury Department said Iraqi Deputy Oil Minister Ali Maarij Al-Bahadly used his government position to help divert oil revenues to the Iranian government and affiliated militias.In a statement, the Treasury alleged Al-Bahadly facilitated the sale of oil “for the benefit of the Iranian regime and its proxy militias in Iraq.”

Iraq’s oil ministry and Al-Bahadly did not immediately respond to requests for comment.The sanctions were announced as Washington and Iran moved closer to a temporary arrangement aimed at halting ongoing hostilities, although key disputes between the two sides remain unresolved.

The Treasury Department also imposed sanctions on three senior leaders linked to the Iran-backed militias Kata’ib Sayyid Al-Shuhada and Asa’ib Ahl Al-Haq, groups Washington has previously accused of threatening U.S. interests and regional stability.

“Treasury will not stand idly by as Iran’s military exploits Iraqi oil to fund terrorism against the United States and our partners,” U.S. Treasury Secretary Scott Bessent said in a statement.Under U.S. sanctions rules, any assets held in the United States by the designated individuals are frozen, while U.S. citizens and entities are generally prohibited from conducting transactions with them.

The move follows comments in March by Iraqi Oil Minister Hayan Abdel-Ghani, who said Iranian oil tankers intercepted by U.S. forces in the Gulf had been operating with forged Iraqi documentation. Tehran denied those allegations.

The sanctions underscore Washington’s continuing efforts to curb Iran’s regional financial networks while maintaining parallel diplomatic contacts over de-escalation efforts in the wider Middle East conflict.