Iraq weighs US Iran sanctions, eyes exemptions to cushion energy and trade fallout

BAGHDAD, Iraq — Iraq's government is reviewing a new US Treasury sanctions package targeting Iran, weighing its obligation to enforce the measures against the economic strain the restrictions could place on energy imports and cross-border trade. According to a prime ministerial source, Prime Minister Ali Zayadi al-Sudani has directed financial advisers and the ministers of electricity, finance and oil to find ways to mitigate the impact or seek formal exemptions from Washington. The package covers five sectors — digital assets, technology, gold, aviation and shipping — and targets 60 individuals, entities and vessels, while also suspending general licenses that had permitted certain financial transfers linked to Tehran. Iraq has not had formal banking ties with Iran since 2011, but commercial flows continue across the roughly 1,400-kilometer border, according to Mazhar Mohammed Salih, the prime minister's financial adviser. Officials at the Electricity Ministry have identified the full halt of Iranian gas flows — following the expiration of waivers in March 2025 — as the most pressing concern. Some militia-aligned leaders within the Coordination Framework have argued that the sanctions are intended to sever Iraq's economic links with Iran and eventually target Iraqi figures. Ihsan al-Shammari, head of the Center for Political Thought, said bilateral trade exceeded $10 billion in 2025 and placed Iraq among the countries, alongside China, Russia, Turkey and India, most exposed to US secondary sanctions pressure.