Baghdad Has an Opportunity To Counter Illicit Iranian Activity in Iraq. Will the Government Take It?

Past Iraqi investigative committees have been largely toothless when it comes to targeting Iran-backed criminals, and history may now repeat itself.

On September 6, Iraqi Prime Minister Mohammad Shia al Sudani announced the formation of a committee to investigate the smuggling of Iranian oil through Iraqi ports and waters, which has oftentimes been accomplished by mixing it with legitimate Iraqi exports. While Sudani’s statement “emphasized no leniency in this file,” the track record of similar committees investigating Iran-aligned actors suggests the perpetrators may not be held to account.

Illicit Oil Smuggling Schemes Through Iraq Earn Iran Billions

Iran has devised numerous illicit schemes to generate revenue. These plans are dependent upon the participation of Iraqi businesses, Iran-backed militias, and even government officials. Reporting by Reuters in 2024 identified oil smuggling routes that generated at least $1 billion, and potentially reached more than $3 billion, annually. This illicit activity includes oil blending, other methods of camouflaging the oil’s origin, and the misuse of Iraqi fuel allocations.

Iran’s oil smuggling is enabled by Iran-backed militias’ capture of government oil positions. These militias, many of which have political arms that are part of the governing coalition, have used their influence in the Iraqi government to put members and allies in key offices that control essential elements of Iraq’s oil sector.

The Trump Administration Is Addressing Iraq as Part of Maximum Pressure on Iran

In early March, the Trump administration chose not to renew a waiver that enabled Iraq to purchase electricity from Iran. State Department Spokesperson Tammy Bruce encouraged “the Iraqi Government to eliminate its dependence on Iranian sources of energy as soon as possible.” However, a similar waiver for gas purchases remains in place.

In early September, the U.S. Treasury Department sanctioned an Iraqi national “for smuggling Iranian oil disguised as Iraqi oil,” which generates about $300 million annually for Iran and others involved in the scheme. In early July, the department targeted a network run by Iraqi Salim Ahmed Said for selling Iranian oil, which companies in Said’s network falsely describe as Iraqi, implicating Iraqi officials who provided documentation. This network moved billions of dollars’ worth of Iranian oil.

Previous Committees Fail To Hold Iran Accountable

Past investigative committees of the Iraqi government have largely failed to hold Iran accountable for a range of malign activities in Iraq. For example, following drone attacks on military bases throughout Iraq in June, widely credited to Iran-backed militias, an investigative committee determined the drones were made outside of Iraq, but did not identify the weapons’ country of origin.

Similarly, when members of Kataib Hezbollah, an Iran-backed militia that is part of the Popular Mobilization Forces (PMF), engaged in a firefight in the Ministry of Agriculture and killed a policeman, the investigative committee condemned the militia and recommended the removal of two Kataib Hezbollah commanders from their roles in the PMF. While Sudani accepted the recommendations of the investigation, the government does not appear to have followed through on them.

U.S. Should Pressure Sudani To Ensure an Unbiased Investigation and Swift Action

The United States should tell Sudani that this committee is an opportunity to put an end to rampant illicit activity in Iraq that funds and enables the regime in Tehran. He should staff the committee with impartial experts and provide them with unfettered access to oil officials, relevant sites, and businesses, as well as records. Then, the government should quickly address problems they identify, executing a substantive campaign of reforms to decrease Iran’s influence in Iraq’s oil sector and put an end to its sanctions evasion.

If this committee instead conducts a sham investigation and the government fails to reform, then the United States should expand its sanctions to include Iraqi oil officials who enable and benefit from Iranian oil smuggling.

Bridget Toomey is a research analyst at the Foundation for Defense of Democracies (FDD). For more analysis from Bridget and FDD, please subscribe HERE. Follow Bridget on X @BridgetKToomey. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.