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Iran Conflict 2026
13SEP

US blacklists an Iraqi bank over Iran

3 min read
13:27UTC

OFAC designated Baghdad's International Development Bank for Investment and Finance on 15 October, saying it sends profits to Iran monthly in dollars.

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ConflictAssessed
Key takeaway

Treasury hit an Iraqi bank it says pays Iran monthly in dollars, weeks after US troops left Erbil.

On 15 October OFAC, the US Treasury's sanctions office, designated Baghdad's International Development Bank for Investment and Finance, also known as the Iraq Development Bank⁠1. General Licence FF gives counterparties time to wind down dealings with it. Treasury says the bank abused its access to the now-dissolved US dollar wire auction and sends profits to Iran monthly in dollars⁠2.

The auction was the Central Bank of Iraq's daily sale of dollars to commercial banks. Treasury says the bank also absorbed Bank Melli Iran's Iraqi capital when that branch closed⁠3. In September the State Department sanctioned Kataib Hezbollah finance networks; this designation moves from militia money to a licensed Iraqi lender.

The designation came 15 days after the last American troops left Erbil Air Base. On 2 October Esmail Qaani, head of the IRGC Quds Force, the Guards' foreign arm, called for eliminating "remaining traces of the US presence in other arenas"⁠4. On 1 October Kataib Hezbollah, an Iran-aligned Iraqi militia, announced a halt to operations except against "hostile aircraft". It also denied any disarmament deal with Prime Minister Ali al-Zaidi⁠5.

Deep Analysis

In plain English

Iraq earns most of its money from oil sold in US dollars. Those dollars pass through the US financial system, which gives Washington a say over which Iraqi banks can use them. Treasury says this Baghdad bank used that access to move money for Iran, which is under US sanctions. Being blacklisted means US firms must stop dealing with it. OFAC did not mark it for secondary sanctions, which lowers the risk for foreign banks. The Quds Force is the foreign operations arm of Iran's Revolutionary Guards.

Deep Analysis
Root Causes

Iraq sells its oil in dollars, and those dollars pass through the US financial system, which gives Washington a say over how they reach Iraqi banks. Until it was dissolved, the Central Bank of Iraq's dollar auction let private banks buy dollars against import invoices that were often hard to check.

Iran needs dollars it cannot earn directly under sanctions. An Iraqi bank with legacy auction access and a former Bank Melli branch's capital offers a route, Treasury says, through ownership tied to an IRGC Quds Force financier.

What could happen next?
  • Precedent

    Treasury's pressure on Iraqi banks continues after the last US troops left Erbil.

  • Risk

    Further Iraqi bank designations could weaken the dinar on the street market and strain Baghdad's ties with Washington.

Sources:OFAC·US Treasury·The National
Mentions:OFAC →US Treasury →Central Bank of Iraq →Bank Melli Iran →Iraq →IRGC Quds Force →Erbil Air Base →Kataib Hezbollah →Ali al-Zaidi →Iran →Tehran →Baghdad →Hezbollah →FinCEN →Washington →International Development Bank for Investment and Finance →General Licence FF →
First Reported In

Update #181 · Houthi missiles kill 13 at Riyadh's airport

OFAC· 17 Oct 2026
Read original →
Causes and effects
Caused by
US flies its last troops out of Erbil
Qaani called for removing the remaining US presence elsewhere after US troops left Erbil.
Occurred 30 Sept 2026
Read story →
State Department sanctions two Hezbollah money networks
Washington moved from sanctioning militia finance networks to designating an Iraqi bank.
Occurred 10 Sept 2026
Read story →
This Event
US blacklists an Iraqi bank over Iran
US troops have left Erbil, but Treasury is still policing the dollars it says an Iraqi bank routes to Iran.
Different Perspectives
Wang Yi
Wang Yi
China's foreign minister and Djibouti's issued a joint communique on 21 October saying the war should not reach the Horn of Africa and stressing free navigation through Bab al-Mandeb. The text names neither Iran nor the Houthis, and Djibouti hosts China's only overseas military base, opposite the Yemeni coast.
Ministry of External Affairs
Ministry of External Affairs
India's foreign ministry called the attacks on Saudi civilian and energy sites "unacceptable" on 22 October and said they must stop at once. An Indian died at Dammam, Indians were injured there and at Shaybah, and about 4,000 Umrah pilgrims remain stranded by one MP's count.
Iraq
Iraq
Iraq closed the al-Sheeb crossing with Iran to travellers and trucks from 21 October and said other crossings would close gradually. Unlike September's closure, which ended on a staged timetable, this one has none, and Iran's interior ministry said it received no notice.
Abdel Fattah el-Sisi
Abdel Fattah el-Sisi
Egypt's president said on 21 October that Cairo's support would "defend Saudi territory, and does not include an attack on Yemen". Araghchi warned that Egyptian involvement would further complicate the situation, and Cairo's limit matches the one Ankara set on 8 October against attacking another state's soil.
UK Ministry of Defence
UK Ministry of Defence
The MoD said on 20 October that RAF Typhoons over Saudi Arabia will not strike the Houthis, but extended tanker support to Saudi operations including against Houthi targets in Yemen. The tanker line sets no limit on strikes, so British aircraft may now refuel Saudi jets on bombing runs.
Turkey
Turkey
Ankara sent the Mecca Joint Defence Agreement to parliament around 20 October, and its published text treats an attack on one party as an attack on all. Article 16 brings it into force only on the last ratification, so the 5 October invocation in Riyadh could not yet bind Turkey.

Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.