US lifts sanctions on Iraqi airline Fly Baghdad

The U.S. Treasury lifted counter-terrorism sanctions on Fly Baghdad and two aircraft, ending a designation that had tied the Iraqi airline to Iran’s Islamic Revolutionary Guard Corps. Treasury said the airline had changed its conduct and stressed that the delisting did not signal a broader policy shift on Iran.

The reversal came after Washington sanctioned Fly Baghdad in January 2024 over alleged support for the IRGC, which the U.S. treats as a major security threat. A Reuters-linked summary said the airline had been designated for alleged links to the IRGC-Quds Force and its proxy groups. Fly Baghdad rejected the action at the time, telling Reuters the sanctions were “baseless.”

Treasury’s move was not a one-company adjustment. Reuters reported that the sanctions relief covered three entities, which suggests the government was clearing a broader set of designations rather than simply erasing one airline from a list. That matters because sanctions on aviation can reach far beyond the airline itself, affecting travel, cargo movement, insurance, leasing, maintenance and access to international banking.

For Iraq, Fly Baghdad’s status carries commercial and political weight. Airlines are visible symbols of national connectivity, and relief from U.S. restrictions can help restore routes, business links and financing. At the same time, any easing on an Iraqi carrier tied to Iran-linked networks will be read against the wider fight between Washington and Tehran over influence in the Middle East.

The decision also points to the way Treasury uses sanctions as a flexible tool, not a permanent sentence. OFAC has a formal process for requesting removal from a sanctions list, which gives companies a path back if the government decides conditions have changed. In Fly Baghdad’s case, Treasury’s language points to a compliance judgment, not a geopolitical reset: the airline changed its conduct, the sanctions were removed, and Washington said the move did not alter its stance toward Iran.