The US Office of Foreign Assets Control (OFAC) has sanctioned Iraq's Fly Baghdad (IF, Baghdad) and its Chief Executive Officer and owner, Basheer Al-Shabbani, for allegedly "providing assistance" to the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its proxy groups in Iraq, Syria, and Lebanon. The airline denied being involved in any illegal activities.

"For several years, Iraqi airline Fly Baghdad has supported the operations of the IRGC-QF and its proxies by delivering materiel and personnel throughout the region. Fly Baghdad flights have delivered shipments of weapons to Damascus in Syria for transfer to members of the IRGC-QF and Iran-aligned militia groups on the ground in Syria, including the Syrian Arab Republican Guard, Lebanese Hizballah, Kata'ib Hizballah (KH), and the KH-affiliated Abu al-Fadl al-Abbas Brigade," the US Treasury Department's enforcement agency said.

OFAC alleges that Fly Baghdad carried "fighters, weapons, and money" to Syria and Lebanon on behalf of Kata'ib Hizballah, one of the main Iran-aligned militias in Iraq. The carrier reportedly carried KH fighters for training in Lebanon alongside the now defunct Iraqi airline, Al Naser Wings Airlines. KH also allegedly used Fly Baghdad aircraft to transfer "bags of US currency and US-made weapons obtained through battlefield collection". OFAC said the airline also participated in carrying Iraqi fighters after the October 7 Hamas attack on Israel to aid Iran-affiliated militias.

The US authorities specifically designated two of Fly Baghdad's aircraft, B737-700 YI-BAN (msn 32412) and YI-BAF (msn 35064). The ch-aviation fleets ownership module shows that both aircraft are owned by the airline. Fly Baghdad operates four more B737-800s and three B737-900ERs, which are all leased. It also has one CRJ200 and one CRJ900, both inactive.

Lessors and other parties have been given until March 22, 2024, to execute all wind-down transactions with Fly Baghdad based on existing contracts. OFAC has also authorised all transactions related to civil aviation safety for another two months.

Following the US decision, the Iraqi Central Bank reportedly froze Fly Baghdad's accounts in three domestic banks.

"The management of Fly Baghdad and its owner were surprised by the US Treasury's decision... Fly Baghdad denounces this decision as it is not based on any material or moral evidence that could convict the company. The company has worked for years under the direct supervision of the Iraqi government, represented by the Iraqi Civil Aviation Authority and the Ministry of Transport. It is also the only member of the IATA organization in Iraq, and all its operations for the transportation of passengers are under the supervision of the Iraqi Civil Aviation Authority and other authorities in the region," the Iraqi carrier said in a statement.

Fly Baghdad demanded that the US come forward with evidence of the airline's wrongdoing and said it would seek legal recourse to demand compensation.

In December 2023, the airline was proscribed on the EU Air Safety List, albeit the decision was based on the general ban on all Iraqi carriers in place since 2015, not any specific safety violation by the carrier. The airline was planning to launch services to the EU using an A320-200 chartered from Dan Air (DN, Bucharest Baneasa).

"We cannot ignore international sanctions. We are analysing and deciding on the next steps that have to be taken in this particular situation," Dan Air's Chief Executive Matt Ian David told ch-aviation.

Fly Baghdad is the latest Iraqi airline to be designated by OFAC for alleged ties to Iran, the most recent being Al-Naser Airlines (Baghdad) and Al Naser Wings Airlines (Baghdad). Under various sanctions programmes related to the country, the enforcement agency has already targeted a number of airlines in Iran, Syria, and select operators in other countries.