The US Treasury Department has lifted sanctions on Iraqi airline Fly Baghdad and two of its Boeing 737s, more than two years after accusing the carrier of transporting fighters and weapons for Iran’s Islamic Revolutionary Guard Corps (IRGC) Quds Force and allied militant groups.
The Office of Foreign Assets Control (OFAC) removed Fly Baghdad, also known as Iraq Express, and the two aircraft from its Specially Designated Nationals list on August 5, 2026.
A Treasury official said the airline had made major changes to its operations and had addressed the conduct that led to the sanctions. The department did not say exactly what those changes were.
Fly Baghdad was sanctioned in January 2024 under US counterterrorism laws.
At the time, the Treasury Department accused the airline of supporting the IRGC Quds Force by transporting personnel, weapons and money throughout the Middle East.
The Treasury Department said Fly Baghdad flights had carried weapons to Damascus International Airport for delivery to the IRGC-Quds Force and Iran-aligned groups operating in Syria. The department said those shipments included missiles, rifles, rocket-propelled grenades and machine guns.
US officials also accused Kata’ib Hezbollah of using Fly Baghdad flights to move fighters, weapons and cash to Syria and Lebanon.
The Treasury Department said the airline helped move hundreds of Iraqi fighters in October 2023, including members of Iran-backed groups, following the October 7 Hamas attack on Israel.
Fly Baghdad denied the allegations after the sanctions were imposed and said the US decision was based on incorrect information.
The sanctions effectively barred US citizens and companies from doing business with Fly Baghdad and blocked any property or financial interests the airline held within US jurisdiction.
The OFAC issued a temporary exemption in 2024 that allowed certain transactions needed for civil aviation safety and for companies to wind down existing agreements with the airline. That included maintenance, insurance, ground services and the repossession of leased aircraft.
The two aircraft removed from the sanctions list were Boeing 737s that the Treasury Department had previously identified as blocked property belonging to Fly Baghdad. The aircraft carry Iraqi registrations YI-BAF and YI-BAN.
The department said removing the airline from the list does not signal a broader change in US policy toward Iran, the IRGC or other groups designated as terrorist organizations.
A Treasury official also said the decision was unrelated to current US negotiations with Iran over the conflict in the Persian Gulf.
“FBA has demonstrated major changes to their operations such that their listing is no longer warranted,” the official said. “They have addressed sanctionable conduct.”
The department said sanctions could be imposed again if circumstances change.
The US action does not clear Fly Baghdad of separate restrictions elsewhere.
The airline remains on the European Union’s Air Safety List and is banned from operating within the EU because of what European regulators describe as serious safety deficiencies. Fly Baghdad and Iraqi Airways were among six individual airlines subject to an EU operating ban when the list was updated in June 2026.
Fly Baghdad was established in 2014 and operates scheduled passenger services from Iraq to destinations around the Middle East and other parts of the region.