The deputy minister, Ali Maarij al-Bahadli, "abused his government position to divert Iraqi oil in support of the Iranian regime and its terrorist proxies," State Department spokesman Tommy Pigott said.

"As part of a scheme to evade sanctions, Iranian oil was fraudulently mixed with Iraqi oil and sold for Iran's benefit," he said.

The United States has unilateral sanctions against Iranian oil, seeking to punish any country or company that buys it.

Iran, led by Shia clerics, has had close relations with many key players in Shia-majority Iraq since the 2003 US invasion toppled Saddam Hussein.

The United States has been escalating pressure on the Iraqi state to break off alleged cooperation with armed Iraqi Shia groups linked to Iran.

Since the United States and Israel attacked Iran on February 28, armed groups have hit US facilities in Iraq more than 600 times before a ceasefire was announced, according to a US official.

The official said that the United States was looking for "concrete actions" from Iraq to cast aside the armed groups before Washington can resume full cooperation.

During the Iran war, the United States notably stopped shipments to Iraq of cash from the Federal Reserve Bank of New York, which has handled the country's oil revenue in an arrangement dating from the US invasion.

President Donald Trump has congratulated and voiced hope for working with Iraq's prime minister-designate Ali al-Zaidi, who was selected by the ruling coalition after heavy US pressure against the frontrunner.