There's no earthly reason for Iraq to help Iran avoid western sanctions except to stick a finger in America's eye.
New York Times:
When President Obama announced last month that he was barring a Baghdad bank from any dealings with the American banking system, it was a rare acknowledgment of a delicate problem facing the administration in a country that American troops just left: for months, Iraq has been helping Iran skirt economic sanctions imposed on Tehran because of its nuclear program.
The little-known bank singled out by the United States, the Elaf Islamic Bank, is only part of a network of financial institutions and oil-smuggling operations that, according to current and former American and Iraqi government officials and experts on the Iraqi banking sector, has provided Iran with a crucial flow of dollars at a time when sanctions are squeezing its economy.
The Obama administration is not eager for a public showdown with the government of Prime Minister Nuri Kamal al-Maliki over Iran just eight months after the last American troops withdrew from Baghdad.
Still, the administration has held private talks with Iraqi officials to complain about specific instances of financial and logistical ties between the countries, officials say, although they do not regard all trade between them as illegal or, as in the case of smuggling, as something completely new. In one recent instance, when American officials learned that the Iraqi government was aiding the Iranians by allowing them to use Iraqi airspace to ferry supplies to Syria, Mr. Obama called Mr. Maliki to complain. The Iranian planes flew another route.
In response to questions from The New York Times, David S. Cohen, the Treasury Department's under secretary for terrorism and financial intelligence, provided a written statement saying that Iran "may seek to escape the force of our financial sanctions through Iraqi financial institutions." But he added that "we will pursue, and are actively pursuing, efforts to prevent Iran from evading U.S. or international financial sanctions, in Iraq or anywhere else."
Should we make a big deal out of it? Obama is covering up Iraq's perfidy because he doesn't want to look the fool during a presidential campaign. I doubt whether our jawboning is doing much good as far as the sanctions are concerned, although we probably shamed Iraq about allowing Iranian planes to use their airspace to deliver supplies to President Assad while he's murdering civilians.
But the sanctions and smuggling are a different story. Those are profitable enterprises for the Iraqis and it isn't likely that importunings from us would change their minds. It once again calls into question just how reliable Iraq will be as an "ally" in the War on terror and our campaign against Iranian nukes.