Baghdad vehemently denied accusations by American officials that Iraq was helping Iran skirt international sanctions by smuggling oil out of the country and funneling the laundered profits back to Tehran.
Iraq's financial dealings with Iran have all been above "the permitted level" allowed under U.S. and international sanctions imposed against Tehran over the country's ongoing nuclear enrichment work, Ali Mussawi, spokesman for Iraqi Prime Minister Nouri al-Maliki, said Monday.
"We are dealing with Iran in a public and transparent fashion, we have not done any secret deals," Mussawi told Agence France Presse. Recent claims to the contrary, according to Mussawi, were simply a "big lie."
His comments were in response to a New York Times report on Sunday, alleging that a vast underground financial network based in Iraq is helping Iran leverage its oil reserves into revenue for the increasingly isolated government.
White House officials have held closed-door talks with their Iraqi counterparts on the country's dealings with Iran, according to the report.
In July, President Obama banned the Iraqi-based Elaf Islamic Bank from doing any business with U.S. financial institutions.
The bank is reportedly one of several institutions in Iraq involved with the smuggling and money laundering operation, American government officials told the Times.
White House officials unveiled a new round of stringent economic sanctions against the Iranian government a few days before news broke of Bagdad's involvement.
The bipartisan sanctions aim to pressure Iran into abandoning its suspected nuclear weapons program by significantly tightening restrictions on business by the country's energy, shipping and insurance sectors.
Tehran has repeatedly claimed its nuclear work is strictly for developing a new energy source for the country.
However, Western powers continue to argue Iran is actively pursing a nuclear weapon, citing the country's refusal to allow international inspectors access to its facilities.
Earlier this month, Israeli media reported that Iranian nuclear scientists have made "surprising, notable progress in the research and development of key components of [Iran's] military nuclear program."
That claim was allegedly part of a new U.S. intelligence estimate, which proponents of preemptive action against the Iranian program claim was a sign Washington was leaning inching toward that option.
But officials from the National Security Council (NSC) quickly refuted such reports, saying Iran's nuclear effort had not accelerated in any significant way since officials last reviewed intelligence on the effort earlier this year.
Source: The Hill