Iraq does not agree with US sanctions against Iran but will abide by them to protect its own interests, Prime Minister Haider al-Abadi said on Tuesday.
"As a matter of principle we are against sanctions in the region. Blockade and sanctions destroy societies and do not weaken regimes," he said at a news conference.
"We consider them (sanctions on Iran) a strategic mistake and incorrect but we will abide by them to protect the interests of our people. We will not interact with them or support them but we will abide by them," he added.
US President Donald Trump pledged on Tuesday that firms doing business with Tehran would be barred from the United States, as new US sanctions against Iran took effect.
The United States and Iran, increasingly at odds, are Iraq's two biggest allies, and the sanctions put Abadi's outgoing government in a difficult position.
Tuesday's sanctions target Iran's purchases of US dollars, metals trading, coal, industrial software and the auto sector.
Global oil prices rose on Tuesday on concern sanctions could cut world supply, although the toughest measures targeting Iran's oil exports do not take effect for four more months.