Overview
The Sanctions Update, compiled by attorneys from Steptoe’s award-winning International Regulatory Compliance team and the Stepwise: Risk Outlook editorial team, publishes every Monday. Guided by the knowledge of Steptoe’s industry-leading International Trade and Regulatory Compliance team, the Sanctions Update compiles and contextualizes weekly developments in international regulatory enforcement and compliance, as well as offers insights on geopolitical context, business impacts, and forthcoming risks.
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The Lede
US Threatens 50% Tariffs on Countries Supplying Weapons to Iran
Just hours after agreeing to a two-week ceasefire with Tehran on Wednesday, President Trump threatened that any country supplying Iran with military weapons would face an immediate 50% tariff on goods exported to the US. Many factors remain unclear, including which countries are intended to be subject to this penalty, whether the Trump administration will follow through, and what legal authority it would use. The warning appears aimed primarily at China, following what the US considers a long history of China aiding Iran in evading Western sanctions. Even as a threat, the move risks complicating US-China relations ahead of the highly anticipated Trump-Xi meeting next month, where stability and a potential reset in ties sits at the top of both Washington and Beijing’s agenda.
The threat of secondary tariffs builds upon the Trump administration’s policy of "maximum pressure” sanctions on Iran, enacted following the 2018 withdrawal from the from the Joint Comprehensive Plan of Action (JCPOA). Iran has developed an extensive network to evade sanctions, involving intermediaries, transshipment hubs, shadow fleets, insulated banking systems, and front companies to sustain its economy and acquire military and dual-use technologies. US sanctions targeting these suppliers have implicated individuals and entities in China, Russia, the UAE, Türkiye, Germany, India, and Ukraine, underscoring the transnational nature of Iran’s procurement efforts.
While these networks operate across multiple jurisdictions, Wednesday’s announcement appears aimed at Chinese entities, following reports alleging Beijing’s support for Iran’s defense supply chains during the US-Israel war on Iran. Since the onset of the conflict, Beijing has taken a relatively restrained approach—avoiding direct military support, steering clear of public criticism of either side, emphasizing de-escalation, and reportedly engaging in quiet diplomacy to encourage a ceasefire (which Beijing has not confirmed, unlike its more recent public mediation efforts). This caution reflects both the depth of Beijing’s ties with Tehran and its hesitancy to antagonize the Trump administration—or embroil itself in a thorny regional conflict—by publicly coming to Iran’s aid, underscoring its longstanding trade-first doctrine in the Middle East. For China, Iran offers both energy security and strategic access to the Middle East. The relationship was reinforced by the 2021 Strategic Cooperation Agreement, a 25-year bilateral pact reportedly involving up to $400 billion in Chinese investment in exchange for Iranian oil at below market prices. Iranian crude accounts for more than 75% of total bilateral trade, 80–90% of Iran’s shipped oil, and 13% of China’s oil imports—a lifeline that has helped Iran mitigate sanctions and fund its missile and nuclear programs.
While not a major arms supplier to Iran, recent reports have accused Chinese firms, including some with links to the People’s Liberation Army, of providing Iran with missile fuel precursors and AI-enabled intelligence on US military activities in the Middle East. Several shipments of sodium perchlorate, a key missile fuel component, have reportedly been sent from China to Iran since the war began. Other reports allege Chinese firms supplied AI-driven open-source intelligence on US bases, warships, and aircraft in the region currently—information that narrows Iran’s intelligence gaps and enables more precise targeting. Additionally, Semiconductor Manufacturing International Corporation (SMIC), China’s largest chipmaker, has reportedly been sending chipmaking tools to Iran’s military-industrial complex for the past year. China’s Ministry of National Defense on Thursday denied that its firms have provided such equipment or intelligence. In a potential escalation beyond the transfer of components, reporting just days before the outbreak of the war suggested Iran was close to acquiring China’s CM-302 supersonic anti-ship missile, though Beijing has not confirmed any transfer. Such a deal would mark a significant step beyond the component-level support alleged by US officials— a concern that could have influenced Wednesday’s announcement.
It remains unclear what legal authority the US would use to impose a 50% tariff on countries engaged in weapons sales to Iran, especially after the Supreme Court in February struck down President Trump’s flexible application of tariffs through International Emergency Economic Powers Act (IEEPA). The administration could argue that the new tariff differs from prior ones, such that IEEPA is an appropriate vehicle. Alternatively, if the 50% tariff is aimed primarily at China, the administration could attempt to add duties under existing Section 301 tariffs, enacted in 2018 to counter what the US calls China’s “unfair” trade practices. Still, it is possible this threat will remain just that—as with previous unimplemented tariff threats, such as the proposed 25% tariff on countries doing business with Iran announced earlier this year. As of January 2026, the Trump administration has only fully implemented 27% of President Trump’s tariff threats.
While the threat could bolster the administrative efforts to further isolate Iran militarily, the announcement also risks adding a new source of friction ahead of the Trump-Xi meeting, rescheduled to May 14-15. The meeting is expected to focus on maintaining the relative stability in the bilateral economic relationship achieved during their October summit in Busan. The meeting outcomes included eased tariffs, resumed agricultural purchases, and a partial rollback of China’s critical mineral export restrictions. US Trade Representative Greer has also suggested discussions could include establishing bilateral trade and investment boards in non-sensitive sectors. A new levy tied to alleged military cooperation with Iran risks these negotiations and prompting retaliation from Beijing ahead of the meeting, such as tightened export restrictions to gain bargaining leverage.
US Developments
Iran Sanctions Relief Remains Uncertain as Negotiations Stall
On April 7, 2026, President Trump announced that the United States had agreed to a two-week ceasefire with Iran, contingent upon Iran’s opening of the Strait of Hormuz. The announcement came just hours after President Trump recommitted to further attacks, including on key Iranian infrastructure, if the two sides were unable to come to an agreement. Following the ceasefire, Vice President JD Vance led a US envoy in negotiations with Iran over the weekend, but the two sides were unable to reach an agreement and high-level talks appear to have halted.
The prospect of further negotiation in the near term remains unclear, but it appears likely that tariff and sanctions relief will be on the agenda should the talks resume. President Trump previously confirmed that the United States is “talking [t]ariff and [s]anctions relief with Iran.” According to reporting by the New York Times, Tehran’s 10-point framework for the negotiation contains demands that the United States lift all primary and secondary sanctions on Iran and that the United Nations Security Council (UNSC) terminates all resolutions against Iran, including those that reimposed sanctions for nuclear activities. It is unlikely that the Trump administration will entertain complete sanctions relief, though whether it grants some degree of sanctions relief is less clear. The administration has recently shown flexibility in its sanctions approach toward Iran in furtherance of its policy goals. For example, on March 20, 2026, OFAC issued General License (GL) U authorizing certain transactions incident and necessary to the sale, delivery, or offloading of Iranian-origin oil or petroleum products at sea.
The ceasefire remains fragile. After the talks ended, President Trump announced a “complete blockade” on the Strait of Hormuz, which US Central Command has clarified will only be a blockade of ships entering or departing Iranian ports or coastal areas. Separately, President Trump has also warned that any country supplying weapons to Iran will be subject to an immediate 50 percent tariff on all goods sold to the United States, which National Economic Council Director Kevin Hassett said could be imposed under the International Emergency Economic Powers Act (IEEPA) despite a recent Supreme Court ruling against the use of IEEPA for previous tariffs.
OFAC Extends Term of License for Certain Payments with Russian Central Bank
On April 8, 2026, OFAC issued an amended Russia-related GL 13Q, “Authorizing Certain Administrative Transactions Prohibited by Directive 4 under Executive Order 14024.”
GL 13 authorizes certain payments of taxes, fees, or import duties to, and purchases or receipt of permits, licenses, registrations, certifications, or tax refunds from the Russian Central Bank, National Wealth Fund, or Ministry of Finance, that would otherwise be prohibited by Directive 4 of Executive Order (EO) 14024. GL 13Q extends the term of the GL from its previous expiration date of April 9, 2026, to July 9, 2026.
Alongside GL 13Q, OFAC also issued two amended FAQs: FAQ 999 (describing authorizations available for entities subject to Directive 4) and FAQ 1118 (explaining that GL 13Q does not authorize payment of the so-called Russian “exit tax”).
Lawmakers Introduce Bill Terminating Russian Oil Licenses
On April 9, 2026, Rep. Gregory Meeks (D-NY), the Ranking Member of the House Foreign Affairs Committee, and Rep. Bill Keating (D-MA), the Ranking Member of the Subcommittee on Europe, introduced the End Russian Oil Windfalls Act (H.R. 8222).
The legislation would, upon enactment, nullify:
- Russia-related GL 133, “Authorizing the Delivery and Sale of Crude Oil and Petroleum Products of Russian Federation Origin Loaded on Vessels as of March 5, 2026 to India”
- Russia-related GL 134A, “Authorizing the Delivery and Sale of Crude Oil and Petroleum Products of Russian Federation Origin Loaded on Vessels as of March 12, 2026.”
Both GLs were issued by OFAC amid the conflict in Iran to ease pressure on oil markets.
The bill would also prohibit OFAC from issuing future licenses authorizing otherwise prohibited transactions that are ordinarily incident and necessary to the sale, delivery, or offloading of crude oil or petroleum products of Russia. Moreover, it would require that the President, within 30 days of enactment, impose sanctions on any Russian person determined to engage in oil and gas extraction, oil and gas refining or production, or maritime transportation of oil and gas or other petroleum products.
OFAC, FinCEN Issue Joint Proposed Rule Related to GENIUS Act
On April 8, 2026, OFAC and the Financial Crimes Enforcement Network (FinCEN) issued a joint proposed rule to implement provisions of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), a sweeping framework for stablecoin regulation.
Principally, the joint proposed rule aims to create anti-money laundering and sanctions regulations for permitted payment stablecoin issuers (PPSIs), which are treated under the GENIUS Act as financial institutions (FIs) for the purposes of the Bank Secrecy Act.
Anti-money laundering (AML)
The joint proposed rule would impose many of the existing rules and regulations for FIs onto PPSIs, including those which were recently proposed by FinCEN relating to the creation and maintenance of anti-money laundering and countering the financing of terrorism (AML/CFT) programs. PPSIs would be required to create and implement policies, procedures, and controls “reasonably designed” to ensure compliance with the BSA and 31 C.F.R. chapter X.
Sanctions
PPSIs will also be required to create and maintain an effective sanctions compliance program. The joint proposed rule indicates that an “effective sanctions compliance program” has, at minimum, five key elements:
- Senior management and organizational commitment;
- Risk assessments;
- Internal controls;
- Testing and auditing; and
- Training.
PPSIs will also be required to comply with the standard recordkeeping and reporting requirements under 31 C.F.R. Part 501, and to provide upon request to OFAC any and all certifications submitted to its primary Federal payment stablecoin regulator or State payment stablecoin regulator, certifying that it has implemented an effective sanctions program.
The joint proposed rule is open for public comment until June 9, 2026.
UK Developments
OTSI to Expand Licensing Remit for Sanctioned Goods
The Office of Trade Sanctions Implementation (OTSI) has announced that the expansion of its licensing remit will include responsibility for licensing the export of sanctioned goods and associated ancillary services to sanctioned destinations from April 27, 2026. This development builds on OTSI’s existing role in licensing standalone trade services, such as professional and business services under the Russia sanctions regime. Responsibility for goods and services subject to both sanctions and strategic export controls, as well as export controls only, will remain with the Export Control Joint Unit.
In practical terms, the application process for export sanctions licences will remain unchanged. Exporters should continue to submit applications via the Department for Business and Trade’s SPIRE platform, with OTSI assuming responsibility for relevant applications from April 27 onwards. Where applicable, OTSI will issue Standard Individual Export Licences through SPIRE to facilitate coordination with HM Revenue & Customs and Border Force. Further guidance and updates to statutory materials are expected ahead of implementation to clarify the division of licensing responsibilities.
OFSI Extends Maritime Re-Insurance Wind Down General Licence
OFSI has announced that it has extended General Licence INT/2026/8893924 (Maritime Mutual Re-Insurance Wind Down General Licence) (the “GL”). The GL was initially introduced to permit certain UK insurers and/or UK insurance brokers to receive, process and/or transmit funds to or from certain UK designated persons, where they are obligated to do so under insurance or reinsurance contracts agreed in writing prior to February 24, 2026. The GL was originally due to expire on April 9, 2026, but has since been extended to July 8, 2026. Any persons intending to use the GL should consult the copy of the licence for full details of the permissions and usage requirements.
EU Developments
EU Council Updates Sanctions Listing under ISIL (Da’esh) and Al-Qaeda Sanctions Framework
The EU Council recently amended an individual listing under the autonomous restrictive measures regime targeting ISIL (Da’esh) and Al-Qaeda, following an update at the UN level. Changes to Council Regulation (EC) 881/2002 reflect the March 30 decision of the UN Security Council Sanctions Committee to add Hamidah Nabagal to the sanctions list. According to the listing, Nabagal acts as a mediator in ISIL financing channels in Central Africa and has been charged with financing a bombing in Kampala, Uganda, in 2021.
Individuals and entities listed under the sanctions framework are subject to an asset freeze and a prohibition on making funds or economic resources available to them.
Asia-Pacific Developments
Japan Added Four Sudan‑Linked Individuals to Sanctions List Following UN Designation
Japan announced the addition of four Sudanese individuals to its asset freeze and related financial measures regime. This followed their designation by the United Nations Security Council Sanctions Committee under Resolution 1591 for involvement in activities obstructing the peace process in Darfur. In a joint statement issued by the Ministry of Foreign Affairs, the Ministry of Finance, and the Ministry of Economy, Trade and Industry, the authorities stated that, effective 10 April, the newly designated individuals are subject to asset freezes and other measures. The action aligns Japan’s domestic measures with the UN’s updated listings adopted on 24 February and brings the total number of individuals subject to Japan’s Darfur‑related asset freeze measures to nine.
Thailand‑Cambodia Border Crackdown Brings Large‑Scale Scam Compound Into Focus
According to Thai authorities, a confiscated complex in O’Smach, Cambodia, was configured to support industrial‑scale online scam operations involving an estimated workforce of up to 10,000. The site, taken over by the Thai military amid border operations, includes dozens of buildings used for scam call centres, worker accommodation, and supporting facilities. The complex has been linked to Cambodian businessman and politician Ly Yong Phat, who has been subject to US sanctions imposed since 2024 under authorities targeting transnational criminal organisations and serious human rights abuses. The operation follows broader regional and international enforcement efforts targeting scam compounds across Southeast Asia, where authorities have increasingly combined criminal investigations with sanctions and financial measures in response to the cross‑border impact of online fraud.
India Allows Limited Iranian Crude Deliveries Under a Temporary US Sanctions Waiver
India has permitted Iranian crude oil shipments to proceed under a temporary US sanctions waiver, marking a limited re‑opening of Iranian oil flows to the country for the first time since 2019. According to industry sources, India’s shipping ministry granted one‑time berthing permission at the western port of Sikka for four vessels carrying Iranian crude at the request of Reliance Industries. Separately, tanker‑tracking data indicated that approximately two million barrels of Iranian crude oil have reached India since March 20 under the same waiver framework. The developments come amid ongoing supply disruptions linked to the conflict in the Middle East and heightened scrutiny over compliance with sanctions and maritime regulations governing sanctioned vessels.
