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 Senators Propose Lebanon Sanctions Bill as Peace Plan Faces Early Roadblocks
On August 7, US Senators James Lankford (R-OK) and Jeanne Shaheen (D-NH) introduced the Lebanon Sanctions, Stabilization, and Support Act which aims to sanction foreign persons aiding Hizballah and support the Lebanese government’s efforts to disarm the group. The bill would expand Foreign Military Financing and other security assistance to the Lebanese Armed Forces (LAF) and Internal Security Forces (ISF), conditioned on verifiable and meaningful progress toward Hizballah’s disarmament. If passed, the bill could strengthen US efforts to broker a durable settlement in Lebanon by building the security and governance capacity of the Lebanese government. However, mutual distrust between Hizballah and Israel as well as misaligned US and Israeli objectives risk derailing the Trump administration’s peace plan, potentially limiting the effectiveness of future sanctions and security assistance.
The proposed legislation would impose sanctions on foreign persons that support Iran’s financing of Hizballah, obstruct efforts by the LAF and ISF to exercise a state monopoly over all arms, or impede reforms to the country’s banking and financial sector. The bill also authorizes $200 million annually in security assistance to the LAF and ISF, with the opportunity to increase this amount to $300 million if the Secretary of State certifies that there is demonstrated progress toward disarming Hizballah. The proposed assistance follows a $230 million security package to the LAF and ISF, which was approved in October 2025 following commitments by the Lebanese government to disarm all nonstate armed groups. An additional component of the bill is humanitarian assistance and the creation of an incentive fund for the reconstruction of government services and infrastructure.
If passed, the act could reinforce the Trump administration’s ongoing efforts to broker a lasting peace agreement between Hizballah and Israel. Under the US’ proposed framework, Lebanese forces are expected to assume control of southern Lebanon as Israeli forces withdraw, while Hizballah is expected to disarm and dismantle its military infrastructure as the withdrawal proceeds. Sanctions could further constrain Hizballah’s illicit financial networks, making it more difficult for the group to finance or rebuild its military capabilities.
Beyond weakening Hizballah, the bill seeks to address the other driver of instability and conflict: limited capacity and legitimacy of the Lebanese state. Increased security assistance could bolster the capabilities of the LAF and ISF, ensuring the government can maintain control in southern Lebanon after Israeli forces withdraw. Furthermore, the bill’s incentive fund could support stabilization efforts by helping the Lebanese government provide basic services to communities historically reliant on Hizballah for security and social assistance. By strengthening state institutions and reducing Hizballah’s ability to provide those services, the act could gradually diminish sources of the group’s influence.
A major obstacle, however, is mutual distrust between Hizballah and Israel. Hizballah has rejected disarmament so long as Israeli forces remain in Lebanon. Meanwhile, Israel has maintained that Hizballah must completely disarm before it can withdraw, arguing that the group still poses a threat to its northern territory. Peace talks have stagnated as both sides remain unwilling to make concessions until the other does so first. Should the US fail to convince both sides that the process will be reciprocal and enforceable, sanctions and stabilization efforts are unlikely to make meaningful progress.
Compounding this issue are the mismatched objectives between the US and Israel. For the US, brokering peace in Lebanon has become intertwined with ending its own war with Iran, as Tehran continues to condition a broader peace deal on Israel’s withdrawal from the country. Rising domestic criticism of the war and operational costs have placed greater pressure on the US to secure a comprehensive peace deal. By contrast, Israel has signaled little urgency in ending the conflict. Israeli withdrawals from “pilot zones” in Lebanon occurred following US pressure but were limited. Israeli Defense Minister Israel Katz stated last week that the IDF was prepared to maintain long-term occupation of designated security zones in southern Lebanon, drawing criticism from the US. The Trump administration’s 15-point peace plan in Gaza has also contributed to the widening rift between the US and Israel. Israeli Prime Minister Benjamin Netanyahu rejected the plan, stating that Israel would withdraw only when Hamas is “genuinely disarmed.”
With increasingly conflicting strategic objectives between Netanyahu and the Trump administration, Israel may delay or resist implementation of the US framework for Lebanon if it determines that the enforcement mechanisms are insufficient. Given bipartisan support for disarming and demobilizing Hizballah, it is possible that the bill is taken up next year by a new Congress. Even if the act is passed, however, its effectiveness will ultimately depend on whether Washington can secure reciprocal commitments from Hizballah and Israel and maintain the process long enough for Lebanese state institutions to assume greater control over the country’s security.
US Developments
OFAC Reaches Settlement Agreement with Wisconsin Manufacturer for Exports to Iran by Its Italian Subsidiary
On August 12, 2026, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a $60,764 settlement with Rice Lake Weighing Systems, Inc. (“Rice Lake”), a Wisconsin-based manufacturer of weighing equipment, in which Rice Lake agreed to settle its and its Italian subsidiary’s potential civil liability for eight apparent violations of the Iranian Transactions and Sanctions Regulations § 560.215(a). According to OFAC, Rice Lake’s Italian subsidiary, Dini Argeo S.r.l. (“Dini Argeo”), exported goods to Iran through a distributor in the United Arab Emirates (“UAE”) while knowing that the goods were ultimately destined for Iran. OFAC does not allege that Rice Lake knew of the exports, but rather that it failed to take sufficient steps to ensure Dini Argeo understood and complied with the prohibitions of US sanctions on Iran. The amount of the settlement agreement reflects OFAC’s determination that the apparent violations were voluntarily self-disclosed and non-egregious.
The settlement agreement highlights the potential sanctions liability US companies with global operations face for the activities of their subsidiaries or affiliates. OFAC has consistently communicated that US parent companies bear some responsibility for the sanctions compliance of their non-US subsidiaries. The Iran sanctions regime in particular extends primary sanctions prohibitions to non-US entities owned by US persons. Notably, Dini Argeo’s alleged conduct also took place while the EU’s blocking statute restricted EU companies from complying with certain US sanctions against Iran that were previously suspended or waived pursuant to the Joint Comprehensive Plan of Action, which underscores the compliance challenges faced by foreign subsidiaries of US companies operating under potentially conflicting legal regimes.
Treasury Secretary Scott Bessent Signals Further Escalation of Pressure on Iran
On August 13, 2026, Treasury Secretary Scott Bessent announced that the Trump administration will introduce additional measures against Iran next week as part of its “maximum pressure” campaign, with the goal of further isolating Iran economically. Bessent said the administration’s “Economic Fury” strategy has targeted Iran’s financial system, oil sector, sanctions-evasion networks, weapons procurement activities, and cryptocurrency holdings, disrupting significant revenue streams for Iran and its proxies. He also indicated that new economic measures will be paired with continued restrictions on Iranian maritime trade and port access.
The anticipated measures follow a renewed sanctions and enforcement campaign launched in July 2026 after President Trump resumed military operations against Iran and reinstated a blockade of the Strait of Hormuz. Recent actions included OFAC’s July 14 designations targeting an alleged oil-shipping network of Iranian businessman Mohammad Hossein Shamkhani and July 15 sanctions against seven individuals and entities allegedly involved in weapons procurement activities on behalf of the Islamic Revolutionary Guard Corps.
Senate Democrats Ask Why Administration Hasn’t Resumed Russia Sanctions Updates
On August 12, 2026, Senator Elizabeth Warren (D-MA) and Senator Chris Coons (D-DE) sent a letter to Secretary of State Marco Rubio and Secretary Bessent demanding an explanation for the Trump administration’s 17-month pause in issuing regular Russia-related sanctions, despite administration officials acknowledging that peace talks with Moscow have stalled. In the letter, the Senators argue that the lack of routine sanctions and counter-evasion measures has weakened US leverage and may have allowed more than 1,000 companies, individuals, and vessels supporting Russia’s military-industrial base to operate without US sanctions.
This letter comes after Members of the House introduced the Senate-passed Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, which grants the President waiver authority in relation to certain Russia-related sanctions and authorizes the President to impose tariffs of up to 100 percent on the largest purchasers of Russian oil and natural gas, as well as countries facilitating Russian oil sanctions evasion.
UK Developments
OFSI Amends and Extends Lukoil International and Lukoil Bulgaria General Licences
OFSI has amended General Licence INT/2025/8031092 (Continuation of Business of Lukoil International Entities) (the “Lukoil International Licence”) and General Licence INT/2025/7895596 (Continuation of Business of Lukoil Bulgaria Entities) (the “Lukoil Bulgaria Licence”) (together, the “GLs”). The GLs were originally introduced to permit the continuation of certain business operations involving Lukoil International GmbH and its subsidiaries, and specified Bulgarian subsidiaries of PJSC Lukoil, respectively, notwithstanding applicable Russia asset-freeze restrictions. Permitted activities include certain payments under existing or new obligations or contracts and the provision and receipt of economic resources. The amended GLs introduce a new one-off notification requirement: entities relying on either licence must notify OFSI and provide current contact details within 14 days of first use where this occurs on or after August 12, 2026, while existing users must notify OFSI within 14 days of that date. Further notification is required if contact details subsequently change, and OFSI makes clear that notification does not constitute confirmation that the relevant activity is permitted. The Lukoil International licence has also been extended until February 26, 2027, while the amended Lukoil Bulgaria licence currently expires on October 29, 2026.
Asia-Pacific Developments
Japan weighs sanctions after Putin’s first visit to disputed Kuril Islands
On August 14, 2026, a senior Japanese Foreign Ministry official stated that Japan may impose additional measures on Russia, potentially including new sanctions. The statement followed President Vladimir Putin's visit to the island chain off Hokkaido, which prompted strong protests from Tokyo. The visit has further intensified tensions over the long-standing territorial dispute between Japan and Russia regarding the islands, preventing the two countries from concluding a peace treaty after World War II.
Chinese Spokesperson Says Expanded US Sanctions Against Russia Could Harm US Interests
On August 11, 2026, Liu Chang, a spokesperson for the Chinese Embassy in Washington, criticized proposed new US sanctions on Russia, arguing that the measures and broader pressure tactics will ultimately backfire on the US rather than achieve their intended goals. The comments came after the US Senate approved a sanctions bill targeting Russia, which includes restrictions on major Russian banks, a ban on new US investment in Russia, limits on purchases of Russian sovereign debt, and potential tariffs of up to 500% on Russian goods.
