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 Pivots to Renewed Economic Pressure in Push for Iran Deal
Late last week, President Trump escalated his threats of renewed economic pressure against Iran – part of a broader effort to shift the facts on the ground in the Middle East amid stalled negotiations and a deadlocked conflict. On Wednesday evening, Trump threatened an “economic D-Day” for Iran, adding that any country that provides “any type of lifeline to Iran will face tremendous economic consequences.” The statement followed similar comments earlier last week, and a statement from Secretary of the Treasury Scott Bessent previewed applying measures that “have never been seen in the history of the economic isolation of a country.”
The new push for economic pressure comes amid a deadlocked peace process and a war of economic attrition with no off-ramps in sight. Last week, the 60-day deadline for negotiations from Iran and the US’ June MOU passed – a mostly symbolic deadline given the de facto collapse of the ceasefire weeks before. Iran and Oman reportedly came close weeks ago to an agreement on the administration of the Strait of Hormuz, a potential precursor to a broader deal with the US, but the provision of Iranian tolls, continued clashes, US unwillingness to lift its blockade on Iranian ports, and other factors, have kept a deal out of reach.
In a flashback to June, both sides are once again stuck attempting to raise the costs of a continued war high enough that the other is forced to return to the negotiating table, and to make significant concessions. Iran has stuck with its strategy of imposing global economic costs via the closure of the Strait of Hormuz, as well as pressuring US allies by regularly striking Gulf military assets and infrastructure (with room to escalate in the Bab al-Mandeb and strikes further afield, like European assets and Egypt). Meanwhile, the US’ post-MOU strategy of imposing military costs is running up against a hard limit of missile and missile interceptor shortages, alongside military and domestic fatigue. The pivot to economic sanctions, then, is a new tack to raise costs for Iran as well as a tacit admission that the US’ ability to secure a decisive military win is dwindling.
It is unclear what the forthcoming “toughest sanctions in history” will consist of. A Thursday package designating 10 individuals responsible for couriering money to Hizballah, and re-designating Hizballah as a Specially Designated Global Terrorist for its support to Iran, was not a part of the major Iran package, according to media quotes by US officials. Many analysts predict secondary sanctions on Iran’s major trade partners, including China (the primary purchaser of Iranian oil), Türkiye, Iraq, Oman, Pakistan, India, Armenia and Azerbaijan. While the US has threatened to impose secondary sanctions several times since the onset of the war, the White House’s Economic Fury campaign has mostly dealt in direct sanctions on individuals and entities involved in Iran’s illicit oil trade and arms procurement networks. Secondary sanctions would constitute significant new pressure on Iran’s trading partners, although the immediate effect could be blunted due to the limited exposure of the Iranian oil trade to international markets. China, which purchases up to 90% of Iranian oil exports, has created a ring-fenced system of refiners to process Iranian oil that is mostly settled in yuan and involves a chain of difficult-to-track intermediaries. The US may also be limited by how much disruption it is willing to cause in international energy markets. Washington has historically been sensitive to global oil prices, for example by issuing controversial sanctions waivers for Russian oil earlier in the Iran conflict – a sensitivity that could become more pronounced as midterm elections approach.
Analysts worry that even significant new US measures are unlikely to tip the scales of a conflict at a strategic standstill. The Islamic Republic is already enduring significant economic pain: the Foundation for Defense of Democracies estimates that the US’ blockade is costing Iran $35 million per day in lost oil sales, its currency is at near record lows, and its Misery Index (a sentiment gauge that combines inflation and unemployment) hit 91.1, its highest point on record.
But Iranian policies insulating its economy from dollar-denominated international markets have blunted the effects of cumulative sanctions, and domestic policies including cash transfers to the poor and avoidance of rationing have contributed to domestic resilience. An economy can perform poorly for a very long time before collapsing. That runway is even longer for Iran, which does not answer to an electorate and does not have to worry about impacts on the global economy.
The UAE’s announcement of an embargo on Iranian trade, which came amidst US sanctions threats last week, could have a bigger impact. The move, immediately prompted by reports that Iran had unsuccessfully targeted Emirati maritime traffic with two missiles (which Tehran denied), reportedly followed weeks of behind-the-scenes lobbying by Washington and came just hours after a phone call between President Trump and Emirati President Mohamed bin Zayed. The move was something of a pivot for the UAE, which has been quietly seeking détente with Iran in recent weeks (likely including paying tolls to transit the Strait of Hormuz).
A full embargo on Emirati trade will be a significant blow for Tehran: the UAE provides more than 30% of Iran’s imports, with non-oil trade estimated to have exceeded $27 billion from 2023-2024. Less easily measurable is the scale of illicit trade. The UAE has long served as a vital informal trade conduit for Iran, enabling it to access international markets and bypass international sanctions via oil transshipments. The UAE has historically enforced US sanctions on Emirati entities but has not proactively sought to crack down on Iranian investment or transshipments; if Abu Dhabi roots out illicit trade alongside legitimate shipments and transactions, Iran would be left without a viable replacement to get that oil to market.
Still, rising economic costs will likely do little to bring about an end to the war in the coming weeks or months. Even if economic pain forces Iran to the negotiating table and results in an interim ceasefire, like the June MOU, core objectives sought by both sides will remain unresolved. Both Washington and Tehran see their win conditions as the other side making serious concessions on strategic issues. For the US, that includes meaningful limits on nuclear enrichment, action on Iranian proxy activity, and Strait of Hormuz arrangements that do not include Iranian tolls. For Iran, that includes cash transfers (given serious doubts about the durability of sanctions waivers or investment pledges) and recognition of its control of the Strait. Iran’s strategic calculus is – and has been since the onset of the war – that while both sides can impose costs, it is capable of enduring more pain than the US and Washington will blink first. Even intense new economic sanctions appear unlikely to change that outlook in coming weeks or months, dimming any prospects for a near-term solution.
US Developments
Trump and Bessent Signal New Economic Sanctions on Iran
On August 19, President Donald Trump announced that the US will launch the “most crushing economic operation ever taken against any country” against Iran. He warned that “any country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face tremendous economic consequences.” The next day, Treasury Secretary Scott Bessent reaffirmed President Trump’s position during an interview with CNBC. Bessent said that the US will impose “the toughest sanctions in history” on Iran and warned allies to stand with the US.
Secretary Bessent is expected to provide more detail in a press conference scheduled for August 24. President Trump previously issued Executive Order (“E.O.”) 14382 on February 6, 2026, which established a framework for the imposition of secondary tariffs on countries that directly or indirectly purchase, import, or otherwise acquire goods or services from Iran. Notably, E.O. 14382 was issued prior to the Supreme Court’s ruling in Learning Resources, Inc. v. Trump, in which the Court held that the International Emergency Economic Powers Act (“IEEPA”) does not grant the President the authority to impose tariffs.
US Department of State Imposes Sanctions on Cuban Officials and Entities
On August 20, the Department of State sanctioned nine entities and three individuals allegedly linked to the Cuban government’s alleged repressive activities and influence networks. The action was taken under E.O. 14404, which authorizes sanctions on persons linked to the Cuban government.
The sanctions target the alleged leadership of the Cuban Institute of Friendship with the Peoples, which is a Specially Designated National (“SDN”) that, according to the State Department, advances Cuban government interests abroad through international solidarity and political influence networks. The State Department also sanctioned four state-owned enterprises (“SOE”) connected to Cuba’s mining sector and the Ministry of Construction of Cuba (“MICONS”).
Alongside the sanctions, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued one Cuba-related Frequently Asked Question (“FAQ”) 1265, which states that OFAC does not intend to target foreign persons, including foreign financial institutions, for engaging in transactions ordinarily incident and necessary to the wind down of transactions involving MICONS, or any entity in which MICONS owns, directly or indirectly, a 50 percent or greater interest, through September 19, 2026. The FAQ advises that persons subject to U.S. jurisdiction have long been prohibited from transacting with MICONS, including in connection with a non-U.S. person’s wind down of activities with MICONS, absent OFAC authorization.
OFAC Targets Hizballah Financial Network
On August 20, OFAC designated 10 individuals allegedly part of a network responsible for transferring cash to Hizballah, a designated Foreign Terrorist Organization (“FTO”). According to OFAC, the network uses couriers travelling on commercial airline flights between Lebanon, Türkiye, the UAE, and Iran to move up to hundreds of millions of dollars between jurisdictions to evade sanctions. The action was taken pursuant to E.O. 13224, which authorizes the US government to block assets and disrupt financial support for terrorists and terrorist organizations.
OFAC also re-designated Hizballah under E.O. 13224 for service to the Iranian government under the command of Iran’s Islamic Revolutionary Corps-Qods Force (“IRGC-QF”). Hizballah was already comprehensively blocked as a Specially Designated Global Terrorist organization and an FTO.
OFAC Sanctions Alleged Ecuador-Based Cocaine Trafficking Network
On August 20, OFAC sanctioned 15 individuals and entities and identified 10 Ecuador-based fishing vessels as blocked property for their alleged role in “shipping thousands of kilograms of cocaine each month from South America to Mexico, destined for distribution in the United States.” OFAC said that the Ecuador-based vessels operate “under the guise of legitimate fishing businesses.” The designated persons are allegedly affiliated with Los Choneros and Los Lobos, two Ecuadorian gangs that the US has designated as FTOs.
This action was taken pursuant to E.O. 14059, which targets international illicit drug trade and production, and E.O. 13224, as amended, which targets terrorists and their supporters.
US Sanctions ICC President, Senior Trial Lawyer
On August 18, the Department of State sanctioned the President of the International Criminal Court (“ICC”), Tomoko Akane of Japan, and ICC Senior Trial Lawyer, Abdoulaye Seye of Senegal. This action was pursuant to E.O. 14203, “Imposing Sanctions on the International Criminal Court.” These designations build on OFAC actions taken on May 27, 2026, December 18, 2025, September 4, 2025, among others, totalling 14 individuals and three entities sanctioned under E.O. 14203.
Additionally, OFAC issued ICC-related General License (“GL”) 12, which temporarily authorizes transactions that are ordinarily incident and necessary to wind down of any transactions involving Seye, Akane, and any entities in which they own, directly or indirectly, individually or in the aggregate, a 50 percent or greater interest. The GL remains in effect until 12:01 a.m. EDT on September 17, 2026.
US Authorizes Certain Transactions and Investments in Venezuela’s Telecom Sector
On August 21, OFAC issued GL 61, “Authorizing the Supply of Certain Items and Services to Venezuela Related to Telecommunications,” and Venezuela GL 62, “Authorizing Negotiations of and Entry Into Contingent Contracts for Investment in the Telecommunications Sector of Venezuela.”
GL 61 authorizes certain transactions that are ordinarily incident and necessary to the provision from the United States or by a U.S. person of goods, technology, software, or services for the installation, maintenance, refurbishment, repair, upgrade, operation, or support of telecommunications in Venezuela provided that (i) any contract with the Government of Venezuela for such transactions is construed and interpreted in accordance with the laws of a state or other jurisdiction within the United States, and (ii) that dispute resolution proceedings relating to the contract occur in the United States, the United Kingdom, France, or Singapore. Covered activities include processing payments and arranging shipping, interconnection and roaming agreements, capacity or infrastructure leases, submarine cable maintenance and support, and the provision, licensing, or maintenance of related software licensing and support.
GL 62 authorizes certain transactions related to the negotiation and entry into contingent contracts for new investment in the telecommunications sector of Venezuela, including the expansion of existing telecommunications operations in Venezuela and the formation of new joint ventures or other entities to support those activities, provided that any such contract is made expressly contingent upon separate authorization from OFAC.
OFAC Extends Russia-related GL Related to the Sale of Lukoil International GmbH
On August 20, OFAC issued Russia-related GL 131I, “Authorizing Certain Transactions for the Negotiation of and Entry Into Contingent Contracts for the Sale of Lukoil International GmbH and Related Maintenance Activities.” The license extends the general authorization for transactions ordinarily incident and necessary to the negotiation of and entry into contingent contracts for the sale of Lukoil International GmbH (“LIG”) and its subsidiaries, from 12:01 a.m. EDT August 22, 2026, to 12:01 a.m. EDT September 19, 2026. GL 131I also extends the general authorization for transactions ordinarily incident and necessary to the maintenance or wind-down of LIG operations.
EU Developments
EU Prepares Broad Expansion of Russia Sanctions Listings
On August 17, High Representative of the EU Kaja Kallas announced plans to present a new package of sanctions listings against Russia that could mark the most significant expansion of EU designations since Russia's full-scale invasion of Ukraine. According to Kallas, the proposed measures would increase the number of designated Russian individuals and entities by one third. The European External Action Service (EEAS) is reportedly preparing around 1,600 new designations, primarily targeting individuals and entities linked to Russia's military-industrial complex. The proposed measures would subject listed persons to asset freezes and a prohibition on making funds or economic resources available to them, while listed individuals would also be subject to travel bans.
The EEAS is expected to present the new listings in early September, with a view to adoption in October. The initiative is not anticipated to include new sectoral measures, a move that may facilitate negotiations among EU Member States.
Beyond the Russia listings, the EEAS is also reportedly preparing additional designations under two separate sanctions regimes addressing the trafficking of Ukrainian children and Russia's hybrid activities, including cyberattacks and disinformation campaigns.
EU Council Updates Sanctions Listing under ISIL (Da’esh) and Al-Qaeda Sanctions Framework
The EU Council recently amended the entries of five individuals and two entities designated 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 August decision of the UN Security Council Sanctions Committee to update the identifying information relating to seven entries on the sanctions list.
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
China Urges Dialogue on US-Iran Tensions
China has reiterated its opposition to resolving the US-Iran conflict through military force or economic sanctions, arguing that such measures only intensify tensions and do not contribute to a lasting solution. Foreign Ministry spokesperson Lin Jian called for disputes to be addressed through dialogue and negotiation, stressing that further escalation benefits no party. The remarks came after US President Donald Trump announced plans for severe new economic measures targeting any country supporting Iran, a move that Iran condemned as “economic terrorism” with potentially harmful consequences for global economic stability and national sovereignty.
Australian Senator Calls for Magnitsky-Style Sanctions Over Alleged Transnational Repression
Calls for targeted sanctions were a central focus of Australian Senator Dean Smith’s remarks on China’s new Ethnic Unity and Progress Law, as he urged the government to consider Magnitsky-style sanctions against individuals allegedly involved in overseas intimidation and repression. Smith argued that the PRC legislation could be used to pressure members of diaspora communities in Australia, potentially discouraging them from exercising their political, cultural or religious freedoms.
Japan Pushes Back Against US Sanctions on the International Criminal Court (ICC)
Japan has publicly criticized the United States for imposing sanctions on ICC President Tomoko Akane, a Japanese judge, and senior prosecutor Abdoulaye Seye, reaffirming its support for the ICC’s role in prosecuting serious international crimes. The sanctions, announced by the Trump administration as part of its campaign against the court, were linked to ICC investigations involving officials from countries that do not recognize the court’s jurisdiction, including Israel. The dispute highlights a rare policy divergence between Washington and Tokyo, with Japan emphasizing the importance of the ICC and the broader international legal system, while the court itself condemned the measures as an attack on judicial independence and warned of their potential impact on global justice efforts.
Sanctions Concerns Surround South Korea’s Arctic Shipping Trial
Potential sanctions risks have become a key point of contention as South Korea prepares to test a commercial shipping route to Europe via the Arctic Northern Sea Route, a passage that requires cooperation with Russia. While Seoul sees the voyage as an opportunity to reduce transit times, lower fuel consumption, and advance plans to establish Busan as a major logistics hub, Western diplomats have expressed concern that engagement with Moscow undermines efforts to isolate Russia over its war in Ukraine. Experts have also warned that reliance on Russian assistance during emergencies could expose operators to sanctions-related complications, highlighting the geopolitical challenges accompanying the route’s potential commercial benefits.
Kyrgyzstan Tightens Measures to Reduce Sanctions Exposure
Kyrgyzstan is intensifying efforts to shield its financial system and economy from Western sanctions risks by ordering the liquidation of additional companies deemed high-risk and by prompting banks to sever ties with clients that could attract scrutiny. Although Bishkek has not formally joined sanctions against Russia, mounting pressure from the US, the EU, and the UK has led authorities to crack down on suspected sanctions-evasion activities after several Kyrgyz firms and financial institutions were targeted in recent years. The government is seeking to preserve access to international banking and trade while maintaining economic relations with Russia, but businesses face growing compliance challenges as foreign restrictions increasingly affect the country’s banks, payment channels, and imports.
