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 Sanctions Houthi Smuggling and Financial Networks
On January 16, the US imposed sanctions on Houthi smuggling and financial networks, seeking to constrict the rebel group’s ability to rebuild its military capabilities for future use against Red Sea shipping and neighboring countries. The US sanctioned 21 individuals and entities, and one vessel, alleged to have transferred oil products, procured weapons and dual-use equipment and provided financial services to the Yemeni group. The action comes as the US and regional partners hope to maintain stability in the Arabian Peninsula, where Houthi maritime attacks in the Red Sea have been on hold for several months (contingent on the success of the Gaza ceasefire), but rising tensions with Iran, a reignited civil conflict in Yemen, and expected difficulties implementing Phase 2 of the Gaza ceasefire could threaten the recent calm.
Houthi attacks on Red Sea shipping between October 2023 and September 2025 disrupted transit through the Suez Canal, which links the Red Sea to the Mediterranean. The Suez Canal typically handles about 12% to 15% of global trade, including roughly 30% of worldwide container traffic, with over $1 trillion in goods transiting annually. The Houthi campaign killed at least nine mariners and sunk four ships. Commercial shipping diverted ships around the Cape of Good Hope (off the tip of Africa) to avoid interception risk, increasing costs in order of $1 million per voyage, mainly due to extra fuel, longer transit times (adding 10-16+ days), higher insurance premiums, and increased crewing/operational expenses. In November 2025, after a punishing US and Israeli military campaign against Houthi leadership and weapons storehouses, and the Gaza ceasefire, the Houthis announced through social media that attacks against “the Zionist entity” and Israeli navigation in the Red and Arabian Seas would pause. The US believes that the current quiet is merely a tactical lull before the next round of attacks.
The US is concerned about the continuing flow of weapons and components from Iran and China to Yemen. This concern is partially reflected in the locations and affiliation of the newly designated companies. The UAE and Oman are transit points for weapons and other military-grade materials sent by sea and over land to Yemen. Barash Aviation and Sama Airlines are also importing into Yemen military equipment and dual-use components. For example, in March 2025, Yemen customs officials intercepted a shipment of 800 Chinese-made drone propellers at a land border crossing from Oman. Previously, the US sanctioned Chinese companies providing dual-use technology to the Houthis. In July, the Yemeni government intercepted one of the largest weapons shipments from Iran, containing 750 tons of materials, including anti-ship missiles and small arms.
Following the November 14, 2025, UN Security Council (UNSC) vote to extend the arms embargo on Yemen (13 countries voted in favor, none against, 2 abstained – Russia and China), the US expressed disappointment that the UNSC did not go farther by expanding the mandate of the Panel of Experts. The new mandate includes requirements for the Panel to report on the flow of dual-use components and precursor chemicals that enable the Houthis’ weapons program, materials sourced outside Yemen enabling sophisticated drone and missile development, and threats to international shipping and the safety of civilians across the region. The US regretted that the Council did not direct the Panel to report more explicitly on the flow of resources between Yemen and Somalia, including between the Houthis and Al-Shabaab. A 2025 UN report detailed intercepted shipments from Yemen to Somalia and Houthi-linked training of Al-Shabaab militants in advanced tactics, highlighting a growing partnership that extends beyond simple transactional benefits to strategic influence.
The US designations are designed to restrict the Houthis’ military capabilities, but risk acceleration of rearming efforts and resumption of attacks on shipping. On January 16, the same day as the designations, Houthi leader Abdulmalik al-Houthi called on supporters to prioritize preparations, saying conflict with Israel and the US is inevitable. Shipping through the Suez Canal is just now recovering, with major shipping lines, led by Maersk, cautiously resuming transit through the Red Sea and Suez Canal this month. Nonetheless, hesitancy from other shipping multinationals, alongside continued US efforts to stem the flow of arms into Yemen, reflects global uncertainty about the durability of the current calm.
US Developments
US Increases Pressure on Iran
On January 23, OFAC announced a new tranche of sanctions against the Iranian regime’s shadow fleet, specifically eight entities and nine vessels that it said transported “hundreds of millions of dollars’ worth” of Iranian oil and petroleum to foreign markets. OFAC’s sanctions targeted entities based in the United Arab Emirates (UAE), India, Oman, the Seychelles, the Marshall Islands, and Liberia.
In an accompanying statement, Secretary of the Treasury Scott Bessent said that OFAC’s sanctions target a “critical component” of how Iran generates the funds used to repress its own people. He also noted that Treasury will “continue to track” the millions of dollars the Iranian regime is allegedly trying to wire out of the country, though he stopped short of saying what, exactly, Treasury will do once it identifies those funds.
OFAC’s sanctions follow related actions taken against the Iranian regime, its terrorist proxies, and their supporters on January 13, 15, and 16 in response to the Iranian crackdown on public protests, which we covered previously. They also follow President Trump’s announcement of a 25% “secondary” tariff on any country “doing business with” Iran, the details of which have yet to be released by the White House.
OFAC Designates Gaza-Based Hamas Supporters
On January 21, OFAC designated six Gaza-based organizations it says are organized by, and integrated into, Hamas’s military wing, the Izz al-Din al-Qassam Brigades. OFAC alleges that these organizations “use deception to raise funds from international donors” and claim to provide medical care to Palestinian civilians, but instead use their funds to enable Hamas’s terrorism. OFAC compared these designations to that of the al-Weam Charitable Society, which it designated on June 10, 2025, pursuant to the same authorities.
In the same announcement, OFAC also sanctioned the Popular Conference for Palestinians Abroad (PCPA) for allegedly being controlled by Hamas and serving as the “main organizer” of recent flotillas that have attempted to access Gaza, and one of its senior officials, Zaher Khaled Hassan Birawi. OFAC states that the PCPA “operates at Hamas’s behest” and places key Hamas-linked figures, such as Specially Designated Nationals Adel Saad al-Din Hassan Doughman and Majid Khalil Moussa al-Zeer, in major positions throughout the organization.
Treasury Designates Costa Rican Drug Trafficking Network
On January 22, OFAC designated five Costa Rican nationals and five Costa Rica-based entities for their alleged involvement in narcotics trafficking and money laundering. Specifically, OFAC alleged that the designated individuals and entities were part of a “network” that was responsible for transporting cocaine from Colombia to the US and Europe.
In an accompanying statement, Secretary of the Treasury Scott Bessent said that the US will continue to hold the “entire drug trafficking supply chain . . . from shipping facilitators to money launderers . . . accountable for the devastation they cause” in the United States.
UK Developments
UK Publishes Iran Protests Sanctions Briefing
The UK Parliament Library has published a briefing examining the sanctions response to renewed protests in Iran in January 2026, amid indications that the UK is preparing further restrictive measures. In a statement to Parliament, the Foreign Secretary confirmed that new legislation is being developed to impose additional sectoral sanctions targeting Iran’s finance, energy, transport, software and other industries linked to nuclear escalation, in coordination with the EU and other partners. Parliamentarians have also renewed calls for more expansive designations, including direct sanctions against Supreme Leader, Ali Khamenei, reflecting growing political pressure to widen the scope of UK measures in response to both domestic repression and regional destabilisation. The briefing outlines the scale of the existing UK sanctions framework against Iran, which now includes 286 individuals and 260 entities across the UK Iran and Iran (Nuclear) regimes, including the morality police and the Basij force involved in suppressing protests. It confirms that the UK, France and Germany triggered the UN snapback mechanism in October 2025, restoring UN sanctions targeting Iran’s nuclear and missile programmes, while the Islamic Revolutionary Guard Corps (IRGC) remains sanctioned in its entirety under UK law. The report also highlights recent structural developments, including Iran’s designation under the enhanced tier of the Foreign Influence Registration Scheme (FIRS) and planned legislation targeting state-backed organisations. For businesses, the briefing signals a likely expansion of sectoral sanctions and continued tightening of controls affecting Iranian-linked financial, technology and trade activity in 2026.
EU Developments
EU Council Adopts Regulation to Phase Out Russian Gas Imports under REPowerEU
On January 26, the EU Council formally adopted the Regulation to phase out Russian natural gas imports, advancing on the REPowerEU roadmap of ending the EU’s dependency on Russian energy. This marks the final step in the legislative process. The Regulation will now be published in the Official Journal of the EU.
Under the Regulation, the ban on Russian pipeline gas and liquefied natural gas (LNG) imports will apply six weeks after the Regulation enters into force, while allowing a transition period for existing contracts. For short-term supply contracts concluded before June 17, 2025, the ban will apply from April 25, 2026, for LNG and from June 17, 2026, for pipeline gas. For long-term supply contracts concluded before June 17, 2025, LNG imports will be prohibited from January 1, 2027, and pipeline gas imports from September 30, 2027.
European Commission Publishes Updates to its FAQs on Sanctions Against Russia and Belarus
The European Commission published a series of updates to its FAQs on sanctions against Russia and Belarus. The revised FAQs include guidance on restrictions on the provision of services under Article 5n of Council Regulation (EU) 833/2014 to reflect amendments introduced by the 19th sanctions package against Russia. The Commission also updated its guidance on the price cap for Russian oil under Article 3n of Regulation (EU) 833/2014, clarifying that the new price level for crude oil of $44.10 per barrel will apply as of February 1, 2026.
The Commission further published additional clarifications regarding the transaction ban on the Nord Stream and Nord Stream 2 pipelines under Article 5af of Council Regulation (EU) 833/2014, in relation to the scope of the transaction ban and the competence of Member States to authorize maintenance work carried out by EU and non-EU operators in their exclusive economic zones.
Asia Pacific Developments
India Cuts Russian Oil Imports Amid Sanctions Pressure and Shifts to Middle East and US Crude
On January 21, 2026, Indian refiners reportedly began shifting crude import strategies away from Russia in response to Western sanctions targeting Moscow’s energy sector. India, once the largest buyer of discounted Russian seaborne crude after the Ukraine war began in 2022, faced US backlash, including doubled tariffs on Indian goods to 50% last year as punishment for heavy Russian oil purchases. To ease tensions and support a potential US-India trade deal, refiners are boosting imports from Middle Eastern producers, who benefit from higher Organization of the Petroleum Exporting Countries (OPEC) output quotas, and increasing US crude buys.
China Boosts Russian Oil Imports as Western Sanctions Redirect Flows
On January 23, 2026, media reported that China is sharply increasing purchases of Russian oil, offsetting reduced purchases from India and Turkey amid tougher Western sanctions. “China is poised to receive nearly 1.5 million barrels per day (bpd) of Russian oil by sea this month, compared with 1.1 million bpd in December,” with Urals imports hitting a record 405,000 bpd — the highest since mid-2023. By contrast, India has cut Urals purchases to below 1 million bpd from last year’s average of 1.3 million bpd, while Turkey has reduced imports to around 250,000 bpd.
China, Hong Kong Condemn EU Resolution Urging Sanctions Over Jimmy Lai Case
On January 23, 2026, Beijing and Hong Kong authorities sharply condemned a European Parliament resolution passed with 503 votes that urged Jimmy Lai’s release, sanctions on Chief Executive John Lee and other officials, suspension of extradition treaties, and removal of Hong Kong’s special trade status under the World Trade Organization. Beijing accused the EU of “serious interference in Hong Kong’s judiciary and a serious violation of the principles including non-interference in internal affairs as a basic norm of international law and international relations.” The Hong Kong Special Administrative Region (HKSAR) Government labeled the resolution “baseless accusations,” stressing that “the European Parliament has entirely no respect for the HKSAR court’s independent judgment.” HKSAR officials defended Lai’s conviction, which was detailed in an 855-page public verdict, as being based entirely on law and evidence, without political influence. They also rejected claims that press freedom was infringed, insisting Lai had used journalism as a tool to destabilize Hong Kong.
