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
The EU Breaks Precedents with New Proposed Sanctions
On Tuesday of last week, just as the ink began to dry on the EU’s latest Russia sanctions package in May, European Commission President Ursula von der Leyen and High Representative for Foreign Affairs Kaja Kallas announced new drastic moves against Russia’s economy. The proposed 18thsanctions package underscores a paradigm shift in the EU’s economic relationship with Russia, with their previous interdependence becoming totally untangled. The announcement includes sanctioning an additional 77 “shadow fleet” vessels (which help Russia circumvent the G7’s $60 price cap on seaborne crude), a unilateral lowering of the G7 price cap from $60 to $45 per barrel, and sanctions on additional companies providing dual-use goods for Russia’s defense industrial base.
However, there are a few precedent-defining moves that the announcement suggested. First is the ban on any transaction related to the Nord Stream pipelines, effectively preventing the return of either project upon a political settlement to the Ukraine war. Although the pipelines were already on the rocks—Nord Stream 2 remains damaged and Gazprom’s unilateral reductions of flows through Nord Stream 1 after Russia’s full-scale invasion led to a flurry of arbitration from at least 20 European customers, leading to roughly €15 billion in known awards—the EU announcement will undercut political opposition to the “de-Russification” of Europe’s energy supply. The ban further cements the EU’s intention to fully ban Russian gas by 2027.
Second, the announcement embraced a ratcheting up of the ban on sanctioned banks from the SWIFT messaging service to a full transaction ban. The EU did not fully spell out what a “full transaction ban” would entail, but it suggests that the EU may embrace a doctrine of secondary sanctions against institutions that help sanctioned entities circumvent the SWIFT ban—essentially, play whack-a-mole to keep up with Russian banks that find alternatives to the West’s financial plumbing. In this latest announcement, the EU seems to inaugurate this approach by explicitly targeting two small regional Chinese banks that use decentralized crypto transactions to facilitate the exchange of sanctioned dual-use goods. The EU’s potential embrace of secondary sanctions spells trouble for Russian banks that joined China’s Cross-Border Interbank Payment System (CIPS). Russia has become more dependent on China: in December 2023, one-third of Russia’s trade was settled in yuan, and 42% of trades on the Moscow Exchange were conducted in yuan in 2023. The secondary sanctions may apply significant pressure, as an estimated 98% of Chinese banks already refuse renminbi-based transactions from Russia in 2024.
Third, the announcement made clear that the EU would introduce safeguards to protect Belgium from lawsuits launched by Moscow under their bilateral investment treaty for the freezing of Russian sovereign assets held by Euroclear, a securities depository housing roughly €180 billion in money owned by the Russian central bank. The EU also did not spell out what measures they would implement to protect Belgium, but with political will, a legal (or at least “lawfare”) solution can be found. Some diplomats have reportedly suggested forcibly triggering a force majeure by their own creation. Russia may have already written off its frozen assets—it has yet to seriously challenge the EU’s expropriation of profits from the assets’ interest to secure $50 billion in G7 loans to Ukraine—but Russia nonetheless would have a legitimate argument to reclaim its money. Crucially, the EU’s shielding of Belgium suggests that it may be open to exploring options for moving Russian assets, such as transferring them to a holding vehicle where they can be reinvested and accrue more interest. This may just be a move to create leverage, as outright seizure is legally ambiguous and, at the very least, would spell trouble for confidence in the euro. But the EU, learning to speak the language of power, may be trying to keep all its options open.
The timing of these unprecedented actions will increase the cards in the EU’s hands before the upcoming G7 summit from June 15-17, the NATO summit from June 24-25, and the European Council summit from June 26-27. The EU seeks a strong negotiating position to steer the position of G7 allies and dictate the pulse of diplomacy with Russia, pushing for sticks instead of carrots to achieve a 30-day unconditional ceasefire.
Hungary and Slovakia—who hold veto power over the proposed package—have pledged to oppose these sanctions, but the EU has managed to negotiate 17 sanctions packages before and renew them every 6 months, even if the dance requires a spectacle of diplomacy. In the end, neither Hungary nor Slovakia want to risk their own EU membership benefits for a structural energy shift that will be difficult to reverse: Russian gas which comprised 45% of the EU’s energy needs in 2021 declined to just 13% in 2024. Moreover, the sanctions are working. Russia’s sovereign wealth fund declined from $42 billion to $36 billion in May alone. Before the war, the fund stood at roughly $117 billion, but it has diminished drastically as gas revenues plummet and Russia continues to finance its war.
UK Sanctions Developments
UK Designates Two Israeli Ministers
On June 10, 2025, the UK designated two Israeli ministers, Itamar Ben-Gvir and Bezalel Smotrich, under the Global Human Rights Sanctions Regime for engaging in, inciting, promoting, and/or supporting activity that amounts to serious human rights abuses against Palestinian individuals in the West Bank. The sanctions were imposed in coordination with equivalent measures by Australia, Canada, New Zealand, and Norway. The two men are now subject to an asset freeze, making available, and director disqualification sanctions, as well as a UK travel ban. In announcing the designations, it was emphasised that the measures “do not deviate from our unwavering support for Israel’s security and we continue to condemn the horrific terror attacks of 7 October by Hamas.” Nonetheless, the sanctions represent a significant development and reflect increased concern from many of Israel’s Western partners, who have taken unprecedented steps to condemn – and now impose sanctions – in response to the current situation in Gaza. The Foreign, Commonwealth, and Development Office also emphasised that the Messrs. Ben-Gvir and Smotrich were being designated in their personal capacity and that the sanctions were not intended to flow down to the Israeli ministries that they head up.
OFSI Amends GTLK General Licence
On June 12, 2025, OFSI amended General Licence INT/2023/3263556, which authorises certain insolvency-related payments and activities involving GTLK Europe, GTLK Capital, and their subsidiaries. The amendments incorporate sanctions on the provision of financial services for the purpose of foreign exchange reserve and asset management to certain Russian institutions within the scope of the licence and clarify that any resulting payments must be credited to that person’s account, add certain new definitions relevant to the interpretation of the licence, clarify that any funds made available to UK designated persons must be held in a frozen account and any economic resources made available must be treated as frozen, and expand the reporting requirement under the licence.
EU Developments
EU Presents 18th Sanctions Package Against Russia
On June 10, European Commission President Ursula von der Leyen and High Representative Kaja Kallas introduced the EU’s 18th sanctions package against Russia. The proposal targets Russia’s energy and banking sectors, alongside its military industry, aiming to increase pressure and advance efforts toward a ceasefire in its ongoing war against Ukraine.
In the energy sector, the new sanctions package seeks to tighten restrictions by adding 77 shadow fleet vessels, used to circumvent oil transport bans, to the list of those prohibited from accessing EU ports. Additionally, the package proposes to introduce a ban on the import of refined products produced from Russian crude oil. The 18th sanctions package also intends to lower the price cap on Russian oil from its current level of 60 dollars per barrel, as set by the G7 coalition, to 45 dollars per barrel. Furthermore, a new transaction ban would be introduced for Nord Stream 1 and Nord Stream 2, preventing EU operators from engaging in any transactions related to those pipelines.
The banking sector would also face expanded restrictions. The proposal converts the current SWIFT ban on certain Russian banks into a full transaction ban and extends this restriction to 22 additional banks and financial entities in third countries that help Russia evade sanctions. The Russian Direct Investment Fund, along with its subsidiaries and investment projects, would also be sanctioned under the proposed measures.
In the military sector, the proposed restrictive measures aim to further undermine Russia’s ability to sustain its war efforts. The package proposes listing 22 new entities, including companies in China and Belarus, that are directly involved in the production of weapons or in supporting such activities. Stricter controls on dual-use goods and technologies are also included in the proposal to limit Russia’s access to critical resources for its military operations.
While several Member States, including France, Germany, Italy, and Poland have reportedly welcomed the 18th sanctions package, others, such as Slovakia and Hungary, have expressed concerns. Slovak Prime Minister Robert Fico has stated that he will oppose any measures that compromise national interests. Despite these reservations, an agreement on the package is expected to be reached by the end of June. Discussions among Member States on the proposal are set to begin this week.
Advocate General Opinion Backs EU Sanctions Criterion Targeting Russian Businesspersons
Advocate General Medina of the European Court of Justice (ECJ) recently issued a series of non-binding opinions supporting the legality of the EU sanctions criterion relating to leading businesspersons whose economic activities provide substantial revenue to the Russian government.
The sanctions, introduced in February 2022 through amendments to Decision 2014/145/CFSP under the listing criterion of Article (2)(1)(g), include asset freezes on leading businesspersons who provide a substantial source of revenue to the Russian government. Five prominent businesspersons, listed in the amended Annex I to Regulation 269/2014, challenged the Council’s decision before the General Court, arguing that the restrictive measures were unjustified due to their lack of direct influence over the Russian government.
In the five opinions, Advocate General Medina recommended that the Court of Justice dismiss the appeals on the basis of the interpretation and appropriateness of the listing criterion. On interpretation, AG Medina clarified that "leading businesspersons" refers to individuals with significant influence within their economic sectors, while stressing that the EU Council is not required to prove a direct link or specific conduct connecting them to the Russian government. Regarding appropriateness, the Advocate General concluded that the measures are lawful and justified, noting that the sanctions imposed under the listing criterion aim to address the gravity of Russia’s actions by targeting major revenue streams that support its war efforts.
EU Council Amends Sanctions Regime to Target Individuals and Entities Undermining Democracy and Rule of Law in Guatemala
The EU Council has amended several pieces of sanctions legislation in view of the situation in Guatemala. Council Decision 2024/254 and Council Implementing Regulation (EU) 2024/287 were revised to include three additional individuals and one entity, while entries for five individuals were updated. The restrictive measures now apply to eight individuals and one entity and include asset freezes, travel bans, and a prohibition on making funds available to those listed. These amendments were adopted amid ongoing attacks destabilizing the democratically elected government of President Bernardo Arévalo.
Asia Pacific Developments
China Plans to Turn Shenzhen into AI and Aviation Hub Amid US Sanctions
In response to escalating US sanctions, China has unveiled a sweeping reform plan to bolster hi-tech industries in Shenzhen, aiming to fortify the city’s resilience as a national tech hub and counter pressures on its major firms like Huawei and DJI. The plan includes measures to boost scalability in sectors like artificial intelligence, aviation, and energy storage by enhancing talent cultivation, expanding financing access, and streamlining technology deployment. Shenzhen, home to major firms like Huawei and Tencent, will strengthen its role as part of the Greater Bay Area by enabling secondary stock listings and fostering cross-border collaborations in trade, aviation, and technology. The reforms also focus on building AI-powered healthcare, modernizing regulations for unmanned aerial vehicles, upgrading trade infrastructure, and promoting the international use of the digital yuan.
Japan Imports Russian Crude on Sanctioned Tanker After Two-Year Halt
Japan has received its first shipment of Russian crude oil in over two years, despite the tanker, Voyager, being sanctioned by both the US and EU as part of efforts to curb Russian energy exports. Taiyo Oil Co., at the request of Japan's Ministry of Economy, Trade, and Industry (METI), facilitated the purchase to maintain operations of a Japan-backed LNG project tied to Sakhalin energy production. While the US and EU sanctions aim to restrict Russian oil exports, Japan continues to receive waivers for Sakhalin crude imports due to national energy security needs, with the EU waiver valid until mid-2026 and the US waiver likely to extend beyond June 2024. Before Russia's invasion of Ukraine, Japan routinely sourced oil from Sakhalin but paused imports following the war, despite maintaining stakes in the project. The global hesitation to use sanctioned Russian tankers is fading, as evidenced by increased Russian crude shipments to countries like India, China, and Syria, often involving creative methods like ship-to-ship transfers. Meanwhile, the EU has accused Sovcomflot, Russia’s state-owned shipping company, of circumventing sanctions by transferring tanker management to UAE-based entities.
Venezuela’s Oil Surge to China Defies US Crackdown
Despite tightened US sanctions that revoked permissions for companies to purchase Venezuelan oil, Venezuela's overall oil exports have remained stable, largely due to increased sales to China. While exports to traditional buyers in the US and Europe have declined, China has emerged as Venezuela's primary customer, importing 584,000 barrels per day in May, up from April. State oil company PDVSA has adapted by redirecting shipments, including heavy crude like Boscan, to Asia, bypassing the need for US permissions. In May, Venezuela exported 779,000 barrels of crude oil and fuel daily, matching the previous month’s levels, and completed significant oil deals before US licenses expired. These adjustments have allowed Venezuela to mitigate the impact of sanctions, which President Nicolas Maduro calls an “economic war,” and continue its oil trade amid political and economic pressures.
