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
Snapback Sanctions on Iran Back on the International Agenda
Over the last several weeks, events regarding Iranian nuclear developments have unfolded rapidly, most recently with the US bombing of key Iranian nuclear sites. In light of these developments, there is an increased risk of so-called snapback sanctions on Iran for its nuclear program ahead of the mechanism’s October sunset. If the UN Security Council (UNSC) triggers international sanctions snapback provisions, six UNSC resolutions from 2006 to 2010 would be automatically restored, including an international arms embargo, a ban on uranium enrichment and reprocessing, a ban on launches and other activities related to ballistic missile capabilities (transfer of ballistic missile technology and technical assistance), and a targeted global asset freeze and travel bans on Iranian individuals and entities. The risk of doing business with Iranian entities will substantially increase, as these would be international sanctions (not just US sanctions), and Iranian sanctions evasion efforts, already quite sophisticated, will require augmented levels of due diligence from businesses for compliance.
IAEA Finds Iran in Breach of its Non-Proliferation Obligations
On May 31, the International Atomic Energy Agency (IAEA), the UN’s nuclear watchdog, released a comprehensive report that found Iran had carried out secret nuclear activities with undeclared nuclear materials at four sites in Iran. In a second IAEA report, the agency found that Iran has increased its stockpile of enriched uranium to 408.6 kg, enough fuel for 10 nuclear weapons.
The US with allies UK, France, and Germany—known as the E3 in the context of Iranian nuclear diplomacy—drafted the resolution for the IAEA board of governors, recommending that the board declare Iran non-compliant with its nuclear non-proliferation requirements. The resolution was approved on June 12 with 19 countries voting in favor (including the US and E3), 11 abstentions, and three countries opposed (Russia, China, and Burkina Faso). The IAEA finding of non-compliance is the first since 2005 and is part of a coordinated diplomatic effort to trigger snapback of nuclear sanctions on Iran.
How Snapback Sanctions Work
The history of Iranian sanctions is long and complicated. Most pertinently, snapback sanctions pertain to the political agreement negotiated by the Obama administration—the Joint Comprehensive Plan of Action (JCPOA) enshrined by UNSCR 2231, passed in July 2015, that provided international sanctions relief to Iran if it met specific conditions related to its nuclear program. The resolution included a “snapback” mechanism which would trigger the reimposition of UN sanctions on Iran if any of the original JCPOA participants notify the UNSC of “significant non-performance of commitments under the JCPOA.” This must be triggered prior to the sunset of UNSCR 2231 on October 18, 2025.
Notification starts a 30-day clock during which the UNSC must either adopt a new resolution continuing sanctions relief under UNSCR 2231 or, absent an approved resolution, terminate UNSCR 2231 (i.e., previous UN sanctions on Iran will be automatically reimposed). While UNSC permanent members could veto a new resolution without the support of the other members, there is no veto option to stop the default reimposition of previous sanctions once the 30-day clock lapses. In the event that the snapback occurs, UNSCR 2231 provides an additional two-week period for legal disputes. In short, participants opposed to snapback sanctions can delay, but not stop, the process if the legal threshold is met.
Geopolitics of Snapback Sanctions
The IAEA reports and finding that Iran is not in compliance with its nuclear obligations are part of the building blocks for the E3’s case supporting snapback sanctions. To move action from the IAEA to the UNSC, the IAEA would need to approve a second resolution, calling on the UNSC to address the matter under the UNSC’s responsibility for international peace and security, a resolution likely to be presented and approved at an extraordinary IAEA board meeting this summer. At that point, the E3 would move forward at the UNSC, timing based on what country holds the rotating presidency and geopolitical conditions at play. The E3 would likely avoid a month when the presidency is held by a country opposed to international sanctions (Pakistan in July and Russia in October), with the most preferential time being September when South Korea holds the seat.
However, geopolitical developments could impact calculations. The IAEA’s finding was immediately followed by Iran’s rejection of the resolution and announcement of plans to inaugurate a new uranium enrichment facility at a secure and undisclosed location. The next day, Israel launched attacks against Iranian nuclear and military infrastructure, and Iran broke off planned nuclear negotiations with the US. Over the weekend, the US joined with Israel and launched massive airstrikes against Iran’s nuclear facilities, risking a significant expansion of hostilities in the near future.
If Israel and the US succeed in destroying Iranian nuclear infrastructure, effectively destroying Iran’s scientific brain trust and shattering the political will supporting a continued nuclear program, additional leverage of international sanctions may not be needed. But this is not guaranteed. The Iranian regime has not only maintained but expanded its nuclear program despite harsh punitive actions by the US and allies over decades. The US and Israeli military actions may only result in a setback to the Iranian nuclear program, not its destruction, with Iran adopting evasion and delaying tactics to preserve capabilities for later development.
International pressure is intensifying for de-escalation and negotiations. Until recently, Tehran was signaling its eagerness for negotiations. The E3 had taken the lead in engaging Iran, holding the first high-level face-to-face diplomacy with Tehran since the war began. The EU’s opening terms reportedly included zero uranium enrichment as well as limits on Iranian missile activities and financing of terrorist groups. Iran has previously rejected a ban on enrichment and limits on its ballistic missile program. That was prior to the recent US strikes on key Iran nuclear targets—Iran’s willingness to negotiate with the E3 is now, as with many things related to the current crisis, uncertain. Snapback sanctions, in this context, could be viewed as a tool in shaping broader negotiations, giving Tehran’s leaders a choice between the continuation of its nuclear enrichment program and Iran’s future as a state weakened by war and international sanctions.
International sanctions on Iranian’s nuclear and ballistic missile programs are likely to be only part of a new coordinated sanctions effort. The US would likely seek support from European allies to impose national oil and gas sanctions to cut off financial flows that sustain the Iranian regime. Because China is the primary customer of Iranian oil, there would be increased risks of secondary sanctions enforcement.
US Developments
Sanctions on Iran Continue as the Conflict with Iran Escalates
On June 20, US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it was sanctioning individuals, entities, and vessels across multiple jurisdictions for their alleged involvement in Iran’s defense industry or with Ansarallah (commonly referred to as the “Houthis”), a Specially Designated Global Terrorist (SDGT) and Foreign Terrorist Organization (FTO) with ties to the Iranian regime:
- In one action, OFAC designated one individual and eight entities for their alleged involvement in the procurement and transshipment of sensitive machinery for Iran’s defense industry. All individuals, entities, and vessels were designated pursuant to Executive Order (E.O.) 13382, which targets proliferators of weapons of mass destruction and their means of delivery.
- In a separate action, OFAC designated four individuals and 12 entities alleged to have imported oil and other illicit goods in support of the Houthis. All individuals and entities were designated pursuant to E.O. 13224, as amended, which aims to, inter alia, disrupt the financial support network for terrorists and terrorist organizations. According to OFAC, this is the single largest action taken against the Houthis to date.
The US has maintained robust sanctions against Iran under the second Trump administration, in accordance with President Trump’s “maximum pressure” strategy as set forth in National Security Presidential Memorandum 2 (NSPM-2). These most recent sanctions actions occurred before several US military strikes against Iranian nuclear facilities over the weekend. President Trump has signaled that these strikes should push Iran to make peace with Israel, while at the same time signaling that future attacks could be forthcoming should peace not be achieved.
OFAC Sanctions CJNG Leaders
OFAC has sanctioned five Mexico-based leaders of the Cartel Jalisco Nueva Generacion (CJNG), a Specially Designated National (SDN), SDGT, and FTO. According to OFAC, one of the sanctioned leaders, Ricardo Ruiz Velasco, is the prime suspect in the killing of Valeria Márquez, a Mexican TikTok influencer.
At the same time as OFAC’s press release, the Department of State’s Bureau of International Narcotics and Law Enforcement Affairs, through its Narcotics Rewards Program, announced that it was offering a reward of up to $15 million for information leading to the arrest or conviction of the founder and current leader of CJNG, Ruben Oseguera Cervantes. The Bureau also announced that it was offering a reward of up to $5 million for information leading to the arrest or conviction of a CJNG commander, Audias Flores Silva, who was accused by OFAC of controlling laboratories used to produce methamphetamine and other illicit drugs trafficked into the United States. Both men were designated by OFAC pursuant to E.O. 14059 and E.O. 13224.
Trump Indicates Opposition to New Sanctions on Russia
During his remarks to the press at the G7 Summit, President Trump suggested that he will not issue more sanctions against Russia despite the European Union (EU) and United Kingdom’s (UK) push for more coordinated action with the US.
Most of President Trump’s hesitation during his remarks appears to stem from the cost of sanctions to the US. Specifically, President Trump stated that, “[w]hen I sanction a country, that costs the US a lot of money – a tremendous amount of money . . .” and that just imposing more sanctions is “[is] not that easy.” President Trump suggested to reporters that he would wait to see whether the EU and UK issue new sanctions first. We expect the Trump administration is also considering the prospect of peace negotiations with the Kremlin and Kyiv, which President Trump said would be “screwed up” if more sanctions were imposed.
Senators Introduce Bill to Repeal Statute underlying Syria Sanctions
Senator Jeanne Shaheen (D-NH), the Ranking Member of the Senate Foreign Relations Committee, alongside Senator Rand Paul (R-KY) recently introduced a bill (S. 2133) to repeal the Caesar Syria Civilian Protection Act of 2019 (the “Caesar Act”). The bill was referred to the Senate Foreign Relations Committee on June 18, 2025. Companion legislation was introduced in the House (H.R. 3941) by Representative Joe Wilson (R-SC) on June 12, 2025, and subsequently referred to the House Committees on Foreign Affairs, the Judiciary, and Financial Services.
The Caesar Act, in part, sanctions the Syrian government and those who facilitate its acquisition of certain goods, services, or technologies that support military activities or Syria’s aviation, oil, or gas production industries. When OFAC announced that it was issuing Syria General License (GL) 25 on May 23, 2025, which authorized certain transactions otherwise prohibited by the Syria Sanctions Regulations, the Department of State concurrently announced that it was issuing a 180-day waiver of mandatory Caesar Act sanctions. The shift in policy, as well as the proposed legislation from Senators Shaheen and Paul and Representative Wilson, reflect the changing attitudes of Trump administration officials and Members of Congress to Syria’s new interim government under President Ahmed al-Sharaa.
DOJ Declines to Prosecute Company Following VSD of Sanctions Violations
The Department of Justice’s (DOJ) National Security Division (NSD) and the US Attorney’s Office of the Southern District of Texas announced that DOJ has declined to prosecute White Deer Management LLC (“White Deer”) and its affiliates after the firm voluntarily self-disclosed criminal violations of US sanctions and export controls committed by a company it had acquired, Unicat Catalyst Technologies LLC (“Unicat”).
According to Assistant Attorney General for National Security John A. Eisenberg, the DOJ’s decision to “decline prosecution of the acquiror and extend a non-prosecution agreement to the acquired entity in this case reflects the [NSD’s] strong commitment to rewarding responsible corporate leadership.” OFAC had previously entered into a settlement agreement with Unicat for a civil penalty of $3,882,797. OFAC asserted that Unicat committed 13 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR) as well as one apparent violation of the Venezuela Sanctions Regulations (VSR) for allegedly providing catalyst products and consulting services to Iran and selling catalysts to a blocked entity in Venezuela.
For more on the NSD’s recent trend toward corporate declinations, read this blog post by Steptoe partners Andrew Adams and Brian Fleming.
UK Developments
UK Imposes New Sanctions on Russia’s Energy, Financial, and Military Sectors
On 17 June 2025, the UK Government imposed new sanctions on Russia following further Russian attacks on Kyiv, which were intended to increase economic pressure on Russia and impact its ability to fund its war in Ukraine. In particular, 10 new designations were made under the Russia sanctions regime, which targeted: (i) UK-based individuals involved in providing electronics on the UK’s Common High Priority List items to Russia through various shell companies; (ii) GUGI (i.e., the Main Directorate of Deep-Sea Research of the Russian Ministry of Defence), which is the military agency leading the development of Russia’s underwater intelligence gathering operations, to protect the UK from attacks on subsea infrastructure; (iii) enablers of Russia’s illicit oil trade through the crewing and managing of “shadow fleet” vessels; and (iv) businesses operating in the Russian energy, extractives, and financial services sectors. The new sanctions also crack down further on Russia’s shadow fleet, specifying 20 additional oil tankers. In announcing the new sanctions, Foreign Secretary Lammy also stated that the UK intends to work with its international partners to tighten the oil price cap to further constrain Russian revenue generation capable of use to fund the war.
OFSI Publishes Sanctions Threat Assessment for Art Market Participants and the High Value Goods Sector
On 18 June 2025, OFSI published its threat assessment for art market participants and the high value goods sector, following the recent introduction of mandatory financial sanctions reporting obligations on the sector. The threat assessment identifies the risk of designated persons facing financial pressures due to UK financial sanctions, attempting to sell high value goods or transfer them beyond the reach of UK asset freeze regulations, identifying a series of red flags and case studies that those active in the sector should be alert to. Russian designated persons and their enablers efforts to deal with high value goods in the UK in breach of asset freeze prohibitions are identified as a particular area of risk. Additionally, persons designated under several other UK sanctions regimes also were identified as posing a particularly elevated risk; namely, the Libya, North Korea, Counter Terrorism (Domestic), Global Anti-Corruption, and Global Human Rights sanctions regimes.
EU Developments
European Commission Unveils REPowerEU Proposal to Phase out Russian Gas and Oil Imports
On June 17, the European Commission presented its REPowerEU proposal to gradually phase out the import of Russian gas and oil into the EU by the end of 2027. This marks the first step in the implementation of the REPowerEU roadmap, as previously reported in our May 12 Sanctions Update.
Under the legislative proposal, new contracts for importing Russian gas will be prohibited starting January 1, 2026. Imports under existing short-term contracts will cease by June 17, 2026, except in cases of pipeline gas delivered to landlocked countries with ongoing long-term contract obligations, which will be permitted until the end of 2027. Additionally, all imports under long-term contracts will come to an end by December 31, 2027. The proposal also bans long-term contracts for liquefied natural gas (LNG) terminal services involving Russian customers or entities controlled by Russian undertakings. Lastly, to ensure a gradual and coordinated phase-out of Russian fossil fuels from the EU market, Member States will be required to develop and implement diversification plans.
The REPowerEU initiative aims to address the remaining dependencies on Russian energy imports while contributing to the broader objectives of the Clean Industrial Deal and the Action Plan for Affordable Energy. The roadmap has reportedly faced pushback from Hungary and Slovakia, which have voiced opposition to sanctions targeting Russian gas.
EU Council Renews Sanctions Against Russia Over Crimea Annexation
The EU Council has renewed the restrictive measures against Russia over its illegal annexation of Crimea and the city of Sevastopol until June 23, 2026. First introduced in June 2014, the sanctions include a ban on the import of goods from Crimea or Sevastopol into the EU, as well as prohibitions on infrastructural or financial investment in these regions and the provision of tourism services. The measures also restrict the export of certain goods and technologies to Crimean companies or for use in sectors such as transport, telecommunications, and energy, along with activities related to the prospection and production of oil, gas, and mineral resources. With this decision, the EU reaffirms its refusal to recognize Russia’s illegal annexation of Crimea and Sevastopol, condemning it as a violation of international law.
EU Commission Updates FAQs on Sanctions Against Russia For Targeted Vessels
The European Commission recently published updated FAQs to provide greater clarity on the rules surrounding vessels targeted under Annex XLII of Council Regulation 833/2014, particularly those carrying dangerous or polluting goods, such as oil. The update outlines exceptional circumstances under which such vessels may be granted temporary access to EU ports to offload dangerous or polluting cargo, despite restrictions, when it is necessary to prevent or mitigate substantial risks to human health, safety, or the environment.
Asia-Pacific Developments
Taiwan and Malaysia Navigate Rising US-China Tensions Over AI Chip Restrictions
On June 16, 2025, Taiwan’s Ministry of Economic Affairs (MOEA) reportedly confirmed the addition of Huawei Technologies and Semiconductor Manufacturing International Corp (SMIC) to its Strategic High-Tech Commodities (SHTC) Export Control Entity list. Both companies, already sanctioned by the US, are key players in China’s efforts to develop AI chips as alternatives to Nvidia’s advanced semiconductors. In response, China’s Ministry of Foreign Affairs (MOFA) criticized Taiwan’s government, stating, “The DPP authorities’ kneeling and ingratiating themselves with the US will only hurt and ruin Taiwan’s interests.”
Just days later, on June 19, 2025, similar tensions surfaced in Malaysia, where reports emerged that Malaysia is investigating claims that Chinese engineers used Nvidia-powered data centers to bypass US export controls and train AI models. This development could strain Malaysia’s trade talks with the US, as the country faces pressure to tighten oversight of semiconductor activities. Despite Malaysia’s digital minister promoting recent tech collaborations with China, the trade ministry emphasized that companies must comply with export restrictions to avoid secondary sanctions, reflecting a careful balancing act in navigating global chip policies.
China Reviews Sanctions on UK Parliamentarians
China is reportedly reviewing its 2021 sanctions on nine UK citizens, including five Members of Parliament and two peers, in a potential move toward easing tensions with the UK. The sanctions were imposed in retaliation for the UK sanctioning Chinese officials over human rights abuses against Uyghurs in Xinjiang. This development follows a series of high-level meetings in London between Chinese officials and UK government figures, focused on trade and diplomatic ties.
China’s reconsideration comes amid broader efforts to improve international relations, as it recently lifted sanctions on EU officials while seeking better ties with Brussels. UK officials, however, maintain there is no plan to remove their own sanctions on Chinese officials. While a UK-China trade deal remains unlikely, there are plans for further diplomatic engagement, with UK officials potentially visiting Beijing later this year.
