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 expertise of Steptoe’s industry-leading IRC 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 G7 bickers on Russia oil sanctions
In the lead-up to the G7 Foreign Ministers meeting last week in La Malbaie, Quebec, the US vetoed a Canada-proposed monitoring group to coordinate sanctions against Russia’s “shadow fleet,” ostensibly because the US will refrain from joining new multilateral initiatives. In lieu of Canada’s shadow fleet proposal, the US instead prioritized broader language against maritime boundary changes (hinting at China) and softer language on Russia during a phase of delicate ceasefire diplomacy. The proposed language was part of a draft communiqué under discussion in the lead up to the ministerial, the content of which is not considered an official statement until it is published by consensus at the close of the summit. G7 declarations are not legally binding documents, but they do serve to enumerate shared priorities and policy direction, as well as announce new joint efforts.
The Canada proposal seeks to crack down on how Russia evades oil sanctions—namely the G7-imposed $60 per barrel oil price cap—through an obscure network of aging oil tankers, often flagged in third countries and insured by a non-Western company. Since Russia’s full-scale invasion, these vessels have been acquired and owned by special purpose companies incorporated in jurisdictions that do not share oil restrictions against Russia, making sanctions against vessels and entities a fragmented game of whack-a-mole requiring constant updates and investigation. Currently, in both Russian-operated and shadow-fleet tankers, the US sanctions 183 vessels, the EU 153, and the UK 133. The Kyiv School of Economics most recently estimated that the shadow fleet alone consists of over 400 vessels, earning Russia an additional $9.3 billion in export revenues (then funneled to war-making) than if the cap were enforced. Canada’s envisaged task force would coordinate Western allies to share information on suspected shadow fleet vessels to improve enforcement. The G7 decided to move forward with the plan independent of the US.
The US abstention against coordinated enforcement suggests an anticipated negotiation over sanctions with Russia, perhaps with the goal of lifting restrictions to accelerate a US-Russian rapprochement. However, amid current negotiations, European leaders have reaffirmed their commitment to permanently diversifying their energy supplies, as demonstrated by the recent balking at reviving the Nord Stream 2 pipeline. The EU now receives only 13% of its natural gas from Russia, down from 45% in 2022. Europe invests in clean energy at a 10-to-1 ratio against fossil fuels, and markets will likely continue to bet on this trend in response to the EU’s recently proposed Clean Industrial Deal. Moreover, sanctions removal faces additional political obstacles in Europe. While US export controls were imposed through IEEPA (giving the president unilateral decision-making), the EU’s sanctions packages must be removed through unanimity in the European Council, unless allowed to expire.
Given that the EU was Russia’s primary trading partner before the full-scale invasion, its energy transition risks undermining American promises to Russia on sanctions removal. Even if the US moved unilaterally, it only imported about $17.5 billion in Russian fuel and mining products in 2021, compared to EU imports of €98.9 billion. In other words, the US will not be able to unilaterally restore Russia’s “business as usual.”
A US-EU schism on Russian energy could play out in a few possible ways. If a negotiated settlement is achieved in Ukraine, the rationale for the G7 oil price cap—to reduce revenues for Russia’s war economy—expires. However, Europe may seek to prevent a flood of cheap Russian gas to keep its energy transition competitive, perhaps pushing for a gradual phaseout of the price cap or renewing AggregateEU, a “buyer’s club” to coordinate purchases of Russian gas at a discount. If Western allies disagree on the oil price cap, global markets will likely watch what the UK and EU decide, since dominant Western maritime insurers for oil tankers are located there. If the UK and EU refrain from removing the oil price cap and insurers refuse to touch transshipping of Russian seaborne crude and oil, then Russia may still rely on some segment of a shadow fleet, undermining the US’ bid at market relief.
Given Europe’s current stated intention to permanently diversify its energy regardless of sanctions, Russia may continue to lean upon India and China as its primary export markets. However, with less pipeline infrastructure to these destinations, Russia risks stranding surplus oil and gas production, requiring it to cut prices, find additional partners, or reduce supply, shocking global energy markets. If Russia and Ukraine do not reach a negotiated settlement, it is possible the US will reverse course and embrace Canada’s proposed monitoring group, perhaps even pushing to include Iran’s sanctioned shadow fleet.
US Developments
Russia Denounces Ukraine Ceasefire Plan While Preparing to Negotiate on Sanctions
The US recently met with Ukrainian representatives in Saudi Arabia to discuss a resolution to the war, and secured the commitment of the Ukrainian delegation for an immediate 30-day ceasefire – subject to the acceptance and concurrent implementation by Russia. Russian President Vladimir Putin’s top foreign policy aid reacted to the proposal days after it was first announced, stating that it would give Russia “nothing” while granting Ukraine the temporary respite it needs on the battlefield. The developments this week follow recent public pronouncements by the Trump administration and Congressional Republicans promising to levy stronger sanctions on Russia if Putin does not negotiate.
Meanwhile, Russia has reportedly provided the US negotiators with a list of demands for a deal to end the war. Russia is expected to seek sanctions relief as part of the negotiations. Russia’s Ministry of Industry and Trade is reportedly asking companies for proposals on which sanctions it should prioritize negotiating relief for ahead of its meeting with the US. If true, this suggests that the Kremlin is poised to come to the negotiating table in search of sanctions relief, among other concessions, in exchange for the ceasefire.
If a deal cannot be reached, it is possible the Trump administration will follow through on threats to increase sanctions against Russia.
OFAC Continues “Maximum Pressure” Campaign Against Iran
Treasury’s Office of Foreign Assets Control (OFAC) continues to target Iranian persons, entities, and vessels with sanctions in furtherance of President Trump’s renewed “Maximum Pressure” campaign against Iran as outlined in the National Security Presidential Memorandum (NSPM-2).
On March 12, OFAC sanctioned the Foxtrot Network, a transnational criminal organization primarily based in Sweden, as well as its leader, Rawa Majid. OFAC alleges that the Foxtrot Network traffics illicit drugs and carried out attacks in Europe on behalf of the Iranian government. On March 13, OFAC designated Iran’s Minister of Petroleum, Mohsen Paknejad, as well as multiple persons, entities, and vessels across numerous jurisdictions, including China and India, that are allegedly associated with Iran’s “shadow fleet.” The State Department concurrently designated three entities and identified three vessels as blocked property for allegedly enabling Iran to disguise its oil trade through ship-to-ship transfer operations near Southeast Asia. OFAC’s press release reiterated the administration’s goal “to reduce Iran’s oil exports to zero.”
In addition, the US has reportedly revoked a license that enabled Iraq to purchase energy from Iran. While the revocation is aimed at limiting Iran’s exports, the renewed Maximum Pressure campaign is reportedly forcing Iraq to search elsewhere for its gas-related needs. Iranian imports comprise a significant portion of Iraq’s electricity.
The sanctions and the revocation follow recent US sanctions on February 6 and February 24 targeting persons, entities, and vessels involved in the shipment or sale of Iranian petroleum or related products. Their announcement also came amid mixed messages from Tehran and Washington on a potential nuclear deal; a letter from President Trump calling for negotiations reportedly arrived this week, with reformist cabinet members expressing openness to negotiations while Ayatollah Khomeini swore off talks. Continued upping of sanctions is likely both an attempt to curb Iranian revenues for their own sake and build leverage for potential negotiations. Barring a significant breakthrough, the Trump administration is likely to continue aggressively targeting Iran’s oil trade, including third-country facilitators.
Lawmakers Introduce Legislation Targeting Chinese Fentanyl
Rep. Dusty Johnson (R-SD) and the Select Committee on China’s Fentanyl Policy Working Group introduced bicameral legislation establishing a Joint Task Force to Counter Illicit Synthetic Narcotics (“JTF-ISN”). Senators Dave McCormick (R-PA), Chris Coons (D-DE), Katie Britt (R-AL), and John Fetterman (D-PA) cosponsored the legislation in the Senate.
The JTF-ISN would be composed of representatives from multiple US agencies, including the Department of Justice, the Treasury Department (including OFAC), the State Department, and the Department of Homeland Security. The JTF-ISN would be tasked with directing and coordinating activities aimed at disrupting fentanyl, including economic sanctions enforcement. Accordingly, the bill would vest JTF-ISN with the authority to investigate and prosecute violations of federal law related to illicit drug trafficking.
The announcement follows the introduction of related legislation, the “Break Up Suspicious Transactions of Fentanyl Act” (the “BUST Fentanyl Act”), by Senators Jim Risch (R-ID) and Jeanne Shaheen (D-NH), the Chair and Ranking Member of the Senate Foreign Relations Committee, respectively. The Trump administration has made tackling fentanyl trafficking a central part of its trade policy. It remains to be seen whether Congress will pursue fentanyl-related policies with the same vigor, but bills aimed at fentanyl trafficking generally garner significant bipartisan support.
Senate Foreign Relations Committee Leaders Introduce Legislation to Sanction Georgian Officials
Senators Risch and Shaheen reintroduced the Mobilizing and Enhancing Georgia’s Options for Building Accountability, Resilience, and Independence Act (or the “MEGOBARI Act”). While a copy of the current legislation is not yet available, the Senators’ press release indicates that the MEGOBARI Act will require the President to impose sanctions on Georgian Dream officials and their enablers who have, among other things, allegedly “engaged in corruption to derail Georgia’s Euro Atlantic integration, undermined Georgia’s sovereignty and territorial integrity or engaged in other corrupt acts detrimental to stability in Georgia.”
Recent reports indicate that Georgian Dream, the pro-Russia governing party in Georgia, has drafted legislation to curb foreign media and NGO operations in the country. Protests erupted near the end of 2024 as Georgian Dream controversially delayed the country’s accession to the European Union (EU); those protests continue to this day.
The US and EU have each taken actions to express their concerns, with the Biden administration sanctioning Georgian Dream founder and de-facto leader, Bidzina Grigoris Dze Ivanishvili in December 2024, and the EU recently adopting a resolution calling into question the Georgian Dream’s authority to govern following allegedly “rigged” parliamentary elections in October 2024.
FinCEN Issues Geographic Targeting Order for Parts of the Southern Border
Treasury’s Financial Crime Enforcement Network (FinCEN) has issued a Geographic Targeting Order (GTO) for money services businesses (MSBs) in 30 different ZIP codes across California and Texas. The GTO requires MSBs to file Currency Transaction Reports (CTRs) with FinCEN at a $200 threshold, in connection with all cash transactions—a steep drop from the previous $10,000 threshold and one that is aimed at disrupting illicit financial activities by cartels and other transnational criminal organizations (TCOs) along the Southwest border.
FinCEN’s GTO aligns with the Trump administration’s whole-of-government approach to cartels and TCOs, as outlined in Trump’s January 20, 2025 Executive Order (EO), “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists.” It also follows recent Foreign Terrorist Organization (FTO) and Specially Designated Global Terrorist (SDGT) designations made by Secretary of State Marco Rubio against certain cartels and TCOs as well as a memorandum issued by Attorney General Pam Bondi calling for the Department of Justice to pursue a “total-elimination policy” with regard to cartels and TCOs.
The GTO will take effect on April 13, 2025, and will remain effective for 179 days thereafter.
Commerce Weighs Additional Export Controls on China
The Department of Commerce is reportedly weighing three actions that would tighten Biden-era controls on the export of sensitive technologies to China. These actions were reportedly drafted in early February. They include amendments to existing export rules for US-made chips for artificial intelligence (AI), further limitations on certain Chinese AI apps and model weights, and new restrictions on so-called “remote access.”
Trump previously directed the Secretaries of State and Commerce to review US export controls in the America First Trade Policy. He also revoked the Biden-era Executive Order (EO) 14110 on AI, declaring the regulations it imposed on industry “unnecessarily burdensome” and ordering that the US pursue its own strategy of AI dominance. Lawmakers in the House and Senate have also previously called on the US to strengthen export controls on certain AI technologies and the chips critical to those technologies.
UK Developments
OFSI Concludes First Enforcement Action for Information Offences
OFSI has made the second ever use of its “name and shame” powers to identify three UK registered and Charity Commission-regulated charities for their repeated failure to comply with OFSI information requests made under the UK’s international counter-terrorism sanctions regime. This enforcement action represents the first OFSI enforcement action to be brought for information offences, as well as the first OFSI enforcement action to target the charity sector. The charities failed on three occasions to engage with OFSI and did not have a reasonable excuse for not providing the information requested by OFSI and needed to monitor compliance with UK financial sanctions.
EU Developments
Hungary Agrees to Renew EU Sanctions on Russians, Delists Four Names
Hungary has agreed to renew sanctions on approximately 2,000 Russians for another six months, until 15 September 2025. Hungary had allegedly exercised its veto on Monday, Wednesday, and Thursday, blocking the EU's renewal of sanctions unless certain oligarchs were allegedly removed from the sanctions list. These sanctions, which encompass travel bans and asset freezes on individuals linked to Russia's actions in Ukraine, were set to expire on 15 March 2025 unless all 27 EU member states agreed to extend them. The reported compromise includes the delisting of four individuals and the removal of three deceased persons.
Expansion of Operation EUNAVFOR MED IRINI
The European Council has adopted a decision to expand EUNAVFOR MED IRINI's mandate. Operation EUNAVFOR MED IRINI, initiated in 2020, is aimed at enforcing United Nations resolutions on the arms embargo on Libya through the use of aerial, satellite, and maritime assets. As a secondary task, the EU mission also monitors and gathers information on the illicit export of refined petroleum products from Libya. The decision to expand was made in light of the latter mission.
The operation will now monitor, surveil, and gather information on additional illicit activities beyond its initial scope. Furthermore, the EU mission will assist relevant Libyan institutions, particularly the Libyan Coast Guard and Navy, in developing their capacities and providing training in law enforcement at sea, with a specific focus on preventing human smuggling and trafficking.
Delisting of Vice-President and board member of TPAO from Turkish sanctions list
On March 11, the EU Council issued a decision to remove Mehmet Ferruh Akalin, the vice president and board member of the Turkish Petroleum Corporation (TPAO) responsible for the exploration department, from the sanctions list related to Türkiye's unauthorized drilling activities in the Eastern Mediterranean. Akalin had been added to the list in 2020. The list now sanctions only Ali Coscun Namoglu, the deputy director of the exploration department, for his involvement in TPAO's unauthorized drilling activities in the Republic of Cyprus.
In 2019, the EU Council condemned Turkey's continued illegal drilling activities in the Eastern Mediterranean despite repeated calls to cease such actions, emphasizing the negative impact on EU-Turkey relations and urging respect for Cyprus's sovereignty. It is unclear why Akalin was removed from the sanctions list, but it could signal warming EU-Türkiye ties.
EU Council Adopts Position on Tariffs for Russian and Belarusian Agricultural Products and Fertilizers
The EU Council has adopted its position to negotiate with the European Parliament on a proposed regulation that would impose tariffs on the remaining agricultural products and specific nitrogen-based fertilizers from Russia and Belarus. As previously reported, the Commission issued this proposal in January. The new tariffs would apply to agricultural products representing 15% of all agricultural imports from Russia, thereby subjecting all Russian agricultural imports to EU tariffs. For Russian fertilizers, which constitute 25% of the EU's total fertilizer imports, new tariffs would also be imposed.
The primary objectives of these tariffs are to reduce EU dependency on these imports, bolster domestic production, and ensure that fertilizer prices remain affordable for EU farmers. The regulation proposes a gradual transition for fertilizer tariffs over three years, with agricultural product tariffs increasing by an ad valorem duty of 50% and fertilizer tariffs reaching up to EUR 315 or 430 per ton after three years. The proposal also includes measures to mitigate the impact on EU farmers.
