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
Ahead of large-scale US-Israeli strikes on Iran over the weekend, the US Treasury Department last week imposed a new raft of sanctions on enablers of Iran’s illicit “shadow fleet” for oil sales, as well as ballistic missile and weapons production, and designated Iran as a State Sponsor of Wrongful Detention (SSWD). The SSWD designation is the first use of new authorities established under President Trump’s September Executive Order to Protect U.S. Nationals from Wrongful Detention Abroad and the subsequent Countering Wrongful Detention Act of 2025, codified through the National Defense Authorization Act in December. The authorities permit the White House to designate entire governments as SSWDs and permit the imposition of sanctions, visa restrictions, financial penalties, and restrictions on foreign assistance and the export of certain items. President Trump has made the return of American hostages a foreign policy priority in his second term, and some 27 Americans are considered wrongfully detained in Iran, with up to seven of that number detained during the June 12-day war alone. As President Trump’s clock to secure a nuclear deal ticks down, the US is upping pressure from all avenues—military, diplomatic, economic—to secure a favorable outcome for the US and its regional allies.
The new measures came just days ahead of long-threatened US airstrikes on Iran, followed by unprecedented Iranian retaliation targeting the US and its allies across the region, all of which raises the prospects significantly of a broader regional conflict. Bypassing the limited strike that the US had telegraphed in recent weeks—to function as an opening salvo to extract greater concessions in ongoing nuclear talks—the US, alongside Israel, unleashed large-scale strikes throughout Iran, targeting nuclear and military sites with the goal of regime decapitation and change. On Saturday, Iranian state media confirmed the death of Iranian Supreme Leader Ayatollah Khamenei in an Israeli airstrike, and on Sunday, there were unverified reports of the death of interim Supreme Leader Alireza Arafi; Israel claimed that its opening strikes had decimated the chain of command beyond the Ayatollah, who did not have a named successor, and President Trump has explicitly called on Iranians to reignite January anti-government protests and overthrow the Islamic Republic.
Iran responded with large-scale retaliation, launching airstrikes into Israel and on US military assets in the Gulf—as widely expected—but also military and civilian targets in Saudi Arabia, the UAE, Bahrain, Qatar, Kuwait, Jordan, Iraq, and Oman, striking US military installations there as well as civilian and economic targets. Strikes have resulted in the closure of the three largest airline hubs in the region—Abu Dhabi, Dubai, and Doha—the closure of multiple countries’ airspace, and suspended operations at multiple commercial ports. Iran has also effectively closed the Strait of Hormuz, a chokepoint that facilitates one-fifth of the global oil trade, and shipping companies have been avoiding the entire region, leading to supply disruptions that spiked Brent crude prices 10% and LNG prices by as much as 20%. The response is a comparatively massive response by Iran, which in previous bouts of conflict with the US and Israel has often opted for more restrained signals of military resolve and avoided direct, large-scale conflict against the US and regional allies like Saudi Arabia, the UAE and Jordan, which Tehran has little chance to win (especially given the low likelihood of assistance from China or Russia).
The strikes followed an unsuccessful round of nuclear talks in Geneva. The renewed negotiations, which opened following US airstrike threats in the wake of Iran’s unprecedentedly large anti-government protests that erupted late last year, had seen genuine attempts to shift positions from both parties. At previous meetings, the US reportedly showed willingness to allow Iran to retain some nuclear material that has not been sufficiently enriched for nuclear weaponization (a departure from previous rounds, when the US position was staunchly opposed to any enrichment at all). Meanwhile, Iran had expressed openness to an old US proposal that would allow Iran to maintain ownership over enriched uranium but store it outside of its borders. Last week’s round, however, revealed that the parties remain fundamentally at odds. The US reportedly demanded the complete destruction of Iran’s last three nuclear sites, while Iran has rejected the idea of legally retaining ownership of its remaining fissile material but storing it in the US (the original proposal for offsite storage of uranium was made pre-Ukraine War and envisioned Russia serving in that role—clearly no longer an option). The US has appeared to omit ballistic missile capacity and proxy networks from the scope of negotiations—at Iran’s demand—but still desires a broader deal than Iran is likely to offer.
The conflict is unlikely to de-escalate in the near term. The US has set out maximalist aims, with President Trump explicitly calling for the elimination of Iran’s nuclear and military capabilities and for regime change—and warning that bombing may continue for weeks to achieve these aims. While Iran’s ability to succeed militarily against the US and its partners is relatively limited, it does not need to win decisively to fulfill its likely strategy of exacting a sufficiently high cost from the US and its regional partners; this approach may cause Gulf capitals to push harder for off-ramps and de-escalation of the conflict. Iran will not be able to sustain high-volume missile and drone barrages for long, but it may yet call upon proxies (an uncertain prospect, degraded as many of them are), harass international shipping, or prolong the closure of the Strait of Hormuz to escalate costs for its opponents (at potentially ruinous cost to itself as well, in the case of the strait closure). The Islamic Republic of Iran, and the region with it, is very much at an inflection point, poised for greater regional instability but also—the US and Israel hope—the end of an era of Iranian power projection and proxy behavior stoking regional conflict. Iran indeed is facing an existential threat, with anti-regime sentiment at a historic high, its economy increasingly suppressed by international sanctions and internal mismanagement, its capabilities at a low following years of conflict with Israel and degradation of its proxies, and a succession battle likely already ongoing—all told, a state of crisis with a high potential to drive reckless retaliation from Iran and fuel violence in the near term.
US Developments
State Department Deploys New IP Sanctions Authority
On February 24, the State Department sanctioned one individual and two entities pursuant to the Protecting American Intellectual Property Act of 2022 (“PAIPA”) (Pub. L. No. 117-366). Although PAIPA entered into force over three years ago, these are the first-ever designations made by either the State Department or OFAC pursuant to PAIPA.
PAIPA authorizes the President to impose blocking sanctions on a foreign person that:
- has knowingly engaged in, or benefitted from, significant theft of trade secrets of US persons, provided that such theft is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy, economic health, or financial stability of the United States;
- has provided significant financial, material, or technological support for, or goods or services in support of or to the benefit of, such theft;
- is an entity that is owned or controlled by, or that acts or purport to act for or on behalf of, directly or indirectly, any foreign person identified under (i) or (ii);
- is a chief executive officer or member of the board of directors of any foreign entity identified under clause (i) or (ii).
Once a foreign person is designated under PAIPA, the President must impose certain sanctions on the foreign person, unless the President affirmatively waives the sanctions by certifying that such waiver is in the national interest. If an entity is designated under PAIPA, the President is required to impose five or more sanctions from a menu of sanctions measures authorized under PAIPA, which includes blocking sanctions, designation on the Entity List, restrictions in dealings with US financial institutions, and visa restrictions. If an individual is designated under PAIPA, the President must impose blocking and visa sanctions.
The State Department sanctioned Matrix LLC (AKA “Operation Zero”), a Russian cyber-tools broker that, from 2022 to 2025, allegedly bought eight trade secret zero-day exploits from Peter Williams, an Australian national and former General Manager of a US defense contractor. According to the State Department, those exploits were meant to be sold exclusively to the US Government and select allies. Williams, who was sentenced to 87 months in prison, admitted that he sold the exploits to Operation Zero in exchange for approximately $1.3 million in cryptocurrency.
The State Department also sanctioned Sergey Sergeyevich Zelenyuk, a Russian national who serves as the Director and sole owner of Operation Zero, and a United Arab Emirates (UAE)-based entity, Special Technology Services LLC FZ (“STS”), that Zelenyuk allegedly intended to use for circumventing US sanctions on Russia. The State Department announced it would be imposing five sanctions under PAIPA on Operation Zero and STS, including blocking sanctions and other financial restrictions.
On the same day, OFAC announced that it was sanctioning Operation Zero, Zelenyuk, and STS pursuant to Executive Order (EO) 13694, as amended, which authorizes sanctions against persons engaged in significant, malicious, cyber-enabled activities. Additionally, OFAC brought sanctions against Operation Zero’s alleged affiliates, including Zelenyuk’s assistant, a suspected member of the Trickbot cybercrime gang, and a separate exploit brokerage firm owned by an Operation Zero affiliate.
In a statement announcing the designations, Secretary of the Treasury Scott Bessent warned that, “[i]f you steal U.S. trade secrets, we will hold you accountable.” Secretary Bessent’s statement suggests that the Trump administration may be considering similar PAIPA designations in the future.
OFAC Sanctions Nicaraguan Officials
On February 26, OFAC sanctioned five Nicaraguan government officials who allegedly assist the Nicaraguan regime, led by Rosario María Murillo Zambrana and Daniel Ortega Saavedra, in the repression of the Nicaraguan public. Specifically, OFAC said that, since 2018, the Murillo-Ortega regime “violently repressed protests, unjustly detained and killed political opponents, carried out extraterritorial killings, silenced independent media and forced journalists into exile.” OFAC also said that the Nicaraguan National Assembly was recently “co-opted” by the Murillo-Ortega regime to approve constitutional changes that cement the regime’s rule.
Among those sanctioned by OFAC were the Director and Deputy Director of Nicaragua’s Financial Analysis Unit, the Minister of Labor, the Deputy Director General of the Nicaraguan Institute of Telecommunications and Postal Services, and the head of the Nicaraguan Army’s Directorate of Military Intelligence and Counterintelligence.
OFAC Issues New Venezuela-related FAQ
On February 25, OFAC issued Venezuela-related FAQ 1238 regarding the resale of Venezuelan origin oil to Cuba. The FAQ is the latest in a series of guidance on OFAC’s new General Licenses (GLs) authorizing certain transactions involving Venezuela’s oil sector.
In the FAQ, OFAC states that it would implement a “favorable licensing policy” toward specific license applications seeking authorization for the resale of Venezuelan-origin crude oil and petroleum products for use in Cuba. OFAC further said that, to qualify for this review policy, the requested transactions would need to be consistent with the terms of GL 46A, “Authorizing Certain Activities Involving Venezuelan-Origin Oil,” though applicants need not have an established US entity and the limitations in GL 46A with respect to Cuba would not apply.
OFAC also specified that the review policy is for the benefit of the Cuban people, including the Cuban private sector. Transactions involving, or for the benefit of, any persons or entities associated with the Cuban military, intelligence services, or other government institutions, including those on the State Department’s Cuba Restricted List, will not benefit from the favorable licensing policy.
US Individual Settles with OFAC for Apparent Violations of Syrian Sanctions
OFAC announced on February 25 that a natural US person has entered into a settlement agreement with OFAC for $3,777,000, for their potential civil liability for 20 apparent violations of the former Syria Sanctions Regulations (SySR). OFAC said that the US person’s apparent violations were not voluntarily self-disclosed and were egregious.
According to OFAC, between January 2018 and December 2021, the US person provided managerial services to Syrian entities in the person’s role as an executive and board member for four Syrian real estate companies. The services included reviewing and signing financial statements, approving operational and employee expenses, and supervising the collection of service fees. OFAC noted that the apparent violations occurred under the former regime of Syrian President Bashar al-Assad, before the US removed sanctions on Syria through EO 14312 and subsequent actions in mid-2025.
OFAC said that the case underscores its commitment to “hold those who violate US sanctions accountable, even if such sanctions are later lifted.” OFAC specified that the fact that certain sanctions are no longer in place is not a defense to liability, and cautioned against attempting to “read the tea leaves” and get ahead of any potential changes to US sanctions.
UK Developments
OFSI Publishes Sanctions Compliance Lessons from Bank of Scotland Enforcement Action
OFSI has published a blog post setting out a series of compliance lessons for industry based on its recent civil monetary penalty enforcement action against Bank of Scotland Plc for violations of the UK’s Russia sanctions regime. OFSI has identified four key lessons from the enforcement action. First, the importance of businesses using all available information to optimise sanctions screening controls relative to their risk. Second, the need to implement contingency procedures to escalate and address the inherent risks associated with automated sanctions screening. Third, the need to regularly review and update sanctions training and related materials to ensure they remain up to date. Finally, the positive impact that prompt and complete voluntary disclosure of potential violations can have on enforcement outcomes. The guidance underscores OFSI’s focus not only on the presence of sanctions controls, but also on their effectiveness of operation in practice. Businesses with UK touchpoints should consider reviewing the adequacy of their sanctions screening, escalation procedures, and training provision in light of OFSI’s guidance.
OFSI Amends Personal Remittances General Licence
OFSI has expanded General Licence INT/2024/4761108 (Personal Remittances GL) to authorise entities to make use of the retail banking services of credit or financial institutions designated under the UK’s Russia sanctions regime to make or receive payments for the personal use of the entity where the account at the final institution in the payment chain is a UK, Canadian, EU, EFTA, or US bank account and the total cumulative value of payments over the life of the licence does not exceed £55,000. Payments relating to the provision of goods and services for commercial purposes are not permitted under the Personal Remittances GL. Those intending to make use of the Personal Remittances GL should familiarize themselves and ensure compliance with the conditions and reporting requirements set out in the licence.
UK Imposes New Russia Sanctions Designations to Mark Fourth Anniversary of the Ukraine War
The UK has designated around 300 individuals and entities under its Russia sanctions regime to mark the fourth anniversary of the war in Ukraine. According to a Foreign, Commonwealth and Development Office press release, the new designations target: (i) PJSC Transnfeft, one of the world’s largest oil pipeline companies; (ii) 175 companies in the 2Rivers oil network, one of the largest shadow fleet operators globally and a major trader of Russian crude oil; (iii) 49 entities supplying vital goods, components and technology for use in Russian drones and other weapons used on the battlefield in Ukraine; (iv) three civil nuclear energy companies and two individuals involved in trying to secure contracts for new Russian nuclear installations overseas; (v) six targets in Russia’s beleaguered Liquified Natural Gas industry, including ships, traders and Russia’s Portovaya and Vysotsk terminals responsible for exporting Russian LNG; and (vi) nine Russian banks that process cross-border payments. The newly designated persons are subject to an asset freeze and, in the case of individuals, a travel ban. The UK has also specified a further 48 shadow fleet vessels.
OFSI Issues Transneft Wind Down General Licence
Following the designation of PJSC Transneft, OFSI has issued General Licence INT/2026/8889196 (Transneft GL), which authorises the wind down or divestment from transactions involving PJSC Transneft or its subsidiaries between February 24, 2026 and 23:59 (BST) on April 9, 2026. Persons seeking to rely on the Transneft GL should carefully review and comply with the conditions and record-keeping requirements set out in the licence.
OFSI Amends Russian Oil Exempt Projects General Licence
OFSI has issued an amended version of General Licence INT/2026/5636700 (Russian Oil Exempt Projects GL) to include subsidiaries of PJSC Transneft within the scope of the authorisations in the licence. The Druzhba pipeline project has also been added as an exempt project until October 14, 2027. Persons seeking to rely on the Russian Oil Exempt Projects GL should carefully review and comply with the conditions and record-keeping requirements set out in the licence.
OFSI Issues Maritime Mutual Reinsurance General Licence
Following the designation of Maritime Mutual Insurance Association (NZ) and Maritime Mutual Association Limited, OFSI has issued General Licence INT/2026/8893924 (Maritime Mutual GL), which authorises the wind down prior to 23:59 (BST) on April 9, 2026 of insurance policies written by these Maritime Mutual entities and their subsidiaries prior to February 24, 2026. Persons seeking to rely on the Maritime Mutual GL should carefully review and comply with the conditions and record-keeping requirements set out in the licence.
UK Indicates Willingness to Back a Ban on Maritime Services for Russian Oil Shipments
During a session of the House of Commons Business and Trade Sub-Committee on Economic Security, Arms and Export Controls on February 25, 2026, Chris Bryant MP, a Minister in the Department for Business and Trade, indicated that the UK could act alongside the EU to implement a ban on maritime services for Russian oil shipments in the future even in the absence of US backing for such action. Any such ban would go beyond the current restrictions imposed under the price cap policy. A representative of the Foreign, Commonwealth and Development Office also confirmed during the same session that the UK continues to discuss such a policy expansion with the EU.
OFSI Publishes Guidance on the Prioritisation of Financial Sanctions Licence Applications
OFSI has published a blog post setting out its approach toward the prioritization of financial sanctions licence applications. OFSI considers a range of seven criteria when determining whether high, medium, or low priority should be ascribed to a licence application. Typically, a licensing case will only be deemed to be high priority when it meets at least two of the seven criteria, such as in humanitarian cases or when there is a demonstrable risk to life. Medium-priority cases generally demonstrate a moderate level of impact across several of the criteria, while low-priority cases generally show limited impact across most of the assessment criteria. OFSI recommends that applicants for financial sanctions licensing should assist OFSI in the efficient processing of applications by providing a clear legal basis for licensing, including all relevant information upfront, avoiding repeat or speculative applications, highlighting genuine deadlines, and making use of OFSI’s online licence application form.
EU Developments
Discussions on the 20th Sanctions Package Against Russia
After the Foreign Affairs Council meeting on February 23, High Representative of the EU Kaja Kallas announced that Member States were unable to reach an agreement on the 20th sanctions package against Russia. Kallas described the outcome as a “setback” to the planned timeline, as the package had been scheduled for adoption on February 24 to coincide with the fourth anniversary of Russia’s full-scale invasion of Ukraine.
Several EU foreign ministers, including those of Germany, Lithuania, and Poland, openly opposed Hungary for blocking agreement on the package. Speaking to the press, High Representative Kaja Kallas noted that outreach efforts are underway to engage with Hungary in order to move the package forward.
EU Council Adds Eight Individuals to Russia Human Rights Sanctions List
The EU Council has amended Decision (CFSP) 2024/1484 to add eight individuals to the sanctions list for their responsibility in serious human rights violations, the repression of civil society and democratic opposition, and actions undermining democracy and the rule of law in Russia.
The newly sanctioned individuals comprise two members of the judiciary, a prosecutor, and an investigator from the Moskovsky and Lomonosovsky regions, who were responsible for sentencing Russian activists Dmitry Skurikhin and Oleg Belousov on politically motivated charges. Also listed are the heads of penal colonies and a pre-detention centre where political prisoners who opposed Russia’s war of aggression against Ukraine and criticised President Putin’s regime were held in solitary confinement and kept in inhuman and degrading conditions.
The restrictive measures include a travel ban, asset freezes, and a prohibition on making funds or economic resources available to the designated individuals.
EU Council Renews Sanctions Regime in Response to the Illegal Annexation by Russia of Certain Non-Government Controlled Areas of Ukraine
The EU Council has renewed the restrictive measures adopted in response to the illegal annexation by Russia of certain non-government-controlled areas of Ukraine for another year, until February 24, 2027. The sanctions regime was initially established in February 2022 following Russia’s decision to recognize the non‑government‑controlled areas of Donetsk and Luhansk oblasts of Ukraine as independent entities and to deploy Russian armed forces into these territories.
EU Council Amends the Scope of EU Terrorist List
On February 26, the EU Council amended the EU Terrorist List regime under Common Position 2001/931/CFSP and Regulation (EC) No 2580/2001, expanding its scope through updated listing criteria and introducing a travel ban for designated individuals.
Under the updated listing criteria, the sanctions regime now expressly covers leading members of listed terrorist groups who play a key role in planning, facilitating, preparing, or perpetrating terrorist acts. In addition, the EU may impose restrictive measures against persons, groups, and entities associated with those involved in terrorist acts, including through participation in financing, terrorist training, and recruitment.
Lastly, the EU Council concluded its periodic review of listings under the counter-terrorism sanctions regime and maintained all current listings without modification.
