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 EU Approves 16thSanctions Package, Boosting Leverage for Upcoming Peace Negotiations
On February 24, the third anniversary of the outbreak of the Ukraine War, the EU approved its 16thsanctions package on Russia. The package is wide-ranging, doubling down on sanctions in sectors already targeted by the EU, expanding the scope of sanctions and closing loopholes used to circumvent sanctions. The sanctions package is important not only for its economic breadth, but for its political weight, a power move in advance of expected peace negotiations between the US and Russia, with the European stakeholders at risk of being pushed to the margins.
Due to proximity and history, Europe has been a significant trading partner for Russia. With EU sanctions in place, the US would be pressed to deliver on a potential peace deal concession of restoring Russian global trade to pre-2022 levels. Speaking on the approval of the package, EU High Representative for Foreign and Security Policy Kaja Kallas zeroed in on the political import, saying, “With talks underway to end Russia’s aggression, we must put Ukraine in the strongest possible position. Sanctions provide leverage.”
The 16thpackage brings EU sanctions in closer alignment with US and UK sanctions in some areas. For example, in the energy sector, the EU is tightening bans on services that support the Russian oil and gas sectors, largely tracking with the US, but still permits import of LNG while the US and UK ban all Russian energy imports. The expanded import ban on aluminum imports aligns the EU with the US and UK, which adopted import restrictions on aluminum, copper and nickel last year.
What’s New in the 16thSanctions Package
Energy Sector Measures: The EU now fully bans temporary storage of Russian crude oil and petroleum products (eliminating exemption of oil in compliance with the price cap and going to a third country, which simplifies enforcement). The package also extended the prohibition on providing goods, technology and services to crude oil projects in Russia (previously the ban was limited to Russian LNG projects under development).
Financial Sector Measures: The package cut off 13 regional banks from the SWIFT international banking system. For the first time, the EU targeted three credit or financial institutions outside of Russia for evading sanctions by using the Russian Central Bank’s System for Transfer and Financial Messages (SPFS), the relatively new Russian financial institution designed to create an alternative to SWIFT. The EU also expanded the scope of the transaction ban to include financial institutions and crypto asset providers that support circumvention of the oil price cap and facilitate transactions for sanctioned shadow fleet vessels.
Infrastructure Measures: The package prohibited any transactions with two Moscow airports and four regional airports, plus three seaports, targeted for the transfer of UAVs, missiles and related technology. Additionally, EU entities are banned from providing construction services in Russia related to infrastructure projects.
Transportation Measures: Within EU territory, the package strengthened existing prohibitions on road transport companies (trucking companies) by EU operators owned 25% or more by Russian natural or legal persons and blocked future changes to capital structures that would increase Russian ownership over 25%. The EU flight ban was widened to include third-country air carriers operating domestic flights within Russia or exporting aircraft or other aviation goods and technology to Russian air carriers. Listed air carriers are prohibited from flying to the EU.
Import Ban: The EU expanded its ban on Russian-processed aluminum products to primary aluminum imports on a phased schedule (to mitigate against market shock).
Export Restrictions: Targeting industrial goods with military use (dual use goods), the package puts new export restrictions on certain minerals, chemicals, steel, glass materials, rubber, some plastics, gaming consoles (used to pilot drones), and software used with precision machine tools to manufacture weapons.
Sanctions Evasion Measures and Asset Freezes: The package added 74 vessels linked to Russia’s shadow fleet to the ban on access to EU ports. The EU added two new criteria for adding people and entities to asset freeze lists, including those who support the operations of unsafe oil tankers and those supporting or benefiting from the Russian military industrial complex. Another 53 entities, having been determined to have supported Russia’s military and industrial complex, are now subject to stricter export restrictions; more than half of these are in countries other than Russia (China, Hong Kong, India, Kazakhstan, Singapore, Turkey, the UAE and Uzbekistan). The package sanctioned another 48 individuals and 35 entities for undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.
Disinformation Measures: The EU suspended the broadcasting licenses of another eight media outlets operating in the EU, or directed at the EU, for spreading disinformation by supporting and justifying Russia’s war of aggression against Ukraine.
Belarus and Russian Occupied Areas in Ukraine: To mitigate against sanctions evasion, the package expanded certain provisions of Russian sanctions to Belarus, and updated and strengthened sanctions regimes in Crimea and Sevastopol and Russian occupied Donetsk, Kherson, Luhansk and Zaporzhzhia oblasts.
US Developments
US Issues New Sanctions in “Maximum Pressure” Campaign Against Iran
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has introduced more Iran-related sanctions under President Trump’s “maximum pressure” campaign, outlined in his recently issued National Security Presidential Memorandum 2 (NSPM-2). The sanctions suggest OFAC intends to be active in ramping up sanctions pressure on Iran under the new administration.
First, on February 24, OFAC designated over 30 persons and vessels for allegedly brokering the sale or transportation of Iranian petroleum-related products. The State Department also announced that it was designating 16 entities and vessels for their involvement in Iran’s petroleum and petrochemical industry. Then, on February 26, OFAC designated six entities for procuring or supporting the procurement of unmanned aerial vehicles (UAVs) for Iranian firms or their subsidiaries.
Importantly, the recent designations have targeted numerous persons outside of Iran, including those in China, Hong Kong, India, Liberia, Malaysia, and the United Arab Emirates.
Early indications suggest the Iranian oil trade, and in particular purchases of Iranian oil by China, are likely to be a top priority for OFAC. Treasury Secretary Scott Bessent recently warned, “anyone who deals in Iranian oil exposes themselves to significant sanctions risk.”
For more information on the Trump administration’s renewed maximum pressure policy, see our blog post on the topic.
US Lawmakers Call for Sanctions in Response to Thailand’s Forced Return of Uyghurs to China
Recent reports indicate that Thailand has forcibly removed 40 or more persons of the Uyghur ethnic group to China. The deportation is notable given the assertions by Western countries, particularly the US, that Uyghurs are among the ethnic groups subjected to human rights abuses in the Xinjiang Uyghur Autonomous Region of China.
Prior to the deportation effort, several US lawmakers advocated against the Uyghurs’ forced removal to China. On February 24, Sens. Jim Risch (R-ID) and Jeanne Shaheen (D-NH), the Chairman and Ranking Member of the Senate Foreign Relations Committee, respectively, as well as Sens. Chris Coons (D-DE) and Pete Ricketts (R-NE) stated that the US has put “practical options” on the table to resolve the issue, and urged Thai leaders to engage with the US on those other proposals.
Similarly, on February 26, Reps. John Moolenaar (R-MI) and Raja Krishnamoorthi (D-IL), the Chairman and Ranking Member of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, respectively, issued a joint statement urging the Thai government to immediately halt the deportations. In that statement, Reps. Moolenaar and Krishnamoorthi also asserted that the US would be forced to consider all measures, including sanctions, to hold those “complicit in facilitating China’s human rights abuses” to account.
It remains to be seen if the US will issue sanctions in response to the Thai government’s actions. Secretary of State Marco Rubio—who has been a notable critic of the Chinese government’s treatment of Uyghurs—condemned the decision. Rubio warned that Thailand’s decision risks violating its United Nations treaty obligations and runs counter to the country’s longstanding commitment to protect human rights.
Senator Calls on Congress to Oppose Any Efforts to Unwind Pressure on Russia
Sen. Elizabeth Warren (D-MA), the Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, issued a statement urging Congress to oppose “irresponsible attempts to unwind measure that keep the pressure on Russia[.]” Warren’s statement follows calls from other top Democrats including Rep. Gregory Meeks (D-NY), the Ranking Member of the House Committee on Foreign Affairs, expressing an unwillingness to provide sanctions relief to Russia.
The statements by Congressional Democrats come amid the Trump administration’s dialogue with Russia concerning an end to the war in Ukraine. Secretary Bessent recently stated that the US is prepared to either rollback or increase sanctions on Russia, depending on the outcome of the aforementioned talks. While President Trump has significant discretion to rollback many of the sanctions that have been imposed on Russia, changes to at least some sanctions would require an act of Congress.
State Department Expands Visa Restrictions on Cuba
Secretary of State Marco Rubio announced the expansion of an existing Cuba-related visa restriction policy that targets “forced labor linked to the Cuban labor export program,” particularly Cuba’s overseas medical missions. Rubio stated that the policy applies to current or former Cuban government officials (as well as other individuals) who are allegedly responsible for or involved in the Cuban labor export program. The Trump administration has signaled its intent to take a hard line toward Cuba as it did during the first Trump administration. Rubio has been a longtime critic of Cuba and is likely to play a key role in Trump administration efforts to ramp up pressure on Cuba.
Trump Unveils “America First Investment Policy”
President Trump has issued a National Security Presidential Memorandum (NSPM) outlining the “America First Investment Policy.” The NSPM details plans to encourage allies and partners to invest in the US, while simultaneously calling for additional restrictions on investment activity involving certain “foreign adversaries,” specifically, China. These plans foreshadow potentially significant changes to the Committee on Foreign Investment in the United States (CFIUS), the Department of the Treasury’s Outbound Investment Security Program (OISP), and other regulatory regimes.
In particular, the NSPM outlines a variety of measures aimed at strengthening the ability of CFIUS to review and restrict certain foreign investment in the US, especially those transactions which concern both “foreign adversaries,” such as China, and critical or emerging technologies; it also suggests multiple changes that could ease restrictions on foreign investment, including the creation of a “fast track” for investments from specified allies and partners. In regard to OISP, the NSPM details plans to establish new rules to prevent or discourage US companies and investors from investing in sectors or industries that further China’s military-civil fusion goals.
For more information on the “American First Investment Policy,” see our recent blog post.
UK Developments
UK Makes First Use of Secondary Sanctions Like Designation Powers Under Russia Sanctions Regime
The Foreign, Commonwealth and Development Office (FCDO) has made its first use of expanded designation powers with an effect akin to secondary sanctions under the Russia sanctions regime. The target of the action was OJSC Keremet Bank, a Kyrgyzstan-based bank that was sanctioned for providing financial services to the Russian financial services sector and is now subject to asset freeze, making available, and trust services sanctions. The designation criteria under the Russia Regulations were expanded in July 2024 to allow the UK government to designate individuals and entities for providing financial services, or making available funds, economic resources, goods or technology to persons involved in destabilizing, undermining, or threatening the territorial integrity, sovereignty or independence of Ukraine and/or obtaining a benefit from or supporting the Government of Russia.
UK Announces Largest Package of Russia Designations Since 2022
To mark the third anniversary of the Ukraine war, the UK has announced the designation of over 100 individuals, entities, and ships involved in Russia’s military supply chains, sectors of strategic or economic significance to the Government of Russia and its funding of the war, as well as government officials and those described by the FCDO as “propping up Russia’s kleptocratic system.” The measures are intended to underscore the UK’s continued commitment to, and support for, Ukraine as the conflict enters a crucial stage. Announcing the measures, Foreign Secretary Lammy stated that “[l]asting peace will only be achieved through strength. That is why we are focused on putting Ukraine in the strongest possible position.” In addition to its size, the package of notable for targeting scores of shadow fleet vessels and third country entities in China, Thailand, Germany, India, Kyrgyzstan, and Turkey linked to the Russian defence sector.
New Restrictions on Military Exports to Rwanda
The UK has removed Rwanda as a permitted destination under four Open General Export Licences relating to military goods with immediate effect. The imposition of these measures follows indications from various UK government officials in recent weeks that the government was assessing its options to respond to the Rwandan Defence Force’s operations in the eastern Democratic Republic of Congo. Rwanda has sharply criticized the UK’s efforts to impose costs on its involvement in the humanitarian crisis in the Congo, calling the decision to halt some aid “punitive.” The revocation of Rwanda’s status as a permitted destination further illustrates the depths to which the previously strong UK-Rwanda relationship has fallen amid the conflict in eastern DRC.
New Guidance on Export Licensing for CHPL Items
The Department for Business and Trade has updated guidance on Russian sanctions evasion and circumvention to clarify the level of risk the UK government is willing to accept when assessing export licence applications for common high priority list (CHPL) items subject to UK export controls. The updated guidance makes clear that the UK government will only issue export licences for these items when doing so is consistent with the UK’s strategic export licensing criteria, with items exported for stock where a risk of diversion to Russia is identified likely to be an area of focus for particular scrutiny.
EU Developments
EU Council Adopts 16th Sanctions Package Targeting Russia, Belarus, and Non-Government-Controlled Areas of Ukraine
The EU Council has introduced a significant 16thsanctions package targeting individuals and entities undermining Ukraine’s territorial integrity including, for the first time, a transaction ban on financial institutions using Russia's ‘System for Transfer of Financial Messages’ (SPFS) outside the country. These measures also encompass restrictions on Putin's shadow fleet, entities supporting the military-industrial complex, an import ban on Russian primary aluminum, extended dual-use and industrial goods export restrictions, and a complete prohibition on the temporary storage of Russian oil in EU ports. Additionally, the package extends the flight ban to third-country carriers operating within Russia and suspends broadcasting activities of eight Russian media outlets. Similar sanctions are also applied to Belarus and further restrictions were applied to non-government-controlled areas of Ukraine to prevent their integration into Russia and the circumvention of EU sanctions and to Crimea and Sevastopol.
EU Council Delays Adoption of Sanctions Against Rwanda
On the 24thof February, it was reported that the EU Council delayed the adoption of additional sanctions against Rwanda for its involvement in the conflict in eastern Democratic Republic of the Congo (DRC). The proposed sanctions are intended to deter Rwandan involvement in the escalating civil war in the DRC, where Rwanda-backed M23 rebels have seized significant ground and caused the displacement of nearly 500,000 in the country’s east.. The proposed sanctions, discussed during the Foreign Affairs Council, reportedly included individual sanctions against one entity and nine individuals, as well as the freezing of 20 million euros contributed by the EU last November under the European Peace Facility (EPF). Following the council meeting, High Representative Kaja Kallas clarified that the EU has urged Rwanda to withdraw its troops. Additionally, the Memorandum of Understanding (MoU) regarding critical raw materials, which was signed in February 2024 to enhance cooperation between Rwanda and the EU in the area of sustainable critical raw materials, will be reviewed.
