Overview
The Sanctions Update, compiled by attorneys from Steptoe’s award-winning International Trade and 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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Lede
US Agrees to Delay the BIS 50% Rule in Exchange for China Suspending Rare Earth Controls
Thursday’s highly anticipated meeting between President Trump and President Xi produced significant progress on easing tensions between the world’s two largest economies. Each side leveraged its economic tools to pressure suspensions of the other’s trade measures, offering relief not only to both nations but also to the global market strained by the escalating and costly US-China trade competition. Notably, the US agreed to suspend the BIS 50% rule, which mirrors OFAC’s 50% sanctions rule, for one year, and in turn China committed to lifting its retaliatory export controls on rare earth minerals for the same period. This reciprocal easing of trade restrictions is expected to benefit businesses, investors, and consumers worldwide—though uncertainty remains over the lack of detail and the durability of these agreements. More broadly, this agreement underscores how both Washington and Beijing are increasingly turning to export controls, in place of sweeping sanctions, as a more nuanced economic foreign policy tool to advance national security aims and gain leverage during trade negotiations.
The BIS 50% rule, issued by the US Department of Commerce’s Bureau of Industry and Security (BIS) on September 29, 2025, significantly broadened existing export controls. Under the rule, export controls apply not only to blacklisted firms on the Entity List, Military End-User (MEU) List, or Specially Designated Nationals and Blocked Persons (SDN) List under economic sanctions programs specified in certain Executive Orders enumerated in 15 C.F.R. § 744.8(a)(1), (related to Russia’s invasion of Ukraine, terrorism, narcotics trafficking, or criminal networks), but also to any foreign entity at least 50% owned—directly or indirectly, individually or in aggregate--by these firms. Even companies with substantial minority ownership or other “significant ties,” such as shared board members, are flagged for additional due diligence before exports can proceed.
BIS’ 50% rule closely mirrors the US Treasury Office of Foreign Assets Control’s (OFAC) 2014 “50% rule,” which treats entities owned 50% or more by sanctioned individuals as if they themselves were sanctioned. The BIS rule built upon a trend in which export controls have increasingly become the regulatory tool of choice for Washington to limit China’s access to US technology, especially those deemed critical to national security. To date, OFAC does not have a comprehensive China-wide embargo sanctions program, rather China-specific sanctions programs are limited to the Chinese Military-Industrial Complex Companies (CMIC) List which narrowly bans US investment in companies it determines support China’s military modernization. The impact of BIS’ 50% rule on China is substantial: roughly 1,300 China-related entities are currently on the Entity List, and the rule was expected to extend restrictions to more than 20,000 subsidiaries and indirectly owned firms.
Chinese companies are well known for their complex subsidiary networks—research in 2019 found that 264 large state-owned enterprises collectively controlled nearly 56,000 subsidiaries. These structuring strategies have been interpreted by some as an effort to circumvent US trade measures, such as the Uyghur Forced Labor Prevention Act (UFLPA), with restricted Chinese firms establishing subsidiaries far from Xinjiang to maintain access to global supply chains. The BIS 50% rule, however, has geographical reach beyond China, with research by Kharon—a company that supports businesses navigate sanctions and global security risks—finding that many blacklisted firms maintain subsidiaries around the world, including the EU, US, and the UK, although only non-US entities are subject to the increased restrictions. The broad reach of the BIS 50% rule requires companies to do extensive ownership screening, imposing significant due diligence and compliance obligations on businesses.
China’s counter measures included a sweeping expansion on export controls on rare earth minerals. On October 9, 2025, China’s Ministry of Commerce (MOCOM) announced restrictions on five of the world’s 17 rare earth minerals to now cover 12 rare earths in total, building on earlier controls imposed in April. The measures also covered lithium batteries, synthetic graphite anode materials, and products manufactured abroad that contain Chinese-origin rare earth elements. Given China’s dominance—accounting for 70% of global mining and 90% of processing capacity—these restrictions triggered a global supply shock and sent prices soaring. With rare earth shortages worsening, the US has sought alternative sources, securing agreements with many partners, including Australia, Malaysia, Cambodia, and Japan. However, developing new supply chains takes years, making a negotiated rollback of China’s controls a priority.
Beyond the BIS 50% rule and rare earth export controls, the two sides also agreed to other de‑escalatory measures, including a one‑year suspension of port fees on each other’s ships. The US agreed to cut fentanyl-related tariffs imposed on China to 10%, and in return China pledged to crack down on fentanyl trafficking. China also agreed to roll back its boycott of US soybeans, committing to purchase 12 million metric tons through January and buying 25 million tons annually for the next three years. Moreover, China agreed to purchase US oil and gas, with potential collaboration in a US pipeline project in Alaska.
While Thursday’s meeting signals a reciprocal easing in US-China tensions, the one-year delay of the BIS 50% rule is a tactical pause in the trade rivalry, not a policy reversal. For US and multinational firms, the immediate upside lies in reduced compliance uncertainty and renewed access to previously restricted entities. However, the lack of clarity on details leaves many questions unresolved, including whether this one-year delay will be renewed next year and whether other national security-related export controls could be on the negotiating table, leaving confusion and risks for supply chains still exposed to subsidiaries affiliated with entities on the Entity, MEU, or SDN List. China’s commitments to expand imports of US goods offer a near-term boost in trade, but past shortfalls—such as China’s failure to fully meet Phase One purchase targets—temper optimism over implementation. While the prospect of reaching a comprehensive trade agreement offers upside potential for exporters and market sentiment, political volatility and the possibility of new escalatory measures remain high.
US Developments
US Sanctions Mexico-Based Human Smuggling Organization
On October 30, OFAC sanctioned the Bhardwaj Human Smuggling Organization (HSO) (“Bhardwaj HSO”), a Mexico-based transnational criminal organization (TCO), as well as its leader Vikrant Bhardwaj, three other individuals, and 16 companies that allegedly facilitated and profited from the HSO’s activities. According to OFAC, Bhardwaj HSO smuggles individuals from Europe, the Middle East, South America, and Asia through Mexico and across the US-Mexico border, often in collaboration with other TCOs, such as the Hernandez Salas TCO, and foreign terrorist organizations (FTO), such as the Sinaloa Cartel.
OFAC’s sanctions against the Bhardwaj HSO follow a similar designation on March 18, which targeted a leader of the Guatemala-based Lopez HSO for allegedly smuggling migrants into the United States. Both designations were made under Executive Order (EO) 13581, as amended by EO 13863, which targets TCOs and their support structures.
OFAC Provides License to Rosneft Affiliates in Germany
OFAC has issued a new general license (“GL”) (GL 129) authorizing certain transactions with two of Open Joint Stock Company Rosneft Oil Company’s (“Rosneft”) affiliates in Germany, Rosneft Deutschland GmbH and RN Refining & Marketing GmbH.
GL 129 follows OFAC’s October 22 designations of Rosneft, Lukoil OAO (“Lukoil”), and certain of their Russia-based subsidiaries and affiliates. Under OFAC’s “50 Percent Rule,” certain other entities, including those not based in Russia, in which Rosneft, Lukoil, or their designated subsidiaries and affiliates own, individually or in the aggregate, directly or indirectly, 50 percent or more, are also considered “blocked.”
The term of GL 129 is set to expire at 12:01 a.m. EST on April 29, 2026.
US Lifts Sanctions on Former Repubilka Srpska President Dodik
On October 29, OFAC removed sanctions on multiple persons and entities connected to the Western Balkans, including former Republika Srpska (“RS”) President Milorad Dodik and many of his supporters and companies. OFAC did not specify why the sanctions were lifted. OFAC recently removed sanctions on other RS officials on October 17.
UK Developments
UK Lifts Arms Embargo on Armenia and Azerbaijan
The UK government has announced the full removal of its arms embargo on Armenia and Azerbaijan, bringing to an end restrictions that had been in place under the Organisation for Security and Co-operation in Europe (OSCE) framework since 1992. The change was confirmed in a Written Ministerial Statement laid before Parliament on October 13, 2025. The UK will no longer apply the OSCE arms embargo to either country, and the previous interpretation of the embargo issued in July 2025, which restricted exports of weapons, ammunition, and munitions for potential use by military, police, or security forces along the Armenia-Azerbaijan land border, is now void. Exporters are advised that all licence applications for controlled goods to Armenia and Azerbaijan will continue to be reviewed individually against the UK’s Strategic Export Licensing Criteria (SELC). Schedule 4 of the Export Control Order 2008 will be amended in due course to reflect this policy change.
OFSI Amends Humanitarian General Licence Covering Israel, Palestine and Lebanon
OFSI has amended General Licence INT/2023/3749168, which facilitates humanitarian activity in Israel, Palestine and Lebanon. The amendment extends the licence for an additional two years and updates several key definitions and reporting provisions. New reporting deadlines have been added for activity undertaken in 2026 and 2027. References to “The Occupied Palestinian Territories” also have been replaced with “Palestine”, and the definition of “Relevant Person” has been broadened. The term “UK Funded Person” now includes anyone who has received UK government funding within the past five years. OFSI has also removed references to “the conflict” to ensure the licence is geographically defined rather than event-specific. Those intending to rely on this General Licence should review the updated text carefully to ensure compliance with its terms and reporting requirements.
UK Government Targets IRGC Enabler in Latest Iran Sanctions
The UK Government has designated Iranian banker and businessman, Aliakbar Ansari, under the Iran sanctions regime (here), following the decision to take action against him for his role in financially enabling the work of the Islamic Revolutionary Guard Corps (IRGC). According to a UK Government press release, Aliakbar Ansari has played a role in financially supporting the activities of the IRGC, which include its use of repression and targeted threats to carry out hostile acts, including in the UK. Aliakbar Ansari is now subject to a UK asset freeze, director disqualification, and a UK travel ban.
OFSI Updates FAQs Guidance
OFSI has updated its financial sanctions FAQ guidance. FAQ 172 has been added and addresses the question of whether an OFSI licence would be required for a UK financial institution to deal with or receive (or use once received) funds allocated to it by an International Central Securities Depository (ICSD) where corresponding ICSD funds held by the National Settlement Depository (NSD) have been seized and dealt with by the NSD. FAQ 53 was amended to reflect the expanded list of sanctions regimes covered by the new Legal Services General Licence. Two FAQs also were withdrawn. Specifically, FAQ 7 (accepting wire transfers from non-UK designated Russian residents with an account with a sanctioned bank) and 49 (amendments made to General Licence INT/2024/5334756).
EU Developments
EU Council Renews Sanctions Regime Against ISIL (Da'esh) and Al-Qaeda
The EU Council has renewed the sanctions regime targeting ISIL (Da’esh) and Al-Qaeda until October 31, 2026. Established under Council Decision (CFSP) 2016/1693, the framework sets out autonomous restrictive measures directed at ISIL (Da’esh), Al-Qaeda, and individuals, groups, and entities associated with them. At present, 15 individuals and 7 groups are designated under the sanctions regime. The restrictive measures include asset freezes, a prohibition on the provision of funds or economic resources, and a travel ban within the European Union.
European Commission Updates FAQs Following 19th Sanctions Package Against Russia
The European Commission recently issued an updated version of its FAQs on sanctions against Russia and Belarus, following the 19th sanctions against Russia. The revisions incorporate changes introduced by the 19th sanctions package and provide further clarification on the scope and application of Council Regulation 833/2014, particularly in relation to oil imports and the import ban on refined petroleum products derived from Russian crude oil. Among the changes, the FAQs clarify that no evidence of crude oil origin is required when importing refined products from designated partner countries listed in Annex LI, which has been expanded to include Australia, Japan and New Zealand.
EU Council Extends Sanctions Regime Targeting Moldova Until October 2026
The EU Council has extended the sanctions regime targeting the leadership of the Transnistrian region of the Republic of Moldova, for another year, until October 31, 2026. The sanctions regime, set out in Council Decision 2010/573/CFSP, imposes restrictive measures, including a travel ban, on individuals who obstruct efforts to achieve a political settlement of the Transnistrian conflict.
Asia Pacific Developments
China Urges US to End Cuba Sanctions Following UN Resolution
China has urged the United States to respond to widespread international demands by ending its decades-long embargo and sanctions against Cuba and removing the country from its list of state sponsors of terrorism, according to Guo Jiakun, spokesperson for China’s Ministry of Commerce (MOFOCOM). This appeal came after the UN General Assembly overwhelmingly approved a resolution calling for the termination of US economic restrictions on Cuba, with 165 countries voting in favor, seven against, and 12 abstaining. China, which has backed similar UN resolutions for 33 consecutive years, reaffirmed its continued support for Cuba’s right to pursue a development path tailored to its national circumstances.
Iranian Oil Discounts to China Deepen Amid Sanctions and Import Quota Constraints
Amid escalating Western sanctions on Russian and Iranian oil producers, Chinese refiners are receiving Iranian crude at the steepest discounts seen in over a year. The US, UK, and EU have recently intensified trade restrictions targeting major Russian energy firms and entities linked to Iran’s oil trade, including several Chinese refiners and shipping infrastructure. These measures have disrupted logistics and heightened caution among buyers, leading to a standoff in the market. With independent Chinese refiners facing a shortage of government-issued import quotas, demand has weakened, pushing Iranian Light crude offers to over $8 below Brent benchmarks for December delivery—down from $6 in September and $3 in March. Some bids have dropped to $10 below Brent, as buyers seek compensation for sanctions-related risks and potential port complications. Iranian oil imports to China fell to 1.2 million barrels per day in September, the lowest since May, and refiners are now awaiting possible new quotas from Beijing, which has historically issued them in November.
Iran Rebuilds Missile Stockpile with Chinese Shipments Despite UN Sanctions
Despite renewed United Nations sanctions prohibiting ballistic missile development and arms-related exports to Iran, intelligence findings reveal that Iran is actively replenishing its missile stockpile with material sourced from China. Since late September, approximately 2,000 tons of sodium perchlorate—a chemical essential for solid missile fuel—have been shipped from Chinese ports to Iran, following Iran’s military engagement with Israel. These shipments involve vessels and companies already under US sanctions, raising concerns about the effectiveness of enforcement mechanisms. While sodium perchlorate is not explicitly listed among banned substances, its role in missile production places it within the scope of prohibited items under the broader UN framework. China, which opposes the reactivation of sanctions, maintains that its export practices comply with domestic regulations and international obligations.
India’s Largest State-Owned Refiner Resumes Russian Oil Purchases Despite US Pressure
Indian Oil Corporation (IOC), the country’s largest state-owned refiner, has restarted imports of Russian crude oil, acquiring five shipments for December delivery from non-sanctioned suppliers. This includes 3.5 million barrels of ESPO crude, a premium grade typically exported from Russia’s Pacific coast. The decision follows a brief suspension of Russian oil purchases by Indian refiners after the US imposed new sanctions on major Russian producers Rosneft and Lukoil, giving global buyers until November 21 to wind down transactions with them. IOC had previously canceled several shipments linked to newly sanctioned entities but has now resumed buying, citing compliance with international sanctions as a guiding principle. Other Indian refiners, such as Reliance Industries and Mangalore Refinery, have paused purchases pending legal review.
India Partners with Sanctioned Russian Firm to Produce Domestic Civil Aircraft
India’s Hindustan Aeronautics Ltd (HAL), a state-owned aerospace manufacturer, has signed a preliminary agreement with Russia’s United Aircraft Corporation (UAC), currently under sanctions from the US, EU, and UK due to its ties to Russia’s defense sector. HAL and UAC agreed to jointly produce civil commuter aircraft, marking a significant step toward domestic passenger jet manufacturing. While the partnership supports India’s push for self-reliance in aviation and aims to meet growing demand for regional and short-haul international connectivity, it risks straining relations with Western nations. India, however, has rejected unilateral sanctions and criticized Western pressure on its ties with Moscow, pointing out continued Western trade with Russia.
US Grants India Temporary Waiver to Operate Iran’s Chabahar Port
India has received a six-month exemption from US sanctions to continue operating Iran’s Chabahar port, a move that reverses Washington’s earlier decision to revoke the waiver as part of its broader pressure campaign against Iran’s nuclear and missile programs. The waiver follows India’s 10-year agreement with Iran to manage the port and coincides with its recent diplomatic outreach to Afghanistan, including the reopening of its embassy in Kabul. The waiver comes amid signs of improving US-India relations, including discussions on a potential trade deal, after tensions escalated over Indian purchases of Russian oil and increased US tariffs on Indian goods.
Japan Resists US Call to Halt Russian LNG Imports Over Energy Security Concerns
During a recent summit in Tokyo, Japanese Prime Minister Sanae Takaichi reportedly told Trump that halting imports of Russian liquefied natural gas (LNG) would be unfeasible for Japan, citing the country’s energy needs. The US had urged Japan and other buyers to stop purchasing Russian energy and impose sanctions on major Russian oil producers to increase pressure on Moscow over the war in Ukraine. Takaichi, Japan’s first female prime minister, argued that cutting off Russian energy would benefit China and Russia, as they remain major buyers. Russian LNG currently makes up nearly 9% of Japan’s total imports, with Japanese firms Mitsui and Mitsubishi holding stakes in the Sakhalin-2 project in Russia’s Far East. Japan has been increasing its LNG imports from the US in recent years to diversify its energy sources and prepare for the expiration of Russian supply contracts.
