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
Israeli Isolation Grows Following New EU Sanctions
Over the last two weeks, European momentum has built toward imposing sanctions—and other punitive measures—on Israel over its handling of the war in Gaza and the mounting humanitarian crisis there. Amid other international steps to impose costs on Jerusalem and express solidarity with the Palestinians, the EU’s potential sanctions reflect Israel’s growing diplomatic isolation as the conflict in Gaza nears its second year. Despite mounting European criticism, however, there remain internal divisions over the appearance of rewarding Hamas by imposing sanctions on Israeli ministers, and the economic impact of the suspension of trade suspension. The path to EU sanctions is not clear, especially with a potential Israel-Hamas peace deal on the horizon.
On September 17, the EU’s top diplomat Kaja Kallas proposed bloc-wide plans to impose sanctions on two members of Prime Minister Benjamin Netanyahu’s Cabinet, several Israeli settlers in the West Bank, and 10 Hamas leaders, as well as impose tariffs on some Israeli goods. The sanctions—which include far-right Israeli ministers National Security Minister Itamar Ben-Gvir and Finance Minister Bezalel Smotrich—would freeze these individuals’ European assets and ban travel within the EU. This proposal follows sanctions already imposed on Ben-Gvir and Smotrich (who have championed maximalist war aims, including the resettlement of Gaza) at the country level by the Netherlands, Norway, the UK, Australia, Canada, and New Zealand. The proposed measures represent a significant escalation for the EU and its member states, which have historically not sought to sanction sitting Israeli members of government.
The European Commission, claiming that Israel is violating the human rights obligations of its Association Agreement with the bloc, proposes to revoke the Agreement’s zero-tariff preference for a select amount of imported Israeli goods and revert to World Trade Organization tariffs, which vary from 8% to 40% on individual goods. The proposal is a pared-down version of calls from some of Israel’s harshest European critics, who had suggested suspending the Association Agreement in its entirety—a move that would have had immense implications for bilateral relations and that would have been virtually impossible, given the need for unanimous approval. The more limited targeting of the zero-tariff preference, framed by EU leaders as “a suspension of preferences, not a suspension of trade,” is an attempt to thread the needle between staunch critics of Israel and those reluctant to impose further consequences. Nonetheless, it would likely have significant effects: if implemented, tariffs amounting to about €230 million ($166 million) would be slapped on 37% of Israeli goods imported to the EU, worth €15.9 billion in total, per the European Commission.
The sanctions package will require a unanimous vote by the 27 member states, while a suspension of tariff preferences will require a qualified majority. Both are difficult propositions given political divisions within the bloc over the conflict in Gaza. The EU’s announcement was followed by statements of support from the usual suspects—such as Ireland and Spain, outspoken European critics of Israel—but also from European leaders historically seen as staunchly pro-Israel, like Italian Prime Minister Meloni who said at the UN that Israel had “crossed a line” and that Italy would support some of the EU’s sanction package, but it is unclear if she is referring to sanctions on Israeli ministers or the suspension of Association Agreement preferences. Other key decision makers remain on the fence: German Chancellor Merz, who initially said that Berlin would present its decision on the package at today’s summit of EU leaders in Copenhagen, announced the day before that he would postpone the decision in light of a potential breakthrough with a US-proposed peace plan in Gaza, which Israel has endorsed and Hamas is considering as of publication. Many European leaders (including Merz, whose ideologically divided coalition has struggled to find common ground on Israel) are likely hoping that a surprise ceasefire agreement will make casting a vote on the sanctions and trade package moot. However, if push comes to shove, it remains unlikely that Germany would support the European Commission’s proposal. Other countries, like Hungary and Austria, remain steadfastly opposed to the proposal, which is enough opposition to prevent sanctions on Israeli ministers and possibly trade restrictions, if Italy joins.
The European Commission’s moves add to growing international criticism of Prime Minister Netanyahu and his far-right cabinet, which has been accused of exacerbating the humanitarian crisis and prolonging the conflict by prioritizing maximalist war aims over a negotiated ceasefire and the return of hostages. Ahead of the UN General Assembly meeting last week in New York, seven countries—France, the UK, Andorra, Belgium, Luxembourg, Malta, and Monaco—announced that they would formally recognize Palestinian statehood, following Spain, Norway and Ireland last year. Israel also faces partial or complete arms embargoes from France, Italy, the Netherlands, Spain, the UK, and others, as well as divestment by Norway’s sovereign wealth fund—the largest in the world. The recognitions dovetail with private sector backlash, including broadcaster boycotts of Israel’s participation in the popular Eurovision Song Contest and a high-profile letter, signed by thousands of filmmakers, actors and movie industry workers in Hollywood, pledging not to work with Israeli film institutions.
Taken together, the steps amount to a rising diplomatic and cultural isolation of the kind that Israel has never faced—and which could have lasting impacts on Israel’s role on the global geopolitical stage and economy. The suspension of trade preference, for example, would be more than a symbolic blow for Israel, whose largest trading partner is the EU. The most exposed sectors from the EU side would include machinery, aircraft-related goods, medical devices, and pharmaceutical products. Still, however, much of EU-Israel trade would continue as normal—the suspension would not affect the 60% of Israeli exports that already benefit from a 0% duty under the “Most Favored Nation” status. Tariffs would also not affect capital movements. Hamas’ decision on President Trump’s new peace proposal—which Israel endorsed on Monday—will be decisive in determining the future trajectory of the EU’s sanctions on Jerusalem, as well as Israel’s broader alienation from the international community.
US Developments
BIS Issues New 50 Percent Rule Significantly Expanding the Number of Restricted Parties
The Department of Commerce’s Bureau of Industry and Security (BIS), which is responsible for administering and enforcing US export controls on dual-use items, promulgated an Interim Final Rule (IFR) on September 30 imposing new restrictions on foreign entities that are at least 50 percent owned by one or more entities on the Entity List or the Military End-User List. BIS’s “50 percent” rule is modeled after the Department of the Treasury’s Office of Foreign Assets Control (OFAC) longstanding 50 percent rule. The new rule is a significant expansion of export controls under the Export Administration Regulations (EAR) and presents substantial compliance challenges and risks for US and foreign exporters and financial institutions. We discuss the new rule in more detail in our recent blog post here.
OFAC Targets North Korean-Burmese Arms Procurement Network
On September 25, OFAC sanctioned five individuals and one entity for their alleged role in generating illicit revenue for North Korea’s weapons of mass destruction (WMD) and ballistic missile programs, including by selling weapons to the Burmese military regime.
According to OFAC, Royal Shune Lei Company Limited (Royal Shune Lei), a Burmese arms procurement company, purchased a variety of military equipment from the Korea Mining Development Trading Corporation (KOMID), which is subject to US and UN sanctions and is allegedly the North Korean regime’s primary arms dealer and principal exporter of arms. As a result, OFAC sanctioned Royal Shune Lei and certain of its representatives.
Additionally, OFAC sanctioned an alleged intelligence officer and representative of the US-designated Reconnaissance General Bureau (RGB) for engaging in multiple overseas revenue generation schemes on behalf of the North Korean regime since 2013. These include multiple companies and restaurants in Laos and Thailand, as well as import-export companies that are allegedly involved in smuggling North Korea-made tobacco products to Southeast Asian countries.
OFAC Sanctions Brazilian Justice’s Wife and Company
On September 22, OFAC sanctioned the Lex Instituto de Estudos Juridicos LTDA (Lex Institute) for allegedly acting as a holding company for Brazilian Supreme Federal Court (STF) Justice Alexandre de Moraes, who was previously designated by OFAC on July 30, 2025. According to OFAC, the Lex Institute owns de Moraes’ residence in addition to other residential properties. Concurrently, OFAC sanctioned Alexandre de Moraes’ wife, Vivian de Moraes, who is also the Managing Partner of the Lex Institute.
OFAC’s designations follow the Brazilian STF’s conviction of Brazil’s former president, Jair Bolsonaro, for attempting to stage a coup. President Trump considers Bolsonaro an ally, and has repeatedly condemned the Brazilian STF for engaging in “political persecution” against Bolsonaro.
Treasury Sanctions Counterfeit Pill Distributors
On September 24, OFAC sanctioned two Indian nationals, Sadiq Abbas Habib Sayyed (Sayyed) and Khizar Mohammad Iqbal Shaikh (Shaikh), for allegedly supplying “hundreds of thousands” of counterfeit prescription pills filled with fentanyl and other illicit drugs to the United States. In addition, OFAC designated one India-based online pharmacy for being owned by Shaikh and used in furtherance of his criminal activities.
OFAC Amends Syria-Related Sanctions Regulations
OFAC issued a Final Rule amending the Syria-related Sanctions Regulations (SySR) to, among other things, change the heading of the SySR to the Promoting Accountability for Assad and Regional Stabilization Sanctions Regulations (PAARSS).
As noted in Executive Order 14312, it is the policy of the US to “ensure meaningful accountability for perpetrators of war crimes, human rights violations and abuses, and the proliferation of narcotics trafficking networks in and in relation to Syria during the former regime of Bashar al-Assad and by those associated with it.” By changing the name to PAARSS, OFAC is aligning the name of the sanctions program with its narrow focus of targeting the former Assad regime and its associates and proxies. OFAC stated in the Final Rule that it intends to supplement 31 C.F.R. Part 569 with a more comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions under the PAARSS.
For more information on the Trump administration’s approach to Syria-related sanctions and export controls, see our recent blog post here.
UK Developments
UK Government Targets UK Entities in Latest Round of Domestic Designations
The UK Government has designated Embers of Empire, a British band, and Rampage Productions, its record label, under the UK’s Domestic Counter Terrorism sanctions regime. According to the UK Government’s designation notice, these sanctions have been imposed on the basis of reasonable grounds to suspect that both entities have been facilitating, promoting and encouraging terrorism via their dissemination of music whose content promotes and encourages terrorism and through supporting events where such music is performed and disseminated. The designated entities are now subject to a UK asset freeze.
OFSI Clarifies Guidance on HM Treasury Debt Exception
OFSI has published an update to the exceptions and licensing section of its UK financial sanctions general guidance regarding use of the HM Treasury Debt Exception. In pertinent part, OFSI has amended section 6.21 of the guidance to clarify that the reference in the exception to an obligation owed by HM Treasury to a United Nations (UN) designated person should also include an obligation owed by any other person to the UN designated person in respect of HM Treasury debt. This covers payments in respect of HM Treasury debt made to a UN designated person on the basis that the person making the payment must: (i) have knowledge or reasonable cause to suspect the obligation owed by the UN designated person arose before the UN designated person was designated; and (ii) take reasonable steps to satisfy themselves that the funds are credited to a type of account specified by the exception. Similarly, for payments to be permitted to a person who is not a UN designated person where the effect of the transfer is to make funds available to or for the benefit of a UN designated person, the person making the payment must: (i) have knowledge or reasonable cause to suspect that the effect of their payment will be to enable the satisfaction of an obligation owed by any person to a UN designated person in respect of HM Treasury debt; and (ii) make reasonable steps to satisfy themself that the obligation between that other person and the UN designated person was entered into before the UN designated person was designated and the funds are ultimately credited to a type of account specified by the exception. Accordingly, it is OFSI’s intention that the exception should apply to all stages of a payment chain.
UK Launches New Sanctions Guidance and Tools
The UK Government has published new guidance and resources on GOV.UK to make sanctions content more accessible and easier to use, following recommendations from the cross-government sanctions review. The updates include a new starter guide to UK sanctions, aimed at helping non-experts understand the basics of how UK sanctions operate. The Russia sanctions statutory guidance has also been improved with two new “look-up” tools covering amendments to the Russia regulations and exceptions to the trade and transport prohibitions. In addition, a new online service has been introduced to guide users on how to report a suspected breach of sanctions, helping ensure reports are directed to the correct authority. Further improvements to sanctions guidance are planned, in line with the Government’s ongoing efforts to strengthen compliance and enforcement.
EU Developments
EU Council Reimposes Sanctions on Iran
On September 29, the EU Council agreed to reinstate a set of restrictive measures against Iran. This move followed the UN Security Council’s decision to reject a resolution tabled by China and Russia that sought to delay activation of the snapback mechanism and maintain sanctions relief under the Iran nuclear agreement, known as the Joint Comprehensive Plan of Action (JCPoA).
The restrictive measures against Iran were reinstated and published in the Official Journal of the EU on September 29 through six legal instruments (Council Decision 2025/1972, Council Decision 2025/1978, Council Regulation 2025/1975, Council Implementing Regulation 2025/1980, Council Implementing Regulation 2025/1982, Council Implementing Regulation 2025/1971). They include UN-mandated sanctions originally imposed in 2006, as well as EU autonomous restrictions. As a result, the EU reinstated wide-ranging restrictions on key sectors of the Iranian economy, including trade, finance, and transportation.
In the trade sector, the EU reinstated a ban on the export of dual-use goods and technologies, arms, internal repression equipment, and software that could support nuclear weapon delivery systems. It also prohibited technical assistance, training, and investment related to these items. Sector-specific restrictions were reinstated on the import, purchase, or transport of Iranian crude oil, petroleum, petrochemical products, and natural gas. Additional bans apply to the sale, supply, transfer, or export of oil refining equipment, naval technology, gold and precious metals, Enterprise Resource Planning (ERP) software used in sensitive industries.
Financial sanctions include asset freezes targeting the Central Bank of Iran and major Iranian commercial banks, along with prohibitions on providing funds or economic resources to listed individuals and entities. Financial services related to restricted goods and technologies, such as investment and insurance, are banned. The EU also prohibited correspondent banking relationships with Iranian institutions and restricted loans or credit to entities involved in dual-use goods, oil and gas production, fuel refining, and petrochemicals. Transfers of funds between Iranian financial institutions and EU entities, as well as transfers to and from Iranian individuals and entities, are also prohibited.
On transportation, the EU reinstated measures requiring inspections of cargo to and from Iran within EU territory when there are reasonable grounds to suspect the presence of prohibited goods. Additionally, EU Member States must prevent Iranian cargo flights from accessing their airports, with limited exceptions for mixed passenger-cargo flights.
EU Extends Sudan and Nicaragua Sanctions Regimes Until October 2026
The EU Council has announced that it will extend the sanctions regime targeting individuals and entities responsible for undermining the stability and political transition of Sudan by one year, until October 10, 2026. Initially established in October 2023 under Council Decision 2023/2135, the sanctions regime was adopted in response to the escalating conflict between the Sudanese Armed Forces (SAF) and the Rapid Support Forces (RSF). At present, 10 individuals and 8 entities who are members, affiliates, or otherwise linked to either the SAF or the RSF are listed in the Annex to Council Decision 2023/2135. Applicable restrictive measures include travel bans, asset freezes, and prohibitions on the provision of funds or economic resources.
On September 29, the EU Council agreed to extend the restrictive measures in view of the situation in Nicaragua by one year, until October 15, 2026. The sanctions framework was established in October 2019 to target individuals and entities linked to serious human rights violations and the undermining in Nicaragua. Currently, the sanctions listing applies to 21 individuals and 3 entities in total, who are subject to asset freezes and prohibitions on the provision of funds or economic resources.
EU Council Updates Sanctions Listings Against Syria and Guinea-Bissau
The EU Council has revised several legal instruments on sanctions targeting Syria and Guinea-Bissau, resulting in updates to the lists of individuals and entities subject to restrictive measures.
In relation to Syria, Council Decision 2013/255 was amended to remove Hala Almaghout from the list of individuals subject to restrictive measures, including asset freezes and travel bans. Regulation 36/2012 was also updated to reflect this change. The update follows the judgment of the EU General Court in Case T‑437/23, which annulled the 2023 and 2024 sanctions listings against Ms. Almaghout after concluding that she had provided sufficient evidence to rebut the presumption, under Articles 27 and 28 of Council Decision 2013/255, that members of the Makhlouf family are therefore associated with the Assad regime.
Following a review of the restrictive measures concerning Guinea-Bissau, Council Decision 2012/285 and Regulation 377/2012 were amended to remove six individuals from the list of persons subject to restrictive measures, such as asset freezes and prohibitions on providing funds or economic resources.
Advocate General Opinion on the Interpretation of “Freezing of Funds”
Advocate General de la Tour of the European Court of Justice recently issued a non-binding opinion in Case C 465/24, referred by the Dutch Supreme Court, on the interpretation of “freezing of funds” under Article 1(f) of Regulation 269/2014, which imposes restrictive measures in response to actions undermining Ukraine’s territorial integrity. The case asked whether a person whose funds in the form of depository receipts have been frozen may still exercise voting rights and rights of participation at meetings. The dispute arose after Fortenova Group STAK Stichting excluded sanctioned shareholders, including SBK Art LLC, from governance votes, leading to conflicting Dutch court decisions and a request for clarification from the Court of Justice of the European Union.
With regard to the interpretation of “freezing of funds,” the opinion endorses the broadest reading of the term, affirming that it encompasses voting rights and rights of participation at meetings, regardless of whether the exercise of such rights results in a direct change in the value or ownership of the frozen assets. This approach, as argued by AG de la Tour, promotes a uniform application across the EU, facilitates enforcement, and strengthens the effectiveness of restrictive measures in accordance with their objective of exerting pressure on the Russian Federation. Exceptions are limited to those expressly provided for in Regulation 269/2014, such as certain dividend payments, or where authorization has been granted by the competent national authority.
Asia-Pacific Developments
China Announces Sanctions Against Six US Entities
On September 25, 2025, China’s Ministry of Commerce (MOFCOM) announced the inclusion of three United States companies, Saronic Technologies, Inc., Aerkomm Inc., and Oceaneering International Inc. on its Unreliable Entity List. The decision was made in response to their involvement in military-technical cooperation with Taiwan, which the Chinese government stated undermines its sovereignty and security. As a result, these companies are subject to bans on import and export activities with China and the prohibition of new investments within Chinese territory. The measures were enacted under China’s Foreign Trade Law, National Security Law, Anti-Foreign Sanctions Law, and the Provisions on the Unreliable Entity List.
In a separate action, China added three other United States companies to its Export Control List. These companies are Huntington Ingalls Industries, Inc., Planate Management Group, and Global Dimensions LLC. This designation restricts the export of Chinese-origin dual-use items to these entities, citing risks to national security and interests. These actions come amid heightened tensions in the trade and security relationship between China and the United States, with Beijing increasingly using regulatory tools to counter what it views as infringements on its sovereignty and strategic interests.
Russia and Vietnam Circumvent US Restrictions on Military Trade
Vietnam and Russia have reportedly implemented a concealed financial arrangement to continue arms transactions while avoiding United States and Western sanctions targeting Russia’s defense sector. According to internal Vietnamese government documents obtained by the Associated Press, Vietnam has acquired Russian military equipment such as fighter jets, tanks, and ships on credit, and repaid the debt using profits from a joint oil and gas venture operating in Siberia. The mechanism bypasses the global banking system, including the SWIFT network, by routing payments through state-owned entities in both countries without direct international transfers. Finalized in 2024, the agreement illustrates Vietnam’s continued reliance on Russian defense supplies at a time when it is also seeking to strengthen ties with the United States.
Singapore Signals Intent to Sanction West Bank Settler Leaders
Singapore will impose targeted sanctions on leaders of radical settler groups in the West Bank responsible for violence against Palestinians. The announcement follows Israel’s decision to proceed with the E1 settlement project, which Singapore views as a threat to the contiguity of Arab towns in the occupied territories and a violation of international law. Singapore’s Foreign Minister Vivian Balakrishnan stated in Parliament on September 22 that Israel’s military operations in Gaza are unconscionable and have worsened the suffering of civilians. He condemned the killing of innocent civilians and described the humanitarian situation as shocking, noting that around 1.9 million people have been displaced and Gaza is nearing famine conditions.
