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
Israel Implements Countermeasures against the UK Following Sanctions, Trade Ban
On October 8, Israel implemented diplomatic countermeasures against the UK, including downgrading the status of the UK consulate in Jerusalem, in response to sanctions on Israeli West Bank settlements. Israel's action against the UK's consulate was not severe and leaves room for reconciliation after Israeli elections at the end of October. However, if Israel’s next government is politically similar or the country faces prolonged coalition negotiation gridlock, it is more likely that strained UK-Israeli relations will remain in their current deteriorated state.
In early September, the UK and allied countries announced their intention to ban imports of goods from Israeli settlements in the West Bank. The UK characterized the measures as a response to: (1) Israeli inaction in the face of growing settler violence against Palestinians; (2) approvals for further settlement expansion; and (3) humanitarian restrictions on Gaza. UK Foreign Secretary Ed Miliband characterized the steps as “ethnic cleansing of Palestinians in areas of the West Bank – perpetrated by settlor terrorists.” The announcement also outlined the UK government’s intention to create a new sanctions regime to target individuals and companies that provide services for settlement expansion, finance, or facilitate illegal settlements.
In retaliation, Israeli Foreign Minister Gideon Sa'ar demanded the complete closure of the British consulate in East Jerusalem, from which the UK operates much of its Palestinian-focused diplomatic work. Sa'ar gave UK diplomats assigned to the consulate a month to shut down operations. This follows Israel revoking the diplomatic status of Dutch diplomats in Ramallah in September after the Netherlands also implemented the settlement import ban. Israel also revoked recognition of Norwegian diplomats working on Palestine issues in August 2024 after Norway recognized Palestine as an independent nation.
Israel's countermeasures against the UK are colored by upcoming Israeli elections in late October, where Prime Minister Benjamin Netanyahu is relying on support from his right-wing coalition to maintain power. Much of Netanyahu's base is supportive of greater settlement construction in the West Bank, including his coalition partner and finance minister Bezalel Smotrich, who lives in a West Bank settlement.
UK National Security Advisor Jonathan Powell traveled to Israel last week to reportedly negotiate a compromise on the status of the British consulate in Jerusalem. According to media reports, Powell threatened to expel Israeli diplomats from the UK if the consulate were shut down. The expulsion could have escalated to further tit-for-tat expulsions and deteriorated British-Israeli relations.
As an apparent compromise, the UK consulate in Jerusalem was reclassified as "UK Mission, Jerusalem" and will act as an independent and separate institution from the UK embassy in Tel Aviv. The new mission will continue the consulate's prior focus on Palestine-related diplomatic activity, with Sa'ar claiming that the new entity's scope would be "very limited." Additionally, 19 UK diplomats and the former consul general will be withdrawn from Jerusalem until new security measures for the UK mission can be implemented, likely in coordination with Israeli authorities. Sa'ar confirmed that just seven UK diplomats would remain in the East Jerusalem mission and framed the move as a stern rebuke to the UK's import ban on settlements. The UK promised to refrain from reciprocal action against Israel while security and other diplomatic "discussions are underway and credible."
This compromise allows the UK to maintain the continuity of its Palestine-focused diplomatic presence. Meanwhile, Israel can claim to have successfully expelled the bulk of the mission's operating staff and leadership. Sa'ar also noted that previously announced expulsions of UK military advisors for the International Gaza Support Center and Palestinian Authority forces have also been implemented. By preserving a latent diplomatic presence in Jerusalem, the UK may be hoping that a potential post-Netanyahu Israeli government would be open to reviving the new UK Mission. However, a triumphant Netanyahu would likely spell more of the same for Israel’s West Bank policy. An inconclusive election could also leave UK-Israeli relations frozen at their current nadir if opposition parties are unable to form a workable coalition for an extended period of time (leaving Netanyahu as a caretaker Prime Minister). A stable post-Netanyahu opposition coalition open to constructive dialogue with London could use the revival of the UK's Palestine-focused diplomatic outpost as a starting point for reinvigorated ties.
The latest polls have neither Netanyahu’s coalition nor a collection of opposition parties close to winning the 60 seats needed for a majority government. To avoid new snap elections, a minor party from either coalition would have to switch sides to form a government. The opposition could also form a coalition with the two Arab parties, an option slightly less popular among Israelis, at 36% approval, than another Netanyahu premiership at 38% approval.
If the UK Mission, Jerusalem remains understaffed and inoperable due to security delays, and if Israeli settlement policy remains unchanged amid escalating West Bank violence, then the UK and its allies may decide to implement expanded settlement-related sanctions on Israel. Potential targets include Israeli government ministers involved in West Bank policy and non-West Bank Israeli organizations seen as supporting settlements. The UK could also eschew sanctions in favor of further limits on security and intelligence cooperation with Israel, including by expanding the limited arms export bans it imposed on Israel in September 2024.
Israel’s demonstrated sensitivities toward settlement-related sanctions mean that multinational businesses must navigate sanctions compliance and potential Israeli regulatory restrictions for that compliance. Additionally, the added compliance costs to a business attempting to differentiate between settlement-derived imports from Israel and non-settlement Israeli imports could convince companies to shift supply chains to less complex jurisdictions.
US Developments
US Authorizes Sale and Import of Russian Diesel Fuel
On October 9, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued Russia-related General License (“GL”) No. 135, which authorizes transactions related to the sale, delivery, offloading, or importation, including importation into the US, of Russian diesel fuel, until April 7, 2027. In a post on Truth Social, President Donald Trump said he held a discussion with President Vladimir Putin and stated that Russia agreed to immediately supply more than 300,000 metric tons of diesel to US and global markets, another 500,000 tons in November, and one million tons immediately thereafter.
The authorization comes as US diesel prices remain at near-record highs and appears at odds with US efforts to target Russia’s energy sector. In October 2025, the Trump administration sanctioned two Russian oil majors to pressure Russia to end the war with Ukraine. Last month, President Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, which authorized the President to impose tariffs of up to 100 percent on the largest purchasers of Russian oil and natural gas. On Sunday, a bipartisan group of six senators called on the President to cancel the deal with Russia and asserted that it would violate the Ending Importation of Russian Oil Act, which became law on April 8, 2022.
GL 135 does not authorize debits to an account on the books of a US financial institution of the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.
State Department Designates International Criminal Court, Issues Four General Licenses
On October 9, the US Department of State announced the designation of the International Criminal Court (“ICC”) pursuant to E.O. 14203, “Imposing Sanctions on the International Criminal Court.” Although the Trump administration had previously sanctioned 17 judges and officials of the ICC under E.O. 14203, these sanctions are the first measures imposed on the court itself. The State Department said the sanctions were intended “to defend US sovereignty and neutralize the threat posed by the ICC.”
The UN Secretary-General, Antonio Guterres, called the sanctions “a serious blow to our collective pursuit of international criminal justice[.]” Several European and G7 partners, including the UK, Canada, Denmark, Germany, France, Italy, Japan and the Netherlands, stated they “regret and strongly disagree with” the sanctions.
Concurrently, OFAC issued a series of GLs designed to limit unintended disruptions resulting from the ICC designation. These licenses did the following:
- GL 13 authorizes transactions ordinarily incident and necessary to the maintenance or wind-down of operations, contracts, or other agreements involving the ICC until April 7, 2027. The GL explains that such transactions include: States Parties’ contributions, employee compensation, insurance, utilities, and other routine operational expenses.
- GL 14 authorizes telecommunications services, internet-based communications, cloud services, and enterprise software support involving the ICC.
- GL 15 authorizes transactions necessary to process pension payments involving the ICC.
- GL 16 authorizes transactions necessary for the continued detention, health, safety, and welfare of specified ICC detainees and the operation of detention facilities.
The State Department said that GL 13 is intended to “provide time for States Parties to demonstrate meaningful progress on diplomatic and legal resolutions that address fundamental US concerns regarding the ICC.” The State Department noted that “[t]his GL can be adjusted in response to the success or failure of such efforts to address our concerns.”
US Targets Iran’s “Shadow Fleet” as Part of Operation Economic Outcast
On October 8, OFAC sanctioned 17 vessels and 17 associated companies allegedly linked to Iran’s network of vessels used to transport billions of dollars’ worth of petroleum and petrochemical products abroad. This action was taken pursuant to Executive Order (“E.O.”) 13902, which targets the Iranian petroleum sector, among other Iranian key sectors.
On the same day, the State Department sanctioned five vessels, ten entities, and six individuals. The entities include India-based Samudra Marine Services Private Limited (“Samudra”), which the State Department alleges facilitated the import of Iranian petrochemical products to India. OFAC issued GL EE authorizing the wind-down of transactions involving Samudra until October 23.
Additionally, OFAC removed two vessels from the SDN List that were allegedly part of Iran’s Shadow Fleet, after the Treasury determined that the vessels had undergone a demonstrated change in circumstances, including their sale to non-sanctioned operators and removal from Iran-related shipping networks.
OFAC Extends License for Administrative Payments with Central Russian Bank, Russian National Wealth Fund, and Russian Ministry of Finance
On October 8, OFAC issued GL 13S, which extends until January 9, 2027 the authorization for US persons or entities owned or controlled by a US person to pay taxes, fees, or import duties, and purchase or receive permits, licenses, registrations, certifications, or tax refunds to the extent such transactions are prohibited under Directive 4 of E.O. 14024, Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation, provided such transactions are ordinarily incident and necessary to the day-to-day operations in Russia of such US persons or entities. GL 13S supersedes the authorization under GL 13R, which was scheduled to expire on October 9.
OFAC Reaches $175,015 Settlement with Pegasus Worldwide Logistics for Apparent Violations of Counter Narcotics Sanctions
On October 9, OFAC announced a $175,015 settlement with Pegasus Worldwide Logistics (“Pegasus”), a California-based forwarding and logistics company, for apparent violations of US counter-narcotics sanctions and reporting obligations. According to OFAC, Pegasus facilitated the shipment of a machine supplied by a sanctioned Chinese company due to significant deficiencies in its sanctions compliance review process and overall compliance program.
The supplier, Youli Technology Development (“Youli”), was designated by OFAC in May 2023 for shipping machinery to US buyers involved in the manufacture of counterfeit pills. Following its designation, Youli changed its name to Huizhou Youli Fushi Co., Ltd., but key identifying information, including its email and phone number, remained unchanged. OFAC found that Pegasus screened only the company’s post-designation name, Huizhou Youli Fushi Co., Ltd., against its sanctions database and failed to screen additional identifiers such as the company’s address and phone number. OFAC determined that Pegasus did not voluntarily disclose the apparent violations, and that the matter constituted a non-egregious case.
OFAC stated that the enforcement action highlights the significant sanctions risks faced by logistics providers and other trade-related intermediaries. The agency further emphasized that it “strongly encourages international trade-related intermediaries and service providers to employ robust, risk-based sanctions compliance controls to effectively manage sanctions risk.”
Treasury Announces Third Round of Sanctions Removals under Sanctions Modernization Initiative
On October 5, OFAC announced the removal of 125 individuals and entities from its sanctions lists and updated 22 additional entries as part of the agency’s modernization initiative. According to OFAC, the removals consisted primarily of deceased individuals, defunct companies, and entries missing sufficient identifying information for effective compliance screening.
The action is the third round of sanctions list revisions, building on actions from May 28 and July 27, totaling nearly 300 sanctions removals. OFAC stated that all removals underwent interagency review and were determined not to adversely affect US foreign policy or national security interests.
OFAC Publishes Iran Alert and Amends One Iran-related Frequently Asked Question
On October 5, OFAC issued guidance warning foreign financial institutions that continue to conduct business with Iran or its financial sector that they may face sanctions under “Operation Economic Outcast.” OFAC emphasized that foreign financial institutions facilitating transactions with sanctioned Iranian banks or supporting Iran’s access to the international financial system could be targeted without advance notice and should immediately review and terminate such activities where appropriate.
Additionally, OFAC updated Frequently Asked Question (“FAQ”) 156 to reference the new alert. FAQ 156 explains how US and foreign financial institutions are notified when the Treasury Department imposes restrictions on a foreign financial institution under the Iranian Financial Sanctions Regulations.
UK Developments
OFSI Amends and Extends Maritime Mutual Re-Insurance Wind Down General Licence
OFSI has amended the Maritime Mutual Re-Insurance Wind Down General Licence (INT/2026/8893924), which provides targeted authorisations for certain activities connected with the wind-down of maritime mutual reinsurance arrangements that would otherwise be restricted under UK financial sanctions. The amendments, published on October 7, 2026, introduce a new definition of “Qualifying Overseas Wind-down Payment” and expand the permissions available under the licence, providing additional flexibility for parties undertaking qualifying wind-down activities. OFSI has also extended the licence by 12 months, with the revised expiry date now October 6, 2027. The changes provide additional time and scope for affected insurers, reinsurers and other parties to manage relevant arrangements, although businesses seeking to rely on the licence should review the amended provisions carefully to establish whether their proposed activities fall within the expanded permissions and comply with all applicable conditions.
UK Announces 38 new Russia Sanctions Targeting Oil Revenues, Financial Networks and Military Supply Chains
The UK Government has announced a further package of 38 sanctions measures under the Russia (Sanctions) (EU Exit) Regulations 2019, comprising the designation of 23 entities, three individuals, and the specification of 12 vessels. The UK Government has also amended the existing designations of two entities. According to an accompanying UK Government press release, the measures target individuals, businesses and vessels allegedly involved in supporting Russia’s oil exports, facilitating military production and circumventing financial sanctions. Among those targeted are 12 additional shadow fleet oil tankers suspected of facilitating Russian oil exports in circumvention of sanctions, alongside three cryptocurrency exchanges and two payment platforms allegedly used to bypass financial restrictions. Two of these financial entities are reported to have facilitated transactions involving the previously sanctioned A7 illicit finance network. The package also targets 17 individuals and entities involved in supplying goods critical to Russia’s military-industrial base, including Russian importers of machine tools, electronics and materials used in the production of missiles and drones. The measures reflect the UK’s continued focus on restricting Russian energy revenues, disrupting alternative financial channels and targeting procurement networks supporting Russia’s war in Ukraine, reinforcing the importance of sanctions screening and due diligence across maritime, financial and international supply-chain activities.
OFSI Issues General Licence Permitting Wind-down of Transactions Involving Zarubezhneft JSC
Following the designation of Zarubezhneft JSC under the UK’s Russia sanctions regime, OFSI has issued General Licence INT/2026/11080040, authorising the wind-down or divestment of transactions involving the Russian energy company and entities it directly or indirectly owns or controls. The licence also permits activities reasonably necessary to complete such wind-down or divestment arrangements, providing a limited period for businesses to terminate or disengage from existing commercial relationships that would otherwise be restricted by the applicable financial sanctions. The General Licence took effect on October 8, 2026, and expires at 23:59 on November 21, 2026, establishing a relatively short window for affected businesses to complete relevant activities. Persons seeking to rely on the licence should carefully review its scope and conditions, including applicable record-keeping requirements, and ensure that any wind-down or divestment activities are completed before the expiry deadline or otherwise authorised under an applicable licence.
OFSI Clarifies Treatment of Specific Licences Following Delisting
OFSI has published FAQ 205, clarifying the status of specific licences where a designated person is subsequently removed from the UK Sanctions List. The FAQ confirms that where a specific licence relates solely to a delisted person and no other applicable sanctions restrictions remain, the licence is no longer required and there is no need to apply to OFSI for its revocation. However, if the individual or entity is subsequently re-designated, any specific licences previously issued by OFSI will not automatically be reinstated, and a fresh licence application will be required to authorise activities that would otherwise be prohibited. OFSI also confirms that any pending specific licence applications which are rendered unnecessary by the delisting will be closed. The clarification provides greater certainty for businesses managing sanctions licences and highlights the importance of reassessing licensing requirements following changes to designation status, particularly where multiple designated persons or sanctions restrictions may be involved.
EU Developments
EU Council Adopts Largest Expansion of Russia Sanctions Designations Since 2022
On October 12, EU foreign ministers of the Council adopted restrictive measures against an additional 1,569 individuals and entities, constituting the largest single set of listings ever agreed by the EU under its Russia asset freeze sanctions regime. The new designations bring the total number of listings under the regime to nearly 4,600. The package was adopted following agreement on the listings by EU ambassadors in Coreper on October 7.
The new sanctions package targets 826 Russian companies associated with Russia's military-industrial complex, as well as 743 individuals holding senior management positions in those companies. As announced by the EU Council, the listed entities include mid-level suppliers of Russia's military industry, with a combined annual turnover exceeding €20 billion and employing more than 250,000 people. The designated companies supply key components used in advanced Russian weapons systems, including missiles, unmanned aerial vehicles (UAVs), and aircraft. These components include electronics and semiconductors, microcircuits and computers, communications equipment such as radars, antennas and transceivers, aviation, satellite and missile systems, explosives and ammunition, and optics and navigation systems.
Among the newly listed entities are Russian defense-sector companies such as Joint Stock Company Vektor, a manufacturer of defense electronics and communications systems, and Joint Stock Company Zavod Proton, a supplier to Russia's aerospace and defense-industrial sectors. The package also designates individuals such as Dmitriy Igorevich Adamovich, General Director of Joint Stock Company Vektor, and Evgeniy Vasilevich Ushakov, General Director of Joint Stock Company Zavod Proton, among numerous senior managers of companies identified as forming part of Russia's military-industrial complex.
Designated individuals and entities are subject to an asset freeze and a prohibition on making funds or economic resources available. In addition, listed individuals are subject to an EU travel ban.
EU Council Renews Sanctions Targeting Russia’s Hybrid Activities
The EU Council recently renewed the individual restrictive measures targeting those responsible for Russia’s destabilizing actions for another year, until October 9, 2027. The renewal comes in response to ongoing hybrid threats, including Foreign Information Manipulation and Interference (FIMI), targeting the EU and its Member States.
First adopted in October 2024, the sanctions regime targets individuals and entities involved in actions and policies pursued by the Russian government that undermine the EU’s fundamental values, security, independence, and integrity, as well as actors responsible for Russia’s hybrid activities against third countries and international organizations. At present, restrictive measures in view of Russia’s destabilizing activities apply to 80 individuals and 20 entities.
CJEU Judgment Sets Aside Order of the General Court in Global 8 Airlines v Commission
The Court of Justice of the European Union (CJEU) delivered its judgment in Case C‑482/24 P (Global 8 Airlines v Commission), following an appeal brought by Global 8 Airlines, a Kyrgyz airline company. The case concerned the inclusion of two of the airline’s aircraft on a list of aircraft subject to a flight ban under Article 3d of Council Regulation (EU) 833/2014. The airline had purchased both aircraft from a Russian company and learned of their inclusion on the list after Eurocontrol rejected a flight plan for one of the aircraft and confirmed that the Commission had supplied the list. Global 8 Airlines sought annulment of the Commission decision before the General Court, which dismissed the action as inadmissible by an order issued in April 2024, holding that the decision did not constitute an act amenable to review under Article 263 TFEU.
The Court of Justice set aside the General Court’s order and referred the case back to the General Court for examination. In its judgment, the Court of Justice recalled that any act of an EU institution that is intended to have binding legal effects may be the subject of an action for annulment. Determining whether an act produces such effects requires a specific examination of its content, taking account of its context and the powers of the institution which adopted the act.
The Court of Justice further clarified that whether an act is open to challenge must be assessed objectively, on the basis of its substance. Whether the act affects the applicant’s interests by bringing about a distinct change in its legal position is a separate question concerning the applicant’s standing under the fourth paragraph of Article 263 TFEU.
EU Council Extends Nicaragua and Niger Sanctions Regimes
On October 9, the EU Council extended the restrictive measures in view of the situation in Nicaragua by one year, until October 15, 2027. The sanctions regime, established in October 2019, targets individuals and entities responsible for serious human rights violations and actions, policies or activities that otherwise undermine democracy or the rule of law in Nicaragua. Currently, the restrictive measures apply to 21 individuals and 3 entities in total. Applicable restrictive measures include travel bans, asset freezes, and a prohibition on making funds or economic resources available.
In addition, the EU Council renewed the restrictive measures in view of the situation in Niger for another year, until October 24, 2027. No individuals or entities are currently designated under the regime. Nonetheless, the framework provides for asset freezes, a prohibition on making funds or economic resources available to listed individuals and entities, and an EU travel ban.
Asia-Pacific Developments
Japan Expands Russia-Related Export Restrictions
On October 6, 2026, Japan’s Ministry of Economy, Trade and Industry (METI) announced additional Russia-related sanctions under the Foreign Exchange and Foreign Trade Law, following a Cabinet decision approved on October 2. The measures expand Japan’s export prohibitions on goods deemed to support Russia’s industrial base, adding a broad range of products including minerals, chemicals, metals, machinery, industrial equipment, and precision instruments to the restricted list. According to METI, the new controls are intended to align Japan with measures adopted by other major economies and to contribute to international efforts responding to Russia’s invasion of Ukraine. The amended Export Trade Control Order is scheduled to be promulgated on October 9 and take effect on October 16.
Japan Reaffirms Support for ICC as US Expands Sanctions Against the Court
On October 11, 2026, Japan reportedly expressed “deep concerns” over US sanctions targeting the International Criminal Court (ICC), reaffirming its support for international courts. Chief Cabinet Secretary Minoru Kihara said the sanctions “run counter to Japan’s position,” although Tokyo stopped short of calling for their withdrawal. The disagreement was also reflected in a telephone call between Japanese Foreign Minister Toshimitsu Motegi and US Secretary of State Marco Rubio. Rubio defended the sanctions, arguing that the ICC’s actions threatened American sovereignty, while Motegi “conveyed the Japanese government’s position.” According to Japan’s Foreign Ministry, both officials agreed “to maintain close communication.” Separately, the Bureau of the ICC’s Assembly of States Parties called for the sanctions’ “immediate revocation,” condemned the coercive measures, and urged the international community to defend the court and its officials.
Malaysia’s Maritime Sector Faces US Sanctions Risks Over Iranian Oil Trade
On October 7, 2026, Malaysia’s maritime services sector reportedly faces heightened US sanctions risks. The case of local shipping agency Tefcas Marine highlights compliance challenges surrounding Iranian oil transfers. The company was sanctioned in late 2024 for allegedly “materially assisting” a network linked to sanctioned Houthi financier Sa’id al-Jamal after coordinating repairs and an inspection for the tanker Reneez. The vessel was not designated when the engagement began but became subject to sanctions during the repairs. Tefcas earned approximately USD 2,500 from the work but subsequently lost access to bank accounts and company email access, while at least nine other entities involved with the vessel remained undesignated. The case underscores sanctions exposure for Malaysian maritime service providers operating near a major hub for Iranian oil transfers, particularly smaller firms with limited screening resources. Targeting these small intermediaries may not have effectively disrupted the trade. Tefcas’s owner reportedly sought OFAC reconsideration in 2025 and was awaiting a response, while the tanker continued transporting Iranian oil under a different name and flag.
Australia Rejects Russian Diesel Imports
On October 11, 2026, Australia reportedly reaffirmed its opposition to purchasing Russian diesel, despite rising fuel prices and a reported US–Russia agreement to resume diesel shipments to the United States. Home Affairs Minister Tony Burke said Australia had “no interest in buying fuel from Russia,” stressing that Moscow should not benefit financially from ongoing conflicts. Energy Minister Chris Bowen separately said Australia was working with trading partners to prevent Russian fuel from reaching the country. Ukrainian officials urged international partners to impose further restrictions on Russia, warning that energy revenues finance its war effort. Australia already maintains sanctions targeting Russian individuals, businesses and the “shadow” tanker fleet, while legislation seeking to impose additional sanctions was “expected to pass Parliament next week.”
