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
China’s New UEL Designations Adds to the Increasingly Complex Trade Environment
China’s Ministry of Commerce (MOFCOM) announced on Thursday that 14 companies in the defense and intelligence sectors have been added to its Unreliable Entity List (UEL). Effective immediately, these firms are prohibited from engaging in trade or investment activities in China, and Chinese organizations and individuals are barred from interacting with them. Notably, the announcement also prohibits the transfer of data or other sensitive information to these companies—a new restriction compared to previous UEL measures. The move underscores Beijing’s increasing use of regulatory tools against Western firms, particularly US-based companies, amid persistent US–China trade tensions.
The UEL—a mechanism established in 2020 but first implemented in 2023—has become an increasingly prominent feature of China’s trade policy this year. As in prior UEL announcements, MOFCOM said the measures are intended to safeguard China’s sovereignty, security, and development interests. A ministry spokesperson stated that the listed firms engaged in military and technical cooperation with Taiwan, made public statements deemed harmful to China, and supported foreign governments in restricting Chinese businesses. The designations highlight Beijing’s readiness to counter foreign restrictions and draw firm red lines on issues such as sovereignty and Taiwan.
The sanctioned entities—including defense contractors, drone-technology firms, a semiconductor research company, a cybersecurity intelligence firm, and an international security forum—operate in sectors that Beijing views as high-risk for national security. For example, China’s inclusion of the semiconductor research firm TechInsights and its affiliates in the UEL came less than a week after the company revealed a leading Chinese chipmaker used advanced components sourced from outside mainland China. TechInsights’ findings raise questions about China’s ability to achieve self-sufficiency in the semiconductor supply chain.
The announcement comes amid an especially tense phase in US–China trade relations, marked by increasingly escalatory and retaliatory measures. Since taking office, US President Trump has imposed multiple tariffs and regulatory actions on Chinese imports. China has responded in kind, potentially ushering in a second phase of the trade war. With the extended tariff truce set to expire next month, US duties on Chinese imports are expected to rise to at least 145%, while Chinese tariffs on US goods will reach 125%. As the threat of these record-high tariffs looms, both Washington and Beijing introduced another round of measures last week, further fueling market anxiety. Beyond tariffs, China’s control over critical resources such as rare earths remains a major strategic lever in the competition between the two countries.
On the same day MOFCOM announced the addition of the 14 companies to the UEL, Beijing issued five other notices which expanded export restrictions to include rare earth production equipment, five medium and heavy rare earth elements, and materials used in lithium batteries and graphite anodes. This move extends export controls to 12 of the 17 rare earth elements and further consolidates China’s dominance in the sector, as the country already accounts for roughly 70% of global rare earth mining and 90% of processing. These measures are set to take effect November 8. In response, President Trump on Friday announced that starting November 1—or earlier—the US would leverage its own market dominance and impose a 100% tariff on Chinese goods and introduce export controls on “any and all” critical software. That same day, China launched an antimonopoly investigation into a major US semiconductor manufacturer suspected of breaching its antimonopoly law.
With President Trump and President Xi slated to meet on the sidelines of the upcoming APEC summit next month, both governments appear intent on showcasing their respective economic leverage. The latest designations, issued alongside the five other trade-related notices, illustrate Beijing’s readiness to employ multiple trade policy tools simultaneously, particularly in the context of its negotiations with Washington. This dynamic leaves businesses navigating an increasingly complex and fluid regulatory environment. Notably, the new rule barring Chinese individuals and entities from transferring data or other sensitive information to the listed firms underscores Beijing’s efforts to tighten control over access to technical expertise and increases risks to businesses on data-sharing practices. As the US–China tech race intensifies and technological decoupling accelerates, companies operating in sensitive sectors face growing exposure to geopolitical risks and regulatory volatility.
US Developments
Trump Administration Continues to Sanction Iran but Remains Open to Negotiations
On October 9, OFAC and the Department of State unveiled their newest tranche of sanctions targeting Iran’s exports of petroleum and petrochemical products as well as individuals and entities that allegedly assist the regime in evading US sanctions.
- OFAC designated over 50 individuals, entities, and vessels across multiple jurisdictions for allegedly facilitating Iranian oil and liquefied petroleum gas (LPG) sales and shipments from Iran. Those designated include nearly two dozen “shadow fleet” vessels, a China-based crude oil terminal, and an independent “teapot” refinery.
- Concurrently, the State Department sanctioned approximately 40 individuals, entities, and vessels for their alleged involvement in the trade of Iranian petroleum and petrochemical products. The State Department’s designations include some of the largest alleged buyers of Iranian petrochemical products by volume and value, as well as the first China-based terminal that the US has designated for allegedly receiving Iranian-origin petrochemical products.
- In a separate announcement, OFAC designated individuals and companies that allegedly assist the Iranian regime in evading US sanctions. These designations include Iraqi bankers as well as individuals affiliated with the Islamic Revolutionary Guard Corps (IRGC), who OFAC says operate a source network that gathers information, including on US forces in Iraq, on behalf of the IRGC.
The sanctions, which total over 100 new designations under Iran-related authorities, came just days before President Trump, speaking to the Israeli Knesset after the successful negotiation of a ceasefire in Gaza, said that the US is prepared to make a deal with Iran when Tehran is ready. For its part, the Iranian regime also said that it was open to a “fair and balanced” deal with the US over its nuclear program, though it noted that it has not yet received such a proposal from Washington.
US Lifts Sanctions on Former Paraguayan President
On October 6, OFAC announced that it removed former Paraguayan President Horacio Cartes, and several of his companies, from the List of Specially Designated Nationals (“SDN List”). He was previously designated as an SDN due to alleged involvement in “significant corruption.”
In a statement to Reuters, an unnamed Department of State spokesperson said the US decided that the “sanctions on Cartes and his related businesses were no longer required to incentivize changes in behavior and were therefore not in the foreign policy and national security interests of the United States.”
In response, Senator Jeanne Shaheen (D-NH), the Ranking Member of the Senate Foreign Relations Committee, along with Senator Elizabeth Warren (D-MA), the Ranking Member of the Senate Banking Committee, and Senator Tim Kaine (D-VA), issued a statement condemning the Trump administration for its “abuse” of the Global Magnitsky program. They claimed that removing Cartes and, in April, Hungarian Prime Minister Viktor Orban’s aide, Antal Rogan, from the SDN List “fly in the face and spirit of the purpose of the Global Magnitsky Act,” which provides authority to target officials who engage in human rights abuses or corruption.
OFAC Targets Mexico-Based Fentanyl Supply Network
On October 6, OFAC designated eight Mexican individuals and 12 Mexico-based companies allegedly affiliated with the Sinaloa Cartel, a Specially Designated Global Terrorist (SDGT) and Foreign Terrorist Organization (FTO).
According to OFAC, the designated individuals and entities are affiliated with the Los Chapitos faction of the Sinaloa Cartel, which was separately designated by OFAC on June 9, 2025. OFAC alleges that Los Chapitos-controlled laboratories are responsible for introducing fentanyl in counterfeit pills manufactured by the Sinaloa Cartel and trafficked into the US.
OFAC alleges that the individuals and entities designated on October 6 were involved in the supply of fentanyl precursor chemicals to the Sinaloa Cartel.
OFAC Announces Expansive Sanctions on Southeast Asian Cybercriminal Networks
On October 14, in what OFAC describes as its “largest action ever” targeting cybercriminal networks in Southeast Asia, OFAC imposed sanctions on 146 targets within the Prince Group Transnational Criminal Organization (Prince Group TCO), a Cambodia-based network that allegedly operates online investment scams targeting the US and allied nations through shell and holding companies in the British Virgin Islands (BVI), the Cayman Islands, Singapore, Hong Kong, and Taiwan, among other countries.
These sanctions accompany various other actions taken across the US government:
- The Department of Justice (DOJ), for instance, unsealed a criminal indictment in the US District Court for the Eastern District of New York (EDNY) charging Chen Zhi, the alleged founder and chairman of Prince Holding Group, which is part of the above-mentioned Prince Holding TCO, with conspiracy to commit wire fraud and conspiracy to commit money laundering.
- The DOJ also announced it was filing a civil forfeiture complaint against approximately 127,271 Bitcoin, currently worth approximately $15 billion, that are allegedly proceeds and instrumentalities of Zhi’s fraud and money laundering schemes: the largest forfeiture action in the history of the DOJ.
- For its part, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Final Rule that severs Cambodia-based Huione Group from the US financial system.
- Huione, which FinCEN says serves as a “critical node” for laundering proceeds of cyber heists carried out by North Korea and TCOs in Southeast Asia, was previously identified in a FinCEN Notice of Proposed Rulemaking (NPRM) as a financial institution of primary money laundering concern in May.
The Trump administration appears to have made Southeast Asian-based scam networks an enforcement priority. The administration’s actions against the Prince Group, Zhi, and Huione follow recent designations made by OFAC against similar networks from September 8, May 29, and May 5.
Those actions also follow the introduction of the Scam Compound Accountability and Mobilization (“SCAM”) Act in the Senate, which would, among other things, require the Secretary of State, in consultation with the Attorney General, Secretary of the Treasury, and other relevant departments and agencies, to submit to Congress a strategy to counter “scam compounds.” The SCAM Act would also authorize the President to impose sanctions under the International Emergency Economic Powers Act (IEEPA) against foreign persons who are determined to support or enable international scam compound operations.
EU Developments
EU Council Updates Sanctions Framework Targeting Russia In Response to Destabilizing Activities
The EU Council adopted amendments to two sanctions instruments in response to Russia’s destabilizing activities. Specifically, Council Regulation 2024/2642 was revised to update the statement of reasons for one individual listed in Annex I, whose media platforms were found to be closely linked to Russian state propaganda and involved in coordinated disinformation efforts. In addition, Council Decision 2024/2643 was amended to reflect this change and to extend the sanctions regime until October 9, 2026, as reported in our October 6 Sanctions Update.
Austria Proposes Asset Exemption in EU’s 19th Russia Sanctions Package
On October 8, EU ambassadors of the EU Council met in Brussels to advance discussions on the 19th sanctions package against Russia.
During the meeting, Austria introduced a proposal to release frozen assets linked to Russian oligarch Oleg Deripaska. According to reports, Austria is requesting an exemption that would allow the transfer of a €2.3 billion stake in the construction firm Strabag to Raiffeisen Bank International. The bank, which continues to operate in Russia, paid €2.1 billion in fines following a Russian court ruling and is seeking compensation through the asset transfer.
The proposal has raised concerns among several Member States. Diplomats from Poland and Czech Republic have reportedly warned that granting such an exemption could weaken the EU sanctions framework and create a precedent for other sanctioned entities to pursue similar claims.
Austria is not the only Member State who has created roadblocks to the adoption of the upcoming sanctions package. Early last month, Slovak Prime Minister Robert Fico expressed concerns about the package, warning of its potential impact on Slovakia’s automotive industry and broader economy.
EU ambassadors are expected to continue discussions on the 19th sanctions package at the EU Council meeting scheduled for October 23.
EU Council Fails to Agree on the Commission’s Russian Energy Phaseout Proposal
The Committee of Permanent Representatives (COREPER I), which prepares the work of the Council in areas including energy, met on October 8 to discuss the European Commission’s REPowerEU proposal to phase out imports of Russian natural gas by the end of 2027.
EU ambassadors were unable to reach agreement on the Council’s negotiating position due to unresolved technical concerns. While the proposal received broad support, objections from France, Spain, and Italy prevented final endorsement. Reportedly, Spain expressed concerns about arbitration risks, while other Member States questioned the feasibility of a provision requiring importers to submit proof-of-origin documentation to customs authorities several days in advance for shipments suspected of containing Russian gas.
The proposal will now be discussed by EU energy ministers on October 20. If needed, the Danish Council Presidency may convene an additional COREPER meeting to resolve outstanding concerns before the end of the year, which remains the target for adoption.
EU Council Renews Sanctions Against the Proliferation and Use of Chemical Weapons
The EU Council has renewed the legal framework for restrictive measures against the proliferation and use of chemical weapons, as established under Council Decision 2018/1544. The sanctions regime will now remain applicable until October 16, 2026. Currently, the individual restrictive measures apply to 25 persons and 6 entities. Those listed are subject to asset freezes and a prohibition on the provision of funds or economic resources. Additionally, a travel ban to the EU applies to the persons listed.
Asia-Pacific Developments
China Adds 23 Foreign Entities to Unreliable Entity list
China’s Ministry of Commerce (MOFCOM) added 23 foreign entities to its Unreliable Entity List, citing violations that threaten national sovereignty, security, and development interests. The listed companies included Dedrone by Axon, TechInsights Inc. and its nine subsidiaries, DZYNE Technologies, Elbit Systems of America, AeroVironment, and others. These listed companies are now barred from conducting import-export activities with China, making new investments in the country, or engaging in any form of cooperation or data exchange with Chinese organizations or individuals. MOFCOM explained that these sanctions respond to actions such as military technical cooperation with Taiwan, dissemination of hostile commentary about China, and support for foreign efforts to suppress Chinese enterprises. A ministry spokesperson emphasized that the move is grounded in legal provisions and targets only a small number of entities posing security risks, assuring that compliant foreign businesses remain welcome and will continue to benefit from China’s stable and fair business environment.
China Tightens Rare Earth Exports to Safeguard National Security
China has introduced a series of stringent control measures targeting rare earth-related technologies and materials, citing national security and non-proliferation concerns. These controls, announced by MOFCOM and the General Administration of Customs (GAC), include restrictions on the export of technologies used in rare earth mining, smelting, and recycling, as well as equipment and materials related to superhard substances, lithium batteries, and artificial graphite anodes. Overseas entities must now obtain dual-use export licenses, and applications linked to military use or flagged end-users will be denied. While the measures are not aimed at any specific country, they reflect China's growing emphasis on safeguarding strategic resources and preventing their misuse in sensitive sectors. MOFCOM emphasized that compliant trade will still be permitted, with exemptions for humanitarian purposes and licensing facilitation mechanisms in place. Experts noted that these policies align with international norms and WTO rules and are designed to regulate—not prohibit—exports, ensuring minimal disruption to global supply chains. The move also marks a significant step in China's extraterritorial application of export controls, reinforcing its role in global trade governance.
Japan Threatens Sanctions Over Israel's Stance on Two-State Solution
During a press conference in Tokyo, Japanese Foreign Minister Iwaya Takeshi warned that Japan may impose sanctions on Israel and formally recognize Palestine as a sovereign state if Israel continues to undermine the prospects of a two-state solution. He emphasized Japan’s unwavering support for a peaceful resolution that allows both Israel and Palestine to coexist sustainably, noting that any recognition of Palestinian statehood would depend on favorable conditions.
India Shifts to Yuan Payments for Russian Oil Amid Sanctions and Renewed China Ties
Due to Western sanctions imposed on Russia following its 2022 invasion of Ukraine, Russian oil traders are now encouraging Indian state refiners to make payments in Chinese yuan, aiming to reduce transaction complexity and costs. This shift coincides with a recent thaw in India-China relations, which traders see as an opportunity to streamline deals. Indian Oil Corp has reportedly used yuan to pay for several Russian oil shipments, a move that marks a return to a practice briefly adopted in 2023 but halted due to government concerns during a period of diplomatic tension. The use of yuan eliminates the need to convert dirhams or dollars into yuan before exchanging them into rubles, which are required for payments to Russian producers. While oil prices are still quoted in dollars to comply with EU price caps, yuan payments are becoming more common, potentially increasing access to Russian oil for Indian state refiners, especially as some traders now reject other currencies. This financial shift is further supported by renewed India-China engagement, including resumed direct flights and Prime Minister Modi’s recent visit to China.
