Overview
Lede
Western Momentum Builds Toward Action on Immobilized Russian Assets
On the sidelines of an informal European Council meeting in Copenhagen on Wednesday, G7 finance ministers discussed a coordinated effort to transfer immobilized Russian assets to assist in Ukraine’s reconstruction and ease a $23 billion fiscal hole for 2026. There was no final agreement, but the discussions signified unprecedented movement to leverage frozen Russian assets for Ukraine.
The issue of frozen Russian assets requires a bit of context. In February 2022, as part of the initial sanctions packages launched in response to Russia’s full-scale invasion of Ukraine, G7 countries immobilized roughly $300 billion worth of Russian central bank assets, mainly bonds, held in Western securities depositories. Sovereign banking sanctions were an unprecedented move, and it has put depositories like Belgium-based Euroclear—the largest manager of frozen Russian assets at €185 billion—in legal limbo. On the one hand, they are obligated to pay the depositor, in this case Russia, the value of the bonds given to Western central banks plus accrued interest. On the other hand, depositories are barred from receiving or transferring the physical cash owed to Russia, which is managed by various central banks. Shortly after Russia’s invasion, the EU interpreted that depositories are only obligated to pay Russia back its principal investments, which can be held until Russia pays reparations for Ukraine’s reconstruction, most recently estimated at $524 billion by the World Bank. Nonetheless, this interpretation does not totally eliminate liability risks for depositories from Russia or the credibility of Euro-denominated assets, which make up most of Russia’s frozen assets. It is this legal limbo that casts a shadow over recurrent debates on Russian frozen assets, which usually accompany discussions on new EU sanctions packages.
Negotiations around the EU’s 19th sanctions package is no different. While the sanctions package targets financial entities, crypto exchanges, companies that assist Russia’s defense industrial base, and more of Russia’s “shadow fleet” tankers, the package is accompanied by European Commission proposals for a complete Russian fuels phaseout by the end of 2026 and a €140 billion “reparations loan” from Russian sovereign assets that have matured into cash, which sits in an account with the European Central Bank. The proposal is not finalized, but the rough idea is that Euroclear delivers the €140 billion reparations loan to Ukraine at 0% interest. The loan will be backed by guarantees from most EU member states but repaid by Ukraine once Russia compensates it. Either EU state guarantees or Ukraine’s repayment will allow Euroclear to repay Russia—thereby keeping their claim intact. The money will be held in a special purpose vehicle contributed to by all G7 nations, which will allow the money to earn interest and be disbursed to Ukraine in coordinated tranches.
The European Council will have an opportunity to adopt the plan when it meets from October 23-24, but some politicking will occur before then. German Chancellor Friedrich Merz is the most outspoken proponent, reversing Germany’s previous opposition to challenging the norms around the immunity of state property. Merz argues that the sanctioned cash should exclusively equip Ukraine’s military to financially guarantee its defense for years and raise the costs of Russia’s continued aggression. However, indebted countries like France and Italy worry about issuing IOUs to depositories like Euroclear due to the pressures of their already-challenging austerity agendas. Moreover, any lost credibility for the euro could increase the costs of their debt, making matters worse. However, state-backed guarantees are a key reassurance to Belgium, which would otherwise harbor all of the risk for Euroclear.
In order to cushion any effects on the euro, the EU has asked other G7 nations to move ahead with similar loan plans. After all, a coordinated effort would ensure that the euro alone does not take the fall. It is unlikely that the US dollar, euro, pound, and yen together—comprising 98% of global reserves—would suffer much lost credibility.
The US has pressured the EU to move ahead. Although the US has not committed to doing the same with its own frozen Russian cash just yet, Congress is moving in this direction. In late September, mirroring G7 discussions, a bipartisan group of senators led by Sen. Jeanne Shaheen (D-NH) proposed the REPO Implementation Act, which would grant the president authority to repurpose tranches of sanctioned Russian sovereign assets on a suggested timeline of every 90 days. This follows up the original REPO Act, which was signed into law in April 2024 and mandates that sanctioned Russian sovereign assets only be transferred for Ukraine’s reconstruction. The UK indicated that it would adopt a $25 billion “reparations loan” similar to the EU’s but for pound-denominated assets. Japan has suggested it would follow the lead of the US.
US Developments
US Designates Iranian Procurement Network
On October 1, OFAC designated 21 entities and 17 individuals across multiple jurisdictions that were allegedly involved in the acquisition of sensitive goods and technology for Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL), a Specially Designated Global Terrorist (SDGT) and key component of Iran’s defense apparatus. According to OFAC, the designations include “networks” of individuals and entities from Iran, Hong Kong, China, Germany, Türkiye, Portugal, and Uruguay.
Concurrently, the State Department announced that it was sanctioning five individuals and one entity allegedly connected to Iran’s Organization of Defensive Innovation and Research (SPND), which is the successor to Iran’s pre-2004 nuclear weapons program. The State Department noted that many of the persons it sanctioned have sought to obtain sensitive dual-use technologies and technical expertise applicable to nuclear weapons development.
The US continues to apply pressure on Iran under President Trump’s National Security Presidential Memorandum 2 (NSPM-2) which calls for, among other things, the imposition of “maximum pressure” on the Iranian regime. Notably, these sanctions from OFAC and the State Department follow the United Nations Security Council’s (UNSC) decision from September 26, 2025 to reimpose sanctions on Iran that were originally suspended as part of the Joint Comprehensive Plan of Action (JCPOA) in 2015. They also follow the European Council’s decision from September 29, 2025 to implement the UNSC measures.
Senators Introduce Bill Authorizing Sanctions Against Foreign Cyber Scams
Senator Jeanne Shaheen (D-NH), the Ranking Member of the Senate Foreign Relations Committee, along with Senator John Cornyn (R-TX) introduced the Scam Compound Accountability and Mobilization (“SCAM”) Act in the Senate.
The SCAM Act (S. 2950), according to Shaheen, would 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,” which are locations at which transnational criminal organizations conduct large-scale cyber scam operations against Americans often by forcing trafficked captives to commit cybercrimes. The bill would create a task force to implement and evaluate the progress of the strategy over a six-year period. It also authorizes 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.
The introduction of the SCAM Act follows a series of recent OFAC sanctions designations targeting alleged scamming operations, including those on September 8, May 29, and May 5.
UK Developments
UK Issues General Licences and Updates Iran Sanctions List Following JCPOA Snapback
The UK Government has designated or amended the designation of 32 individuals and 120 entities under the Iran (Nuclear) sanctions regime (see here and here), following the decision by the E3 (i.e., the UK, France and Germany) to trigger snapback sanctions at the end of August in response to Iranian nuclear escalation. According to a UK Government press release, these sanctions target those with links to Iran’s nuclear programme, including financial institutions, energy companies, as well as individuals and entities involved in facilitating Iran’s nuclear programme such as Iranian nuclear scientists, senior IRGC members, and the Atomic Energy Organisation of Iran. Businesses should update screening systems immediately to reflect the expanded list and amended entries. Particular attention should be paid to counterparties in the energy, technology, and financial sectors, where overlap with newly listed entities is most likely.
The UK Government has also issued four new general licences to allow the wind-down of existing transactions in response to the reimposition of sanctions on Iran under the JCPOA snapback mechanism (the “GLs”). The GLs cover UK-based Iranian banks (i.e., Bank Melli, Bank Saderat Iran, Bank Tejarat, and Persia International Bank Plc) (GL INT/2025/7345464), a further 13 Iranian banks worldwide (GL INT/2025/7345664), two UK-based Iranian firms (i.e., Iran Insurance Company and NIOC International Affairs Ltd) (GL INT/2025/7345264), and continued support for the Shah Deniz gas project under strict conditions preventing direct payments to Naftiran Intertrade Company (NICO) (GL INT/2025/7363752). All GLs require records of activity to be kept for six years and expire between October and November 2025. OFSI has also clarified in updated FAQs (q.168) that licences issued pre-2015 under the UN regime ceased to apply once designations were lifted, therefore, re-designated persons must now reapply. Companies with historic licences should confirm whether those remain valid (most will not) and reapply promptly if necessary.
Following the implementation of snapback sanctions, the UK also intends to introduce legislation to impose further sectoral measures targeting finance, energy, shipping, software, and other significant industries that are advancing Iranian nuclear escalation in line with the UK’s international partners.
UK Parliamentary Report on Iran Snapback Sanctions
The UK House of Commons Library has published a briefing on the reimposition of UN sanctions on Iran under the JCPOA snapback mechanism. The report explains the process, the sanctions that have been reinstated, and international reactions. It highlights that opinion is divided on the likely impact, with some analysis suggesting limited economic effect given Iran’s reliance on established trade partners such as China, Iraq, the UAE, and Turkey. In the UK, snapback has received broad cross-party support in Parliament as part of a wider strategy to counter nuclear proliferation. The report also notes that Iran has dismissed the sanctions as baseless but faces internal debate over whether to curb uranium enrichment and allow IAEA inspections to prevent further restrictions. Businesses should expect continued parliamentary backing for robust sanctions enforcement against Iran. Businesses with regional exposure should pay close attention to forthcoming UK guidance and ensure screening systems are updated.
OFSI Issues Penalty Against Colorcon Limited for Russia Sanctions Breaches
OFSI has announced that it has imposed a monetary penalty of £152,750 on Colorcon Limited, a UK company and provider of products to the pharmaceutical and nutritional industries. The penalty was imposed for breaches of regulation 12 of the Russia (Sanctions) (EU Exit) Regulations 2019 and concerned 79 Russian Ruble payments with a combined value of £128,277.72 made by the company’s representative office in Moscow to non-designated employees and certain service providers holding accounts at several designated Russian banks during a six month period in 2022 in breach of UK sanctions. This case underscores OFSI’s continued commitment to robust sanctions enforcement and offers important compliance lessons for companies with overseas operations, particularly those operating in high-risk jurisdictions.
UK Updates AUKUS Open General Licence
The Export Control Joint Unit (ECJU) has updated the open general licence with respect to AUKUS Nations. The updates to the licence include updated text on Authorised User Community and clarification on F680 requirements. Additionally, updates have been made to the items not permitted by the licence, including additional nerve agents, prototypes for naval nuclear propulsion plant, test and maintenance equipment and test models for naval nuclear propulsion plant and prototypes.
EU Developments
EU Council Extends Sanctions Until 2026 in Response to Russia’s Destabilizing Actions
The EU Council has extended individual restrictive measures until October 9, 2026, targeting those responsible for Russia’s destabilizing actions, in response to ongoing hybrid threats such as Foreign Information Manipulation and Interference (FIMI) against the EU and its Member States. First adopted in October 2024, the sanctions regime targets individuals and entities involved in actions and policies by the Russian government that undermine the EU’s fundamental values, as well as the security and integrity of its Member States. The framework also covers actors engaged in hybrid operations directed at third countries and international organizations. Currently, 47 individuals and 15 entities are subject to restrictive measures such as asset freezes, travel bans, and a prohibition on the provision of funds or economic resources.
European Parliament Reaches Preliminary Agreement on Russian Energy Phaseout Proposal
The European Parliament has reached a preliminary agreement on the Commission’s legislative proposal to gradually phase out the import of Russian gas and oil into the EU by the end of 2027. According to specialist reports, members of the Energy and International Trade committees have finalized a draft that proposes banning long-term contracts with Russian suppliers by January 1, 2027, one year earlier than initially planned, and expanding the ban to include Russian oil, gas, LNG storage, and refined products. The draft also proposes removing exemptions for short-term contracts and limiting the European Commission’s ability to suspend the ban on importing Russian fossil fuels in the event of a supply crisis. Companies that violate the ban could be subject to fines of at least 5% of their annual turnover, with enforcement overseen by the European Public Prosecutor’s Office and OLAF. The draft is scheduled for a vote in the European Parliament’s Energy committee on October 16.
Europe Tightens Grip on Russia’s Shadow Fleet
French President Emmanuel Macron has announced a coordinated European effort to obstruct vessels linked to Russia’s shadow fleet as they enter European waters. Speaking after the European Political Community meeting on October 2 in Copenhagen, Macron revealed that European defense chiefs, in collaboration with NATO, will soon develop joint actions to enforce this policy. The initiative, led by France and the UK, aims to counter Russia’s covert oil trade, which continues to fund its war efforts in Ukraine despite international sanctions. The announcement follows the arrest by French authorities of two crew members aboard a tanker suspected of operating within Russia’s shadow fleet. With an estimated 800 to 1,000 ships aiding Russia’s strategic interests, Macron described the decision as another step in Europe’s efforts to dismantle the shadow fleet.
Asia Pacific Developments
Shandong Oil Port Moves to Tighten Access for Shadow Fleet Subject to Sanctions
In an effort aimed at vessels carrying sanctioned crude oil from sensitive suppliers from Iran, terminal operators at Qingdao Port in Shandong province — a key crude import hub that handles about one‑sixth of China’s total oil shipments — reportedly announced on September 29, 2025 their plans to bar shadow fleet vessels. They will also limit port calls by older tankers. According to a notice seen by Reuters and confirmed by a tanker‑tracking source, the new rules, set to take effect on November 1, will prohibit vessels “using fake International Maritime Organization numbers and ships of 31 years or older.” Vessels with expired or invalid international certificates, or a record of pollution or accidents in the past three years, will be barred. A new risk‑scoring system will assess factors such as vessel age, classification society, and pollution liability insurance coverage, with ships scoring below 55 points classified as high‑risk and denied entry. These tankers often operate under opaque ownership structures, change flags frequently, and present incomplete documentation, making them difficult to vet and increasing both safety and compliance risks. Once enforced, the restrictions are expected to reshape tanker traffic into Shandong, so charterers relying on older ships will face stricter pre‑arrival checks, possible rerouting to more lenient ports, and higher freight rates for compliant, well‑documented tonnage.
Taiwan Emerges as Largest Buyer of Russian Naphtha Despite Sanctions
Despite Taiwan’s alignment with Ukraine and its participation in sanctions against Moscow following Russia’s 2022 invasion, the Centre for Research on Energy and Clean Air reported on October 1, 2025, that Taiwan had become the world’s leading importer of Russian naphtha. Taiwan has purchased $1.3 billion worth of naptha in the first half of the year — a monthly average nearly six times higher than in 2022 and 44% more than in the same period of 2024. Naphtha, a crude oil derivative, is essential to Taiwan’s semiconductor industry. While state-owned firms have cut Russian coal and naphtha imports, private companies have ramped them up, with Formosa Petrochemical Corporation boosting its reliance from 9% before the invasion to 90% in early 2025, making it the top buyer worldwide. Analysts warn that the dependence weakens Taiwan’s credibility with allies, funds Russia’s war effort, and risks higher US secondary tariffs that could hit key exports.
Japan Reimposes UN Sanctions on Iran While Pushing for Diplomatic Resolution
On October 2, 2025, Japan’s foreign minister joined G7 counterparts and the European Union’s High Representative in issuing a joint statement backing the E3’s move to trigger the UN “snapback” mechanism, reinstating sanctions on Iran over its nuclear program. The coordinated action followed Japan’s September 28 announcement that it would reimpose economic sanctions in line with the UN Security Council’s decision to restore measures lifted in 2015 under Resolution 2231. Tokyo reportedly designated the freezing of assets belonging to 78 organizations and 43 individuals linked to Tehran, citing the need to prevent the development of nuclear weapons. Chief Cabinet Secretary Yoshimasa Hayashi called the situation a “crossroads” and stressed the importance of keeping diplomatic channels open, reaffirming Japan’s commitment to dialogue while implementing the UN decision.
