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
Snapback Process Progresses as Iran Agrees on Nuclear Inspections Framework
In late August, the E3 (France, Germany and the UK) formally initiated the process of applying snapback sanctions on Iran over its longstanding noncompliance with the terms of the 2015 Joint Comprehensive Plan of Action (JCPOA). The announcement came as the window to impose the sanctions narrowed, with JCPOA-era UN instruments set to expire at the end of October. In the following weeks, Iran and its partners have pushed back on the implementation of the snapback sanctions, while Iran has recently taken tentative steps to meet some of the E3’s demands. The coming weeks will be decisive as Iran solidifies its response to looming snapback sanctions, amid internal divisions and rising regional turmoil.
The process for imposing the sanctions is ticking along at the UN Security Council (UNSC). Last week, the UNSC rotating chair South Korea finalized a draft resolution that would permanently lift sanctions on Iran, a legal requirement in the process to impose snapback sanctions on Tehran but that will certainly not pass unless Iran changes its behavior drastically and begins to comply with JCPOA-era requirements (a very slim possibility). The resolution was triggered by the E3’s notification that snapback sanctions are being triggered, which started a 30-day clock under which the UNSC must either adopt a new resolution continuing sanctions relief to Iran under UNSCR 2231 (the UNSC resolution enshrining the nuclear deal) or, absent an approved resolution, terminate UNSCR 2231 (automatically reimposing pre-JCPOA UN sanctions on Iran). While UNSC permanent members could veto a new resolution without the support of the other members, there is a no veto option to stop the default reimposition of previous sanctions once the 30-day clock lapses. Thus, countries on the UNSC that have supported Iran’s position before – namely, China and Russia – are largely powerless to stop the reimposition of UN sanctions on Iran. Russia has introduced a resolution providing a six-month pause to allow for continued negotiations, but it is unlikely to pass.
The E3 has stated that they will hold off on completing the snapback process if Iran meets three requirements: allow the International Atomic Energy Agency (IAEA) inspections to resume, account for its highly enriched uranium stockpile, and hold nuclear talks with the United States. There has been recent progress on the first issue: on Thursday, Iran and the IAEA reached a deal to resume inspections of Iranian nuclear sites, which had been suspended in June following Iran and Israel’s 12-day war. However, the deal was notably short on specifics, and Iranian and IAEA spokespeople have portrayed the agreement differently. The deal should, in principle, lead to the full resumption of inspections, which the IAEA seeks, but Iran’s foreign minister told domestic media that “the agreement does not currently provide access to IAEA inspectors,” except for the Bushehr Power Plant, by all accounts a legitimate power generation site. Even a return to the pre-12 day war status quo would likely not satisfy E3 requirements; in the years following the Trump administration’s withdrawal from the JCPOA, Iran steadily winnowed away the IAEA’s access to nuclear sites, allowing inspections less frequently, damaging or switching off remote monitoring equipment, and requiring advance notice that many Iran-watchers believe allowed Tehran to move or conceal its most sensitive nuclear materials.
The lack of clarity (and, likely, teeth) in the IAEA inspection agreement reflects deep divisions within Iran over the future of the country’s nuclear program. For hardliners like the Ayatollah, the recent decimation of Iran’s nuclear program by Israel is proof that Tehran cannot afford to be without a credible nuclear deterrent. For pragmatists like moderate President Masoud Pezeshkian, the recent conflict is evidence that further confrontation with Israel or the US will not serve Iran’s interests, and that diplomatic engagement may be the most prudent way ahead. The appearance of capitulating to the West, however, would damage national pride and likely spell the end of Pezeshkian’s political career.
The stakes for Iran are high. While Iran is already subject to crushing sanctions, largely from the US, the reimposition of UN sanctions would be devastating, materially and symbolically. A successful snapback would revive a global arms embargo, a ban on developing or testing ballistic missiles, a freezing of financial assets, travel restrictions on senior Iranian officials, and a ban on enriching or processing uranium. Most consequentially, all 193 UN Member States are obliged under the UN Charter to implement the Security Council’s resolutions on sanctions—meaning the currently mostly Western sanctions regime against Iran would go global, with implications for Iranian trade, nuclear, maritime, and aviation cooperation projects, and access to international markets, even for non-dollar-denominated transactions. The actual impact of this global ban is, of course, not certain—it is likely that Russia, already cut off economically and diplomatically from much of the Western world, would be willing to flout UN sanctions. China, whose teapot oil refineries still buy Iranian oil, would also be in an uncomfortable position. Even without 100% participation, snapback sanctions would further damage Iran’s struggling economy, with trickledown effects for Iranians already dealing with deflated currency, power shortages, and low employment, as well as potential regional impacts if a desperate Iran seeks to reestablish power and deterrence via nuclear armament or a redeveloped proxy network.
US Developments
Momentum for Russian Sanctions Builds
The Trump administration renewed its discussion of new sanctions against the Kremlin, this time involving European leaders as well.
Multiple outlets have reported that Trump administration officials met with their European counterparts to explore new economic measures against Russia, including sanctions and tariffs on Russian oil purchases. While the exact content of these discussions was not made public, statements from Trump administration officials indicate that transatlantic coordination was among the prerequisites for US action. For example, Secretary of Energy Christopher Wright told the Financial Times that the US would be more likely to impose sanctions on Russia if Europeans “drew a line” and ceased their purchase of Russian oil and gas, supplanting it instead with purchases of US energy to meet the terms of the US-EU trade agreement. Secretary of the Treasury Scott Bessent similarly asserted that, “if the US and the [EU] can come in, do more sanctions, secondary tariffs on the countries that buy Russian oil, the Russian economy will [collapse],” bringing Russian President Vladimir Putin to the table.
The Trump administration’s proposals have mostly centered on the EU imposing tariffs of up to 100 percent on imports from China and India for the countries’ purchase of Russian oil. However, the EU has reportedly indicated it is unlikely to go along with such a proposal. More recently, Bloomberg has reported that the US will be urging allies in the G7 to consider an array of other non-tariff measures, including pathways to seize immobilized sovereign Russian assets; sanctions on the Russian energy, defense, and financial sectors; and prohibitions on services relating to maritime insurance, as well as to artificial intelligence and financial technology in Russian Special Economic Zones (SEZ).
Congress has also renewed its focus on Russian sanctions. According to Politico, Senate Majority Leader John Thune (R-SD) said on September 10 that there is an “intensified interest” in passing Russian sanctions legislation in the wake of recent actions by Moscow, which include a rejection of the West’s proposal to place European peacekeeping troops in Ukraine, and a recent drone incursion into Polish sovereign territory. This interest is apparent in statements across party lines, with Senator Lindsey Graham (R-SC) and Senator Richard Blumenthal (D-CT), the two co-sponsors of the Sanctioning Russia Act of 2025, calling on the Trump administration to support the legislation. Separately, Senator Jeanne Shaheen (D-NH), the Ranking Member of the Senate Foreign Relations Committee, has reiterated her call to sanction Chinese enablers of the Russian war effort via her bill, the STOP China and Russia Act of 2025; and Representative Don Bacon (R-NE-02) became the first Republican to sign on to an effort by the Democrats to force a vote on Russia sanctions-related legislation.
OFAC Targets Houthi Revenue and Procurement Networks
On September 11, OFAC sanctioned 32 individuals and entities, and identified as blocked property four vessels, in what it called Treasury’s “largest sanctions action to date” targeting the Iran-backed Foreign Terrorist Organization (FTO) and Specially Designated Global Terrorist (SDGT) Ansarallah, more commonly referred to as the Houthis. OFAC alleged that the sanctioned individuals, entities, and vessels are part of the Houthis’ global illicit fundraising, smuggling, and weapons procurement operations, and are located in Yemen, China, the United Arab Emirates (UAE), and the Marshall Islands.
Treasury’s actions build on an already lengthy history of Houthi-related designations made under the Trump administration, including on July 22, June 20, April 28, and April 2. They are also in line with President Trump’s National Security Presidential Memorandum 2 (NSPM-2), which calls for a “maximum pressure” campaign against Iran and its terrorist proxies, such as the Houthis.
Treasury Designates Southeast Asian Scam Centers
OFAC has sanctioned multiple individuals and entities in Southeast Asia for their alleged roles in cyber scam operations that “steal billions of dollars” from Americans using forced labor and violence. Under Secretary for Terrorism and Financial Intelligence John Hurley stated that, in 2024, Americans were scammed out of $10 billion by Southeast Asia-based operations, and that, under the current leadership, Treasury will “deploy the full weight” of its tools to combat such crimes.
The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) previously issued an Alert related to such investment scams, which are sometimes referred to as “pig butchering scams,” in September 2023.
UK Developments
OFSI Issues Disclosure Notice Against Vanquis Bank Limited for Breach of Counter-Terrorism Sanctions
OFSI has published a disclosure notice against Vanquis Bank Limited (“VBL”), an FCA-regulated UK financial services provider, for breaches of the Counter-Terrorism (Sanctions) (EU Exit) Regulations 2019. The case concerned an eight-day delay in restricting a UK-designated person’s account, during which time a small amount of funds was accessed and spent. OFSI had notified VBL on the day before the designation that a customer may shortly become subject to an asset freeze; however, operational failures on the part of VBL prevented it from freezing the designated person’s account sooner. While OFSI assessed the breach as “moderately severe”, it did not impose a monetary penalty, instead determining that public disclosure was the proportionate enforcement response.
This case reflects OFSI’s broader enforcement strategy of combining monetary penalties, public disclosure, and other measures to achieve both deterrence and compliance improvements across the financial sector. Firms should view this as part of a wider trend in which OFSI is prepared to act where lapses, however small, undermine the credibility and effectiveness of the UK sanctions framework.
UK Targets Russia’s Military Machine and Shadow Fleet in Latest Round of Designations
The UK Government has designated 30 individuals and entities and specified 70 ships under the Russia sanctions regime, targeting the shadow fleet carrying Russian oil and key suppliers of military components such as electronics, chemicals, and explosives used to manufacture missiles and other weapons systems. According to a UK Government press release, these sanctions come as Russian air strikes violated NATO airspace in Poland and damaged the Cabinet of Ministers building in Kyiv earlier this week. These newly designated persons include individuals and entities of Russian, Azeri, Indian, Chinese, and Thai nationality. According to new UK Foreign Secretary, Yvette Cooper, these sanctions form the next stage in the UK’s leading efforts to ramp up economic pressure and security support to bring about lasting peace in Ukraine. These designated persons are now subject to a UK asset freeze, and, in the case of individuals, a UK travel ban.
UK Government Publishes Notice on Frozen Asset Review 2025
The UK Government has published a notice regarding its annual Frozen Asset Review. According to the notice, all persons who hold funds or economic resources owned, held, or controlled by a UK-designated person are required to submit a report to OFSI by November 30, 2025. The report must include details of all funds or economic resources frozen in the UK as well as those overseas, where these funds or economic resources are subject to UK financial sanctions jurisdiction. All persons who have previously reported information related to frozen assets to OFSI are still required to submit a return to OFSI as part of the 2025 Frozen Asset Review. All returns must be made in the form of a completed template from the GOV.UK website to ofsi@hmtreasury.gov.uk.
EU Developments
European Commission Updates the EU Dual-Use Export Control List
The European Commission has adopted a Delegated Regulation updating the EU dual-use export control list in Annex I of Regulation (EU) 2021/821. The amendments reflect decisions and commitments made by EU Member States within the framework of multilateral export control regimes and arrangements, including the Wassenaar Arrangement (WA), Missile Technology Control Regime (MTCR), Australia Group (AG), and Nuclear Suppliers Group (NSG).
The update includes new technical definitions, notably concerning spacecraft, and introduces new items such as quantum technologies, semiconductor manufacturing and testing equipment, advanced computing integrated circuits, additive manufacturing machines, peptide synthesizers, and coatings for high temperature applications.
The updated export control list will enter into force after the two-month scrutiny period by the EU Council and Parliament.
France and Germany Position Paper to Strengthen Pressure on Russia through 19th Sanctions Package
France and Germany have jointly prepared a position paper proposing reinforced EU restrictive measures targeting Russia under the 19th sanctions package. The paper begins by outlining measures to reduce Russian energy revenues. These include the proposed listing of major oil companies such as Lukoil and Litasco, along with continued efforts to sanction shadow fleet vessels transporting Russian oil. Building on this, the two EU countries recommend targeting third-country operators that facilitate circumvention schemes. This would involve listing refineries responsible for exporting Russian oil to the EU, as well as trade companies engaged in its distribution.
To further undermine Russia’s financial networks, additional proposals include expanding sanctions to cover 250 small and regional Russian banks, as well as non-EU financial institutions connected to Russia’s SPFS payment system. The position paper stresses the importance of aligning EU measures with those of the US and the UK, particularly regarding sanctions on cryptocurrency operators in Central Asia. It also calls for action to target a broad range of third-country entities and individuals involved in logistical channels used to circumvent EU sanctions. Lastly, the position paper urges sanctions against individuals responsible for the forced transfer of Ukrainian children to Russia.
EU Debates Exemption for Russian LNG Services in Gas Phase-Out Plan
As part of its REPowerEU initiative to fully phase out Russian gas in 2028, the European Union is reportedly reconsidering its approach to liquefied natural gas (LNG). A compromise proposal from the EU Council, led by Denmark, suggests allowing Member States to continue providing services such as storage and handling for Russian LNG until 2028, provided those contracts were signed before June 17, 2025, and remain unamended.
While the proposed exemption offers operational continuity for certain Member States, it also raises concerns about enforcement and the integrity of the EU’s planned ban on Russian oil and gas imports. To address these risks, the compromise text introduces stronger monitoring mechanisms, allowing Member States to use “available information” beyond customs declarations to verify the origin and circulation of gas. Additional provisions would empower customs authorities to request full contract details (excluding price) to assess compliance, particularly in cases involving LNG mixtures or indirect supply routes.
EU diplomats in the EU Council are expected to discuss the compromise proposal, while the European Parliament is preparing to vote on amendments to the Commission’s proposed Regulation in committee next month.
Asia-Pacific Developments
China Sanctions Japanese Senator Over Criticism, Sparking Diplomatic Clash
On September 8, 2025, China imposed sanctions on Japanese Senator Seki Hei, also known as Shi Ping, a naturalized Japanese citizen originally from China and a vocal critic of the Chinese Communist Party. This marks the first time Beijing has formally targeted a Japanese parliamentarian for political expression. The sanctions, issued by China’s Ministry of Foreign Affairs (MOFA), entail freezing any assets Seki may have in mainland China, prohibiting business collaborations with Chinese organizations, and barring him and his family from entering Chinese territories, including Hong Kong and Macau. According to MOFA, Seki engaged in “grave interference in China’s internal affairs” and caused damage to China’s “sovereignty and territorial integrity” through criticisms of contentious issues such as Taiwan, Xinjiang, Tibet, and historical disputes. Tokyo swiftly lodged a diplomatic protest, with government spokesperson Yoshimasa Hayashi reportedly condemning the sanctions as “absolutely unacceptable” and accusing China of attempting to intimidate “those with differing views.” On September 10, 2025, however, MOFA rejected Japan’s criticism, asserting that the sanctions “are right and just.”
Adani Group’s Ban on Sanctioned Vessels Sparks Disruption in Russian Oil Trade
On September 11, 2025, India’s largest private port operator, the Adani Group, reportedly announced a ban on vessels sanctioned by the US, EU, and UK from accessing its 14 ports. This decision could disrupt the supply of Russian oil to key Indian refiners, as India depends heavily on Russian seaborne oil, much of which is shipped via sanctioned “shadow fleet” tankers. The move, intended to protect Adani’s legal and commercial interests, creates new logistical challenges for India, which is the world’s largest buyer of Russian crude. It also comes at a time of increased global scrutiny of Russian shipping activities. While India continues to follow only UN sanctions, this policy by Adani could reshape oil sourcing strategies and influence the country’s trade and geopolitical relationships.
Japan Expands Sanctions on Russia, Cuts Oil Price Cap to Pressure Moscow
On September 12, 2025, Japan imposed stricter sanctions against Russia in response to its ongoing invasion of Ukraine, targeting the assets of 14 individuals and 51 entities. Additionally, Tokyo reduced the price cap on Russian seaborne crude oil from USD 60 to USD 47.60 per barrel, aligning with the European Union’s 18th sanctions package, in an effort to curb Moscow’s revenue from energy exports. The measures prohibit shipping companies and insurance providers from transporting Russian oil sold above the capped price. Furthermore, Japan imposed export restrictions on entities in Russia, China, and Turkey to block attempts to bypass the sanctions. During the announcement, Chief Cabinet Secretary Yoshimasa Hayashi reportedly reaffirmed Japan’s dedication to collaborating with the global community to address the ongoing crisis in Ukraine.
