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
Sanctions Relief for Prisoner Release: US and French Transactional Diplomacy Tests Western Sanctions Policy
Western countries appear more willing to use sanctions waivers to achieve transactional geopolitical goals, opening new diplomatic avenues but also risking strain on alliances and raising compliance uncertainty for businesses. This trend is highlighted by last week’s US prisoner-for-sanctions-relief deal with Belarus and a similar proposed deal between France and Azerbaijan. Targeted sanctions waivers or full delistings can be a powerful motivator to change the behavior of political influencers. However, repeated use of such tactics could undermine the public narrative behind a sanctions campaign. It could also weaken relationships between countries coordinating sanctions efforts if individual states push for delistings in pursuit of their own policy goals. Finally, rogue states could exploit increased willingness to issue sanctions waivers for one-off prisoner deals by arresting foreign travelers to gain bargaining chips. Businesses face increased uncertainty about the direction and longevity of sanctions programs if quid pro quo waivers can be issued at any time. Multinational companies also face elevated risks that their expat employees could be arbitrarily arrested in pursuit of a sanctions delisting deal.
Belarus Deals Reveal Limits of Sanctions Relief Strategy
On September 16, US Special Envoy to Belarus John Coale announced that Belarus had released 25 prisoners in exchange for the US lifting sanctions on two Belarusian manufacturing companies. Coale also promised Belarusian President Alexander Lukashenko that US banks would unfreeze tens of millions of dollars in frozen Belarusian assets.
Since the start of the second Trump administration, the US has repeatedly used sanctions waivers on Belarusian businesses to secure prisoner releases and nudge Belarusian policy away from Russia. As of early 2025, Special Envoy Coale declared that his mission was to secure the release of over 1,200 Belarusian prisoners. In December 2025, the US lifted sanctions on Belarusian potash production, a significant engine of the Belarusian economy, in exchange for the release of 123 Belarusian prisoners, including several leading figures in the country's opposition movements. Lukashenko freed another 250 prisoners in March 2026 after the US agreed to drop sanctions on two Belarusian banks and the country's finance ministry.
But US sanctions relief alone has had limited success in bringing Belarus into the Western orbit. While the US delistings allowed Belarusian potash to be more easily exported to the wider world, the industry relies heavily on Russia for exports. Belarus is reportedly seeking access to more conveniently located export facilities in Lithuania, where access is blocked by EU sanctions. Belarusian opposition figures warned in June that Lukashenko was re-arresting dissidents and delaying further releases over the US’ inability to influence EU sanctions relief.
The sanctions-relief-for-prisoners strategy may face diminishing returns. The 25 prisoners released most recently are significantly fewer than the “hundreds” Coale had suggested in earlier statements. Coale told news media afterwards that he would return to Belarus in October to secure the release of “hundreds more prisoners” and negotiate with the EU to restore Belarusian potash exports through Lithuania. US media estimated that around 900 alleged political prisoners remain in Belarusian jails.
The US appears unlikely to secure EU sanctions relief on Belarusian potash, which would require a consensus among the 27 member states. US negotiators would need to overcome strained US-EU relations, in addition to deeper distrust of Lukashenko among EU member states than within the Trump administration. Without EU cooperation, Coale will likely only secure the release of an additional few dozen prisoners during his planned October visit to Minsk.
France Tests EU Unity with Sanctions-for-Prisoners Deal
Ad hoc transactional sanctions relief is particularly disruptive for the EU, where any one state can endanger an entire sanctions package by pushing for individual relief, since each package must be renewed unanimously every six months. On September 14, member states were forced to delay a vote on prolonging Russia-related sanctions by a week after France and Slovakia pushed at the last minute for the delisting of Uzbek-Russian billionaire Alisher Usmanov. According to media reports, Usmanov's delisting was part of an indirect deal to release a French-British businessman from an Azerbaijani prison, where he was arrested on espionage charges in 2023 and sentenced in March 2026 to 10 years.
Hungary and Slovakia reportedly pushed for Usmanov's delisting earlier in 2026, with Turkish President Recep Tayyip Erdogan also urging the EU to delist him due to “Usmanov’s sincere efforts to fully cooperate with the EU institutions, as well as taking into account humanitarian considerations.”
While debates over sanctions targets are an expected part of the EU's rolling sanctions campaign against Russia, explicitly tying Usmanov's delisting to a prisoner release is unprecedented for the EU. Ukraine, alongside several unnamed EU diplomats, criticized France for pushing for the delisting at the last minute. If member states do not unanimously approve the sanctions for another six-month extension, the approximately 3,000 designations on individuals and entities will automatically expire. France risks straining EU cohesion by exploiting this leverage to obtain a prisoner release. Russia could also exploit these “political delisting” debates by offering individualized delisting deals to a few EU member states every time sanctions are up for renewal, forcing the EU to go through last-minute internal negotiations every six months.
Implications for Businesses
For businesses, an increase in the use of transactional sanctions-relief deals could open up new opportunities for foreign dealmaking with newly unsanctioned companies. However, it also introduces more uncertainty into how sanctions policies are implemented and coordinated between the US, EU, and other allies. Especially under the current administration, the US is prioritizing a realpolitik approach to sanctions delistings that further national security goals, such as rapprochement with Belarus amid declining Russian influence. France also cherishes its strategic autonomy, especially in the context of the generally more multilateral EU. Both countries’ strategies split from the rhetoric of other EU member states, where norms are institutionalized within sanctions policy. Large-scale sanctions relief deals could make US-EU sanctions regimes inconsistent, and EU member state haggling, such as in the case of France, could increasingly force greater malleability in the EU’s regime. Calls to reform the EU sanctions process, such as to qualified majority instead of unanimity or decreasing the frequency of rollovers, may increase.
Businesses also face increased regulatory volatility. Companies may be less able to predict whether a sanctions designation will remain in place as delistings become bargaining chips in diplomatic negotiations. This could complicate long-term investment decisions, particularly in sectors where sanctions compliance is a significant factor in decision-making.
US Developments
The Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 Becomes Law
On September 16, the US House of Representatives passed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 by a vote of 262 to 159, and President Donald Trump signed the bill into law on September 18. Originally introduced in April 2025, the Act gained momentum after the President signaled support in November 2025, conditioned on new tariff authorities and flexibility over the imposition of sanctions. Absent a presidential waiver, the Act imposes sanctions on various persons and entities, including Russian officials, certain Russian financial institutions, and Russia’s “shadow fleet” vessels.
The Act also authorizes sanctions on persons who knowingly sell, lease, provide, or facilitate the provision of goods or services relating to Russia’s defense industrial base, including computer numerical control (“CNC”) tools, lubricant additives, specialty chemicals, chemical coatings, military-grade fiber optics, advanced sensors, items on the Bureau of Industry and Security’s (“BIS”) Common High Priority Items List, and any other products designated by US authorities as critical to Russia’s defense industrial base.
Additionally, the Act authorizes the President to impose tariffs of up to 100 percent on the largest purchasers of Russian oil and natural gas, as well as countries facilitating Russian oil sanctions evasion. The law is expected to have the most impact on China and India, which are reportedly the largest purchasers of Russian crude oil. China’s Commerce Ministry voiced its opposition to the new sanctions. President Trump is scheduled to meet with President Xi Jinping at the White House on September 24. Trade and national security issues are expected to take center stage at the meeting.
OFAC Targets Digital Asset Exchange in Operation Economic Outcast
On September 17, OFAC designated BitBank, Pishtaz Simorgh Electronic Trade Company (“Pishtaz Simorgh”), and three individuals as part of Operation Economic Outcast. According to OFAC, BitBank is a digital asset exchange controlled by OFAC-designated Iranian financier Babak Zanjani. OFAC further identified Pishtaz Simorgh as the developer of BitBank’s digital assets software. The designated individuals and entities were described as key components of Iran’s digital assets-based sanctions evasion infrastructure. OFAC previously designated multiple digital assets entities and individuals allegedly linked to Zanjani on January 30 and July 24. We previously reported on Operation Economic Outcast in a recent blog post.
State Department Sanctions Cuba’s Nickel Sector and Military R&D Apparatus
On September 17, the State Department sanctioned 11 Cuban targets, including four state-owned enterprises in the nickel mining industry, four military research and development enterprises, and three military officials. These actions were pursuant to E.O. 14404, “Imposing Sanctions on Those Responsible for Repression in Cuba and for Threats to United States National Security and Foreign Policy.” These sanctions follow recent Cuba designations by the State Department on September 3, which included Empresa Importadora y Abastecedora del Níquel, a state-owned nickel industry support services company.
OFAC Removes Ethiopia-related Designations After Expiration of Emergency with Respect to the Situation in Ethiopia
On September 18, the national emergency declared in E.O. 14046 of September 17, 2021, “Imposing Sanctions on Certain Persons with Respect to the Humanitarian and Human Rights Crisis in Ethiopia,” expired. Following the expiration of the national emergency, OFAC removed 11 Ethiopia-related designations. The designated parties had originally been identified in connection with alleged violence and human rights abuses in Ethiopia and the Horn of Africa region.
Alongside the expiration of the E.O. 14046, OFAC has deleted all Frequently Asked Questions (“FAQs”) related to the program from its website.
OFAC Amends General License for Transactions Involving Petróleos de Venezuela, S.A.
On September 14, OFAC issued Venezuela-related General License (“GL”) 52C, “Authorizing Certain Transactions Involving Petróleos de Venezuela, S.A.,” which replaces and supersedes GL 52B. In general, GL 52C authorizes transactions otherwise prohibited by E.O. 13884 or E.O. 13850 involving Venezuela’s state-owned oil company, Petróleos de Venezuela, S.A. (“PdVSA”), or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest (the “PdVSA Entities”), by an established US entity, subject to certain restrictions. We examined the initial version of the GL in detail in our March 23 update.
The amended GL authorizes transactions ordinarily incident and necessary to the execution and signing of contracts, agreements, and other transaction documents by certain individuals blocked under the Venezuela Sanctions Regulations acting in their official capacities on behalf of PdVSA or PdVSA Entities to effectuate a transaction authorized under the GL.
In addition, the amended GL excludes from the scope of the GL “[a]ny transaction to affect or alter the governance of PDV Holding, Inc., Citgo Holding, Inc., or CITGO Petroleum Corporation.” The amendment comes as the current supervision of Citgo is reportedly set to step down and pave the way for Venezuelan Interim President Delcy Rodriguez’s government to play a greater role.
Relatedly, OFAC also extended the delay of the PdVSA bond-related authorization. On September 14, OFAC issued GL 5Z, which authorizes certain transactions related to, the provision of financing for, and other dealings in the PdVSA 2020 8.5% Bond that are otherwise prohibited by E.O. 13835, as amended, on or after November 5, 2026. GL 5Z is the most recent extension in a long-running delay in the effective date of GL 5’s authorization.
OFAC Extends General License Related to Lukoil
On September 18, OFAC issued Russia-related GL 131J, “Authorizing Certain Transactions for the Negotiation of and Entry into Contingent Contracts for the Sale of Lukoil International GmbH and Related Maintenance Activities.” Broadly, GL 131 authorizes certain transactions related to the negotiation of and entry into contracts with PJSC Lukoil or any of its affiliates for the sale, disposition, or transfer of Lukoil International GmbH or any of its majority-owned entities, subject to certain restrictions. The license replaces and supersedes GL 131I, extending the authorization period from September 19, 2026, to October 22, 2026. We previously covered the earlier versions of GL 131 on November 17, 2025, May 4, 2026, June 1, 2026, and June 29, 2026.
UK Developments
House of Commons Library Publishes Briefing on Proposed UK West Bank Sanctions
The House of Commons Library has published a research briefing providing further detail on the UK Government’s proposed sanctions measures targeting Israeli settlements in the occupied West Bank, announced on September 8, 2026. The proposed new regime will prohibit imports of goods from settlements in the Occupied Palestinian Territories and restrict services supporting settlement expansion, including construction, infrastructure, financing and real estate services, subject to religious exemptions. Significantly, the import prohibition is expected to operate geographically rather than by reference to designated persons, with importers required to demonstrate through postcode declarations that goods do not originate from settlements. HMRC, OTSI and OFSI will monitor compliance, and the UK Government expects the necessary legislation to be introduced within six to nine months. Separately, amendments to the Global Human Rights sanctions regime are expected within weeks to facilitate faster action against settlement expansion, while the Government has also stated that it will refuse applications for arms and other export licences where the exports would materially contribute to the occupation.
OFSI Clarifies Asset Freeze Exception for Interest and Earnings on Frozen Accounts
OFSI has published FAQ 203 clarifying the scope of the asset-freeze exception permitting relevant institutions to credit frozen accounts with interest or other earnings. OFSI explains that regulation 58(3) of the Russia Regulations, and equivalent provisions under other sanctions regimes, only permits interest or other earnings to be credited to the same frozen account on which they accrued. The exception therefore does not permit a relevant institution to transfer those amounts to a separate frozen account held for the same designated person, including where that separate account has been nominated to receive the interest or earnings. Relevant institutions should consider whether an OFSI licence is required before making such payments. The clarification is intended to promote consistent application of the asset-freeze framework and reduce the risk of circumvention, and firms should ensure that their processes for administering frozen accounts distinguish between permitted credits to the originating account and transfers requiring separate licensing.
EU Developments
EU Member States Delay Renewal of Russia Asset Freeze Sanctions Regime
Following a failure to reach unanimous agreement on the renewal of the EU's Russia asset freeze sanctions regime, EU ambassadors in Coreper agreed to postpone the expiry of the measures by seven days, until September 22. The temporary extension is intended to provide additional time for Member States to consider proposals concerning the regime's renewal, which requires the unanimous approval of all 27 Member States. The restrictive measures apply to over 3,000 individuals and entities and were initially due to expire on September 15.
The delay follows disagreements among Member States regarding the continued designation of certain listed individuals, as reported in our September 14 Sanctions Update. In particular, Slovakia has sought changes to the sanctions list as a condition for supporting the renewal, while France has reportedly called for the delisting of Russian businessman Alisher Usmanov.
Discussions are expected to continue ahead of the revised expiry date of September 22.
European Commission Updates the EU Dual-Use Export Control List
On September 14, the European Commission adopted a Delegated Regulation updating the EU dual-use export control list set out in Annex I to Regulation (EU) 2021/821. The update incorporates amendments agreed by participating states in 2025 under the Australia Group, the Nuclear Suppliers Group and the Wassenaar Arrangement. It also reflects additional commitments accepted by all EU Member States within the framework of the Wassenaar Arrangement to subject further items to export controls.
The updated EU export control list provides for the addition of new dual-use items, including semiconductor manufacturing and testing equipment and materials, advanced computing integrated circuits and electronic assemblies, ceramic matrix composites reinforced with mullite, rotary encoders based on inductive sensing technology, additive manufacturing equipment for energetic materials, chemical vapor deposition equipment used to produce silicon carbide fibers, and technology for the development of axial compressors of gas turbine engines. The amendments also modify specific control parameters and update certain technical definitions and descriptions.
The Delegated Regulation has been transmitted to the European Parliament and the EU Council for scrutiny. If neither of the co-legislators objects to the Delegated Regulation within the two-month scrutiny period, the Delegated Regulation will be published in the EU Official Journal and enter into force following the publication.
EU Council Amends Sanctions Listings Targeting ISIL (Da’esh) and Al-Qaeda
The EU Council recently amended the entries of two individuals designated under the autonomous restrictive measures regime targeting ISIL (Da’esh) and Al-Qaeda, following an update at the UN level. Changes to Council Regulation (EC) 881/2002 reflect the September 4 decision of the UN Security Council Sanctions Committee to update the identifying information of Sanaullah Ghafari, leader of the Islamic State in Iraq and the Levant-Khorasan (ISIL‑K), and Abubakar Swalleh, an ISIL facilitator.
General Court Judgment Upholds the Designation of Polina Gagarina under EU Russia Asset Freeze Sanctions and Annuls 2025 Sanctions Relistings
The General Court of the European Union delivered its judgment in Case T‑460/24 concerning an action brought by the Russian singer Polina Gagarina seeking annulment of the 2024 and 2025 Council acts that included and maintained her name on the EU Russia asset freeze sanctions list.
The Court upheld the initial June 2024 listing and the September 2024 renewal of Ms. Gagarina’s designation. It held that the Council had established, to the requisite legal standard, that Ms. Gagarina satisfied the criterion set out in Article 3(1)(a) of Council Regulation (EU) 269/2014, which targets individuals supporting actions or policies which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine. The Court found that Ms. Gagarina had regularly participated in State propaganda events that legitimized Russia’s war of aggression against Ukraine and celebrated the illegal annexation of Ukrainian territory.
At the same time, the Court annulled the March 2025 and September 2025 renewals of Ms. Gagarina’s listing. The Court found that the Council had not provided sufficiently specific, precise and consistent evidence to establish that Ms. Gagarina continued to satisfy the Article 3(1)(a) criterion at the time of the 2025 renewals.
Asia-Pacific Developments
Russia Warns Japan’s Military Expansion and Sanctions Stance Threaten Bilateral Ties
On September 16, 2026, Russia’s Foreign Ministry reportedly said Deputy Foreign Minister Andrey Rudenko told Japanese Ambassador Akira Muto that Tokyo’s expanding military cooperation with the United States and other Western partners, including the deployment of medium-range missiles, threatens Russian national security and stability in Northeast Asia. Moscow said it could take compensatory defense measures if these activities continue. Russian officials also linked the security dispute to Japan’s sanctions and support for Ukraine. Kremlin spokesperson Dmitry Peskov described Tokyo’s position as “extremely unfriendly,” saying its participation in anti-Russia sanctions limits prospects for “reciprocal concessions.” Since Japan joined Western sanctions in 2022, Russia has suspended peace-treaty talks, ended visa-free island visits and withdrawn from discussions on joint economic activities.
China and Russia Veto Renewal of UN Iran Sanctions Monitoring Panel
On September 17, 2026, China and Russia vetoed a proposed extension of the UN Iran sanctions-monitoring panel, arguing that the “snapback” mechanism was never validly invoked and that Resolution 2231 (2015) expired on October 18, 2025, ending the Council’s consideration of Iran’s nuclear file. Russia said Berlin, London, and Paris lacked the right and justification to restore sanctions, while China urged equal-footing negotiations, safeguards by the International Atomic Energy Agency and a diplomatic settlement. The US-sponsored resolution received 11 votes in favor, with Pakistan and Somalia abstaining, but failed because of the two permanent-member vetoes. The United States, European members and several other Council members maintain that sanctions were reimposed in September 2025 and warn that the failure to renew the Panel of Experts creates an independent-monitoring gap that could weaken enforcement and obscure sanctions evasion.
India and China Signal Resistance to US Sanctioning Russia and Iran Act of 2026
India and China separately responded to the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026. On September 17, 2026, India reportedly said it would protect its trade and economic interests while safeguarding energy security through diversified supplies, as its status as Russia’s largest buyer of seaborne crude could expose it to potential US tariffs. On September 19, 2026, China rejected unilateral sanctions lacking UN authorization or an international-law basis, opposed secondary measures against third countries and reserved the right to take necessary action to protect its sovereignty, development interests and companies. Both governments called for dialogue and stable trade relations, while Beijing also emphasized the security of global industrial and supply chains.
Australia Declines to Join UK-Led Trade Sanctions Initiative against West Bank Settlements
Australia reportedly opted not to join a UK-led statement by 12 governments considering or committing to restrictions on trade with Israeli businesses in West Bank settlements, despite having participated in related diplomatic discussions. Australia’s Department of Foreign Affairs and Trade said, “blanket import bans present practical challenges, including how to ensure they do not inadvertently harm Palestinian businesses, workers and livelihoods.” Australia said it is instead “pursuing further targeted measures, in coordination with international partners, to deter illegal settlements and settler violence.” Australia previously joined the UK, Canada, France, and Norway in June in coordinated sanctions against Israeli networks accused of “financing, enabling and carrying out violence in the Israeli-occupied West Bank.”
