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 expertise of Steptoe's industry-leading ITRC 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: EU Proposes Russia Sanctions Including Aluminum on Third Anniversary of Invasion
The European Commission proposed a new package of sanctions against Russia including a ban on Russian primary aluminum imports, measures to crack down on circumvention of the G7's Russian oil price cap, and a restriction of sales of video game consoles to Russia. The proposed package, which has not yet been finalized, is to take effect on the third anniversary of Russia's further invasion of Ukraine, would include aluminum alloys and have a one-year phase-in period, the proposal said, with "necessary" imports of 275,000 metric tons exempt for this period. The proposal also adds 50 new entities and individuals, reportedly including some Russian banks, and about 75 ships, mainly energy tankers.
The ban, like other sanctions on Russia, is intended to limit Russia's ability to fund its war on Ukraine. Aluminum exports to the EU garnered Russia an estimated €2.3 billion in 2022, although that number has declined. The EU relies on Russia, the world's second-largest aluminum producer after China, for some 6-9% of its aluminum imports. Aluminum had been a potentiall target for EU sanctions for months, with European aluminum producers pressing the bloc last February to restrict the cheap imports. EU diplomats initially resisted a full ban over concerns that it would face pushback from industrial nations, like Italy, for driving up prices. FACE, an EU group of industrial consumers, called the restriction "a kind of economic tactical nuclear bomb" last year.
The console restriction – which also includes entertainment tools like flight simulators and joysticks – is due to the fact that they could be used as controllers for drones. Last week, the EU's foreign policy chief told media that Russia was "really being creative" in finding alternative military equipment.
Notably, the sanctions package will exclude limits on Russian LNG, which some member states had called for. The EU has spent the last three years trying to limit its dependence on Russian energy, but LNG has been hard to kick: while Russia has ceded its place as the first-largest supplier of the EU's LNG to Norway, Russian exports to the EU grew 21% year over year in 2024. The EU banned transshipments of Russian LNG last June, resulting in more Russian LNG staying in Europe. Following the decision to omit LNG from this sanctions package, EU diplomats indicated that they remain on the table, but that the move will not be made without first securing alternatives, likely largely from the US.
The sanctions come as Europe grapples with how to adapt its broader Russia strategy amid shifting policy priorities in Washington, where President Trump has signaled a shift from unconditional support for Ukrainian security to conflict resolution. While the aluminum ban in particular has been long in the making, the step signals the EU's continued commitment to isolating Russia economically via sanctions as the US configures its future approach.
US Developments
Trump Uses Sanctions Authority to Impose Tariffs on Canada, Mexico, and China
President Trump signed multiple executive orders (EO) imposing 25% tariffs on most goods from Canada and Mexico and an additional 10% tariff on goods from China. The order also eliminated an exemption for small quantities of Canadian goods known as the de minimis exemption. In an unprecedent move, the tariffs were imposed pursuant to a statue known as the International Emergency Economic Powers Act (IEEPA), which is the primary statute that underpins numerous US sanctions programs and similar national security-related regulatory regimes. The statute provides the president with broad authority to regulate international commerce after determining there is a national emergency pursuant to the National Emergencies Act (NEA).
While the statute is used regularly to impose sanctions-related trade restrictions, this marks the first time the statute has been used to impose tariffs. While the statutory language grants the President broad discretion, there is a high likelihood that its use in this context will face legal challenges.
Enforcement of the EOs was assigned to the Secretary of Homeland Security, indicating their implementation and enforcement would likely be similar to other tariff measures. IEEPA-related restrictions are generally assigned to the Department of the Treasury or the Department of Commerce for administration and enforcement purposes.
The President cited concerns including the flow of migrants and fentanyl as the principal motivation for imposing the tariffs against all three countries. The steps Canada and Mexico would need to take for the tariffs to be lifted remain undefined.
US to Impose Tariffs on Semiconductors, Chips, and Pharmaceuticals
In a speech to House Republicans, President Trump committed to placing tariffs on foreign-made semiconductors, computer chips, and pharmaceuticals. He also stated that the United States would apply tariffs to "steel, aluminum and copper" and items the US needs for its military.
While these tariffs have yet to be implemented, the President's remarks indicate that he intends on wielding trade restrictions to incentivize manufacturers of critical technologies and other products to move their operations to the US.
Neither Trump nor any member of his administration has publicly stated an effective date for these tariffs, which follow the broad country-based tariffs, discussed above. It is unclear what statutory authority the President will leverage to impose these tariffs, but it is possible he will do so under IEEPA, meaning the measures could be subject to legal challenge, as noted above.
Bessent Sworn in as Secretary of the Treasury
The Senate voted to confirm Scott Bessent as the next Secretary of the Treasury by a vote of 68 to 29. Bessent was sworn in by Supreme Court Justice Brett Kavanaugh the following day.
In his new role, Secretary Bessent will oversee the Office of Foreign Assets Control (OFAC), which is the office with primary responsibility for implementing and enforcing US sanctions, and the Financial Crimes Enforcement Network (FinCEN), which is the country's primary anti-money laundering regulator.
As covered in our January 22, 2025 installment of the Sanctions Update, Bessent's stance on sanctions was not previously well-known. However, during his Senate confirmation hearing, Bessent noted that he would support more comprehensive sanctions on both Russia and Iran's energy sectors, particularly if the US increases its own energy production.
Democrats Block ICC Sanctions Legislation
A bill that would require the President to impose visa and property-blocking sanctions against foreign persons who assist the International Criminal Court (ICC) in investigating, arresting, detaining, or prosecuting certain individuals failed to pass the de facto 60-vote minimum in the Senate. The legislation, the Illegitimate Court Counteraction Act (H.R. 23), easily passed the House (243-140), but only received 54 votes in the Senate, mostly along party lines with only one Democrat voting in favor of advancing the bill.
A joint statement issued by ten Democratic Senators cited the bill's "overly broad language" as the main reason for opposition. While the Senators expressed concern over the ICC's apparent "targeting" of Israel and its leaders, they asserted that the legislation would, in its current form, put US allies and private companies in the crosshairs of what should be a more targeted action.
It remains to be seen whether Republicans will enter into negotiations over the bill's language. However, the President does not need Congress to impose sanctions on the ICC, which could be done under IEEPA and was done by Trump in his first term. Therefore, such sanctions are possible, or perhaps likely, even without Congressional action.
Lawmakers Reintroduce a Series of Sanctions-related Bills
Lawmakers have begun reintroducing a number of sanctions and similar bills that were introduced last Congress but not passed. These bills include:
- Reps. Young Kim (R-CA) and Jim McGovern (D-MA) reintroduced the Hong Kong Sanctions Act (H.R. 773), which would require the President to undertake a review of whether certain Hong Kong officials allegedly responsible for ongoing human rights violations should be sanctioned under existing US sanctions authorities.
- Senate Minority Whip Dick Durbin (D-IL) reintroduced the Halt All United States Investments in Venezuela's Energy Sector Act of 2025 (S. 261). The bill would prohibit any petroleum-related transaction in the energy sector of Venezuela allowed under (i) the Barbados Agreement, (ii) a license issued after the Barbados Agreement related to petroleum-related transactions with Venezuela, and (iii) any transaction allowed under OFAC's Venezuela General Licenses (GL) No. 41 and 8M until the regime of Nicolas Maduro recognizes Edmundo Gonzalez as the winner of the July 28, 2024 Venezuelan presidential election and relinquishes power. A companion bill (H.R. 328) was reintroduced in the House by Rep. Debbie Wasserman Schultz (D-FL) earlier in January 2025.
- Rep. Andy Barr (R-KY) announced the reintroduction of the Stop Chinese Fentanyl Act, which would, among other things, amend the existing Fentanyl Sanctions Act (H.R. 747) by authorizing sanctions on Chinese persons involved in the production, sale, financing, or transportation of synthetic opioids or their precursor chemicals. The bill would also enable the US to designate any entity that fails to cooperate with US counternarcotic efforts, or that otherwise neglects to implement sufficient "know-your-customer" ("KYC") procedures as a "foreign opioid trafficker." The text of the bill is not yet public, so it is unclear how "failure to cooperate" will be defined under the legislation.
In Response to DeepSeek, China Committee Calls for Stricter Export Controls
DeepSeek, a Chinese AI company, surprised markets and policymakers this week with its announcement that its most recent model performs similarly to US AI leaders without the use of cutting-edge semiconductors and considerably less computing power used in training. Rep. John Moolenaar (R-MI) and Rep. Raja Krishnamoorthi (D-IL), the Chair and Ranking Member of the House Select Committee on the Chinese Communist Party, respectively, issued a statement urging National Security Advisor Mike Waltz to consider stricter export controls on the semiconductor chips utilized by DeepSeek, including restrictions on shipments of those chips to third countries that pose a high risk of diversion to China. The statement follows Rep. Moolenaar's earlier comments on the America First Trade Policy and the need for the Trump administration to prioritize export controls in its China policy, which we covered in our January 27, 2025 installment of the Sanctions Update.
Rep. Moolenaar's call for greater export controls comes weeks after the Biden administration implemented strengthened controls on AI chips under its "AI Diffusion" rule. While Congress and the Trump administration may continue to pursue stronger export controls, DeepSeek's announcement has raised questions about the effectiveness of US export controls.
EU Developments
EU Extends Sanctions on Russia AfterHungary's U-Turn Following Trump's Threats
After initial doubts about Hungary's veto powers to lift all restrictions on Moscow, the European Council decisively renewed the EU's restrictive measures against Russia on 27 January, extending them for another six months, until 31 July 2025. The exact reasons as to why Hungarian Prime Minister Orbán backed down from his threats to exercise his veto powers are subject to speculation. As Orbán awaited a shift in US policy following Trump's inauguration, a stern warning from US President Trump apparently played a role in his decision not to veto the renewal of sanctions. President Trump threatened to impose "high levels of taxes, tariffs, and sanctions on anything being sold by Russia to the United States, and various other participating countries."
EU Proposes New Tariffs on Russian and Belarusian Fertilizers
Besides the new proposed sanctions measures, the European Commission has proposed new tariffs on agricultural products and nitrogen-based fertilizers from Russia and Belarus. This move aims to reduce EU dependency on these imports and support domestic production. If approved, the tariffs would extend to all Russian agricultural imports, impacting 15% of imports that were not previously subject to increased tariffs in 2023. The proposal is designed to secure EU food security, diversify supply sources, and reduce Russian export revenues. Russian exports to third countries will remain unaffected to ensure global food security. The proposal now awaits approval from the European Parliament and the Council.Unlike decisions on sanctions, decisions on tariffs do not require unanimity in the European Council, making it easier to pass such measures without the need to navigate a potential Hungarian veto.
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