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The Lede: US Sanctions Iranian Oil Exports as it Floats New Nuclear Deal
On Thursday, the US announced new sanctions on individuals, entities, and tankers allegedly involved in shipping Iranian crude oil to China as part of Iran's network of strategies to evade US sanctions. These were the first US sanctions on Iranian oil under the new Trump administration, following a pledge last week to bring Tehran's crude oil revenues to zero. The sanctions, undertaken pursuant to the counterterrorism authority Executive Order (E.O.) 13224, as amended by E.O. 13886, and E.O. 13902, target individuals and companies in China, India, the UAE and other countries that shipped oil on behalf of Sepehr Energy, allegedly a front company for the Iranian Armed Forces.
Like former US sanctions on Iran and its oil export network, this set of restrictions is intended to reduce Tehran's ability to profit from its crude oil exports, denying Tehran the revenues to fund its regional proxy network and nuclear enrichment program. Despite significant sanctions, Iranian oil exports reached $35.8 billion in 2024 (according to Iranian news agencies). Without oil exports, Iran would have registered a $16.8 billion trade deficit, per Tehran. Iran has achieved this level of profitability largely via sales to China, which has increasingly taken advantage of cheap prices for oil that Iran struggles to export – in 2023, some 90% of Iranian oil ended up in China. Implementing and enforcing sanctions to prevent the sale of Iranian crude to China has historically been a struggle, as the US lacks complete knowledge of Iran's “shadow fleet,” and much of the Iranian oil shipped to China is either concealed in customs data or purchased by small so-called “teapot” refineries with limited exposure to the international financial system. Cracking down on Iranian oil exports risks provoking Chinese ire – a delicate proposition as the Trump Administration shapes its Asia policy.
Its regional proxy network much reduced by a multifront conflict with Israel, Iran is set to increasingly rely on developing its nuclear program to establish the regional influence and deterrence its proxies once provided. US intelligence gathered at the end of the Biden administration found that Iran was seriously exploring faster, cruder routes to develop a nuclear weapon out of its existing stock of highly enriched uranium, although the intelligence assessment at the time concluded that Tehran had not made a final decision on whether to seek the bomb.
Despite these sanctions – and an earlier presidential memorandum in which Trump promised to reimpose “maximum pressure” on Tehran – the White House has also made surprising overtures to Iran, calling on Wednesday to negotiate a “verified nuclear peace agreement” with the country to avoid a military clash. The announcement comes after weeks of hints from Tehran that it would be open to negotiations, likely in a bid to rescue its economy, the long downward spiral of which has fomented significant anti-regime sentiment in recent years. Taken in this context, these sanctions, and Trump's promise to return to maximum pressure, could be read in a similar way as promised sanctions against Mexico and Canada: as the opening foray in a negotiation. However, skepticism is justified: Trump's openness to an Iran deal stands in opposition to his historically hawkish Iran policy – in his first term, he withdrew the US from the Obama-negotiated Iran nuclear deal. Further, the mood from Israel will also be key in the US' next steps. President Trump has aligned himself strongly with Israeli Prime Minister Netanyahu, whose conservative government members have increasingly called for Israel to make good on a longstanding potential plan to decimate Iran's nuclear program with bunker breaker bombs from the US.
US Developments
Trump Pauses Tariffs on Mexico, Canada, But Pushes Ahead with China, Steel, and Aluminum
In the midst of steep declines on Wall Street, President Trump temporarily halted the implementation of 25 percent tariffs against Mexico and Canada after Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau agreed to bolster border security. The tariff moratoriums are set to expire on March 4, 2025 if not extended by President Trump.
However, China and the US did not reach a similar interim agreement. Chinese goods are now subject to additional tariffs on top of levies that were already applied to select goods. As part of the executive order (EO) authorizing the tariffs, all goods subject to the 10 percent ad valorem tax were also supposed to be ineligible to receive or benefit from the administrative exemption from duty and certain taxes commonly known as the “de minimis” exemption. However, Trump later announced that the de minimis exemption would hold until “adequate systems are in place to fully and expediently process and collect tariff revenue,” granting companies that benefit from the exemption temporary relief.
China responded to the US's tariff announcement with its own set of trade restrictions, which includes a 15 percent tariff on US coal and liquified natural gas and a 10 percent tariff on other goods ranging from crude oil to certain machinery. China also imposed additional export controls on critical minerals such as tungsten, tellurium, bismuth, molybdenum, and indium, and noted that it would dispute the US's tariffs at the World Trade Organization (WTO).
On Sunday, it was reported that Trump was poised to announce plans to impose 25 percent tariffs on steel and aluminum imports into the United States. Both Canada and Mexico are among the top steel suppliers to the United States, and Canada is the top importer of aluminum. President Trump also promised to announce reciprocal tariffs on countries who charge tariffs on US imports. That announcement is expected to come later this week.
As noted in last week's update, these tariffs are being implemented under the International Emergency Economic Powers Act (IEEPA) and is the first time tariffs have been imposed pursuant to that statutory authority. Therefore, the tariffs are expected to face various legal challenges arguing they exceed the bounds of IEEPA's statutory authority.
Trump Reinstates “Maximum Pressure” Against Iran
After meeting with Israeli Prime Minister Benjamin Netanyahu, President Trump signed a National Security Presidential Memorandum (NSPM-2) restoring his “maximum pressure” campaign on Iran. The NSPM-2 cites the Iranian regime's funding of terrorist proxies in the Middle East and rapidly improving nuclear capabilities, among other things, as grave threats to the safety and security of the US. In order to address these threats, NSPM-2 outlines a series of policy stances and actions that the US will adopt, which includes, among other things:
- Mandating that the Secretary of the Treasury:
- immediately impose sanctions on all persons for which they have evidence of violating one or more Iran-related sanctions;
- implement a robust and continual sanctions enforcement campaign that denies Iran and its proxies access to revenue;
- review for modification or rescission any general license (GL), frequently asked question (FAQ), or other guidance that provides Iran or its proxies economic or financial relief;
- issue updated guidance to all relevant business sectors about the risks to any person that knowingly violates the US's Iran sanctions regime; and
- maintain countermeasures against Iran at the Financial Action Task Force (FATF) and evaluate beneficial ownership thresholds and financial institutions' (FIs) “Know Your Customer's Customer” (KYCC) policies to prevent sanctions evasion.
- Mandating that the Secretary of State:
- modify or rescind certain sanctions waivers;
- implement a robust and continual campaign to drive Iran's oil exports to zero, including the export of Iranian crude oil to China; and
- take immediate steps to ensure that the Iraqi financial system is not utilized by Iran for sanctions evasion or circumvention, and that states in the Persian Gulf are not used as sanctions evasion transshipment points.
Trump was expected to resume a maximum pressure campaign against Iran. Iranian President Masoud Pezeshkian has repeatedly claimed that he wants to engage more with the West. One day after issuing NSPM-2, Trump called on Iran to reach a “verified nuclear peace agreement.” Iran responded by denouncing the “maximum pressure” policy, but also by signaling a willingness to negotiate on its nuclear program.
OFAC's First Sanctions Target Under New Administration Is the Iran-China Oil Trade
OFAC issued its first sanctions designations of the second Trump administration on the heels of Trump's issuance of NSPM-2. OFAC designated 16 persons based in China, India, Iran, Hong Kong, and the UAE allegedly involved in an international network that facilitates the shipment of millions of barrels of Iranian crude oil to China. OFAC alleges that the oil was shipped on behalf of Iran's Armed Forces General Staff and its front company Sepehr Energy Jahan Nama Pars. Like the Biden administration, the Trump administration appears poised to target revenue generating activities that support Iran's nuclear program, its ballistic missile and drone programs, and the funding of its regional proxies. Treasury Secretary Scott Bessent stated that the US is committed to “aggressively targeting any attempt by Iran to secure funding for these malign activities.”
The designations were made pursuant to the counterterrorism sanctions authorities under Executive Orders (EO) 13224 and 13886 and the Iranian sanctions authorities under EO 13902. The designations are also reflective of the strategy set forth in NSPM-2, particularly the mandate for the government to “implement a robust and continual campaign . . . to drive Iran's export of oil to zero, including the export of Iranian crude to [China.]” China continues to receive the vast majority of Iran's oil exports. Relatedly, in a letter to Secretary of State Marco Rubio, Republican Senators asked the Trump administration to identify and sanction persons involved in the alleged transfer of missile propellants from Iran to China. Given these developments, the Trump administration and its allies in Congress appear poised to continue to target Iran's trade relationship with China.
Lawmaker Urges Treasury Secretary to Strengthen Russia Sanctions Program
The Ranking Member of the House Foreign Affairs Committee, Rep. Gregory Meeks (D-NY), called on Treasury Secretary Scott Bessent to continue the Biden administration's Russian sanctions policies. Notably, Meeks warned Bessent against removing certain existing sanctions, such as those imposed under programs covered by the Countering America's Adversaries Through Sanctions Act (or CAATSA) or the 21stCentury Peace Through Strength Act. Meeks stated that, if Bessent were to attempt to lift such sanctions designations made pursuant to CAATSA, he would not hesitate to introduce legislation giving Congress the chance to overturn the decision.
Meeks has emerged as a strong advocate in the Congress for continued sanctions on Russia. As covered in our January 27, 2025 installment of the Sanctions Update, Meeks has also reintroduced two Russia-related sanctions bills: the No Russian Tunnel to Crimea Act ( H.R. 476), which requires the President to impose sanctions on any foreign person who knowingly participates in the construction, maintenance, or repair of tunnels or bridges connecting Russia to Crimea; and the Sanction Russian Nuclear Safety Violators Act of 2025 ( H.R. 475), which requires the President to impose sanctions on persons who endanger the Zaporizhzhia Nuclear Power Plant.
It remains to be seen how the Trump administration will use sanctions in negotiations with Russia to resolve the war in Ukraine. Talks are reportedly ongoing, and while both Trump and Bessent have indicated a willingness to pressure Russia, including via sanctions, sanctions relief may be on the table for a deal on Ukraine. Trump is reportedly expected to present a plan to end the war at the Munich Security Conference in Germany taking place later this week.
New US Attorney General Disbands DOJ's “KleptoCapture” Task Force
In a memorandum sent to Department of Justice (DOJ) employees, newly confirmed Attorney General Pam Bondi announced that she will be disbanding the Task Force KleptoCapture, the Kleptocracy Team, and the Kleptocracy Asset Recovery Initiative. The DOJ, the memorandum continued, will shift its focus to eliminating criminal operations of cartels and transnational criminal organizations (TCOs). The policy shift follows Trump's issuance of a January 20, 2025 EO targeting cartels and TCOs and the imposition of tariffs on China on the basis of fentanyl trafficking into the US.
The Biden administration announced the launch of Task Force KleptoCapture in March 2022 to enforce sanctions, export controls, and other restrictions imposed against Russia in response to its invasion of Ukraine. Before its disbandment, the Task Force had charged more than 100 individuals and corporate entities and seized, restrained, or obtained forfeiture orders against nearly $650 million in assets. The dissolution of the Task Force suggests that the Trump administration may be nearing a significant departure from the Biden administration's approach to Russia.
Senate Banking Committee Members Introduce Repatriation-focused Sanctions Bill
The Chairman of the Senate Banking, Housing, and Urban Affairs Committee, Sen. Tim Scott (R-SC), alongside fellow Committee member and first-year Sen. Bernie Moreno (R-OH), recently introduced the Stifling Transnational Operations and Proliferators by Mitigating Activities that Drive Narcotics, Exploitation, and Smuggling Sanctions Act (or the STOP MADNESS Act).
The STOP MADNESS Act ( S. 363) authorizes the President to impose sanctions, including blocking sanctions under IEEPA, on any foreign government the President determines knowingly refuses or obstructs the efforts of the US to repatriate its citizens who have unlawfully entered the US, or on any foreign government or foreign person the President determines knowingly facilitates unlawful immigration into the US. The bill does not define obstruction or facilitation.
The introduction of the STOP MADNESS Act follows the recent dispute between Trump and Colombian President Gustavo Petro over Petro's refusal to accept two deportation flights operated by the US military. (We covered the threat of sanctions and visa restrictions against Colombian officials in our January 27, 2025 installment of the Sanctions Update.) If enacted, the bill would provide Trump with even greater negotiating leverage over a key aspect of his immigration agenda.
It would also likely be possible for President Trump to impose similar sanctions without action from Congress, relying on existing statutory authorities, including IEEPA.
Senators Strengthen Calls for Stricter Export Controls on China
In a letter to President Trump's nominee for Secretary of Commerce Howard Lutnick, Senator Elizabeth Warren (D-MA), the Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, and Josh Hawley (R-MO) echoed calls from the House Select Committee on the Chinese Communist Party to strengthen export controls and close regulatory loopholes that undercut US technology leadership. (We covered the House Select Committee's remarks in our February 3, 2025 installment of the Sanctions Update.)
With strong bipartisan support from both sides of the aisle and across both Chambers of Congress, Lutnick, if confirmed, may consider more stringent export controls on certain artificial intelligence (AI) technologies or chips critical to those technologies. However, the Trump administration's broader strategy on export controls related to advanced technologies like AI remains unclear.
Trump Issues EO Sanctioning the International Criminal Court
President Trump signed an executive order (EO) imposing sanctions on the International Criminal Court (ICC) for its allegedly “illegitimate and baseless actions targeting America and [its] close ally Israel,” in reference to the ICC's investigations into, and arrest warrants issued for, Israeli Prime Minister Benjamin Netanyahu and former Israeli Defense Minister Yoav Gallant. The EO comes shortly after Trump's meeting with Netanyahu and just days after Senate Democrats stopped a bill, the Illegitimate Court Counteraction Act ( H.R. 23), that would have imposed a similar set of sanctions on the ICC.
The EO labels any effort by the ICC to investigate, arrest, detain, or prosecute certain persons as an unusual and extraordinary threat to the national security and foreign policy of the United States. Accordingly, those involved in these efforts by the ICC may be subject to property-blocking sanctions or visa restrictions. The EO is a demonstration of Trump's support for Netanyahu and a rebuke of the ICC's asserted jurisdiction. During his first term, Trump authorized sanctions against the ICC related to the ICC's investigation of US activities in Afghanistan.
EU Developments
EU Commission Issues First Report on Dual-Use Export Controls
The European Commission has released its first report on dual-use export controls, focusing on the application of the 'Dual-Use Regulation' during 2022-2023 and noting significant developments in 2024. The report highlights that authorized dual-use exports represented 2% of extra-EU exports in 2022, totaling €57.3 billion, an increase from €38.5 billion in 2021. In that year, 813 export applications were rejected. Nuclear materials made up 21% of the total value of these authorized exports, with the United States being the top destination, accounting for 24% of the export value. Additionally, there were 288 applications received by Member States for the export of cyber-surveillance items in 2022. The findings indicate a rise in both approved and denied license applications, reflecting the EU's efforts to manage sensitive exports rigorously.
European Ships Fuel Russia's Shadow Fleet
An investigation by Follow the Money and OCCRP reveals that Western shipowners have sold aging tankers worth over $6.3 billion to shell companies, which then enter Russia's "shadow fleet" to sustain its oil exports despite sanctions. Although EU regulations require sellers to ensure their ships do not circumvent sanctions and mandate reporting sales outside the bloc, these indirect sales exploit loopholes. Nearly 40% of the shadow fleet vessels originate from Western sellers, primarily Greek companies. This practice undermines efforts to limit Russia's war funding and increases the risk of maritime disasters due to the fleet's reliance on old, poorly maintained tankers.
Russia to Expand Powers for Seizing Foreign Assets
Sources report that Russia is set to increase its authority to confiscate foreign assets in retaliation for Western sanctions. A new draft bill, recently approved by the government's legislative activity commission, will allow the Russian government to seize the frozen funds of foreign companies and investors from countries that have sanctioned Russia over its actions in Ukraine. This legislation expands the scope to include all "unfriendly states." The law will enable Russian state bodies to pursue lawsuits in arbitration courts to enforce these asset seizures. This could affect type-C accounts, which contain billions of dollars from foreign investors, including major U.S. investment funds.
EU Considers Sanctions on Rwanda Amid Controversy
The EU is weighing sanctions on Rwanda, including budget cuts and suspending partnerships, due to its support for the M23 rebels in the DRC. Recently, around a hundred protesters in Brussels demanded immediate EU action against Rwanda. They called for an end to EU financial and military support and accountability for President Paul Kagame. The UN Human Rights Council will soon hold a session on the situation in the DRC, where recent violence has caused significant casualties and mass displacement. Rwanda openly supports M23, the primary armed group driving a spike in violence in the DRC's east (including the recent capture of the border city of Goma), and argues that the force is needed to repel and eliminate armed factions in the DRC that allegedly participated in Rwanda's genocide and perpetuate anti-Tutsi violence. Outside analysts, however, see Kigali's support of M23 as a significant threat to Congolese sovereignty and regional stability.
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