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
With No Progress Toward a Ukraine-Russia Ceasefire, Stakeholders Ready Additional Sanctions
The diplomatic standoff between Ukraine and Russia was on full display last week. Ukrainian President Zelenskiy arrived in Ankara prepared to discuss a ceasefire directly with Russian President Putin, with an American delegation present and ready to facilitate. Instead, Putin declined to be boxed in and once again refused to meet with his Ukrainian counterpart. Instead, Putin sent a negotiating team of subordinates to discuss terms for a peace agreement starting where talks broke off in 2022. The move was widely interpreted in Western circles as another delaying tactic, as Ukraine was certain to once again reject Russia's maximalist terms, enabling Russia to press on the battlefield.
Ukraine's European supporters have been preparing their response to this anticipated development for weeks, discussing how best to pressure President Putin to negotiate in good faith. Once again, European supporters are looking to impose additional sanctions, targeting Russia's financial and energy sectors, in addition to doubling the number of sanctioned vessels in Russia's "shadow fleet." The EU is also readying legislative proposals to completely phase out Russian gas by 2027. European stakeholders seek to coordinate with the US for maximum impact, but on that front, the picture becomes complex.
This past week, while the Ukraine-Russia diplomatic drama was playing out, President Trump made a power move by pledging to lift all US sanctions on Syria, while doubling down on sanctions against Iran. This policy change sent strong reminders to both Tehran and Moscow that Trump can rearrange the political chessboard at will, causing economic harm or extending an economic lifeline (however, President Trump's policy announcements may also outpace the scope of his authorities, as the lifting of many of the US sanctions on Syria requires an act of Congress).
In Europe as well as in the Middle East, President Trump is shaping the negotiating environment by putting himself in the center of the deal-making, commenting to the media that "[n]othing's going to happen until Putin and I get together, okay?"
President Trump has indicated his patience is wearing thin, and he has multiple options to signal to Putin that the clock is running out. The US could quietly intervene to stop a Hungarian veto threat to the meaningful new sanctions package being discussed in Brussels. Or, the President could quietly encourage Republican backers to advance Senator Lindsey Graham's sanctions bill on Russia that includes language threatening a 500% tariff on countries that buy Russian oil and gas, using the threat of Congressional action to pressure Putin into negotiations. Alternatively, as President Trump prefers to "own" negotiations, Trump could act directly by approving the first new sanctions on Russia since the start of his administration, moving beyond the passive March decision to let lapse a 60-day exemption on certain energy transactions involving sanctioned Russian banks.
No doubt, President Trump sees sanctions as a useful tool in negotiations. The question is whether he judges the current environment as ripe for hard-knuckle negotiations, or whether there is still time on the clock to coax, rather than force, Russia to the table.
US Developments
Trump to Lift Sanctions on Syria
During a speech at a Saudi investment forum in Riyadh, President Trump announced that the US would be lifting sanctions on Syria—a major shift in American foreign policy. The administration had reportedly been waiting for the new Syrian government to fulfill or commit to a number of conditions before granting partial sanctions relief. One day after the announcement, President Trump met with Syrian President Ahmed al-Shara. Trump stated during their conversation that al-Sharaa "has a tremendous opportunity to do something historic" for Syria after the fall of former President Bashar al-Assad's regime.
The announcement and subsequent meeting drew praise from multiple foreign leaders, including Saudi Crown Prince Mohammed bin Salman and Turkish President Recep Tayyip Erdoğan, as well as from both sides of the aisle in Congress. Sen. Jim Risch (R-ID), the Chairman of the Senate Foreign Relations Committee, said, for example, that the decision to lift sanctions gave Syria a "tremendous opportunity." Sen. Jeanne Shaheen (D-NH), the Ranking Member of the Senate Foreign Relations Committee, issued a similar statement commending Trump, and encouraged the US to increase its engagement with Syrian officials to ensure the country moves in the direction of "democracy, stability and security."
The Trump administration has not provided a timeline for implementing sanctions relief, and it remains to be seen when and in what manner US sanctions on Syria are removed. It is also unclear whether all or only some sanctions on Syria will be removed. Certain sanctions on Syria are Congressionally mandated, which may complicate their removal.
US Intensifies Sanctions on Iran Amid Resumed Negotiations
The US has continued to levy sanctions on Iran while it negotiates with Tehran over its nuclear program. Over three consecutive days, the Departments of State and the Treasury announced actions targeting Iran and its alleged supporters:
- On May 12, the State Department sanctioned three Iranian nationals and one Iranian entity for their alleged ties to Iran's Organization of Defensive Innovation and Research. The State Department asserted that the sanctioned parties were all involved in activities that materially contribute to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction.
- On May 13, the Department of the Treasury's Office of Foreign Assets Control (OFAC) designated nearly two dozen firms as well as numerous individuals across multiple jurisdictions for allegedly supporting Iran's illicit oil trade. The designated entities include Hong Kong-based companies allegedly acting as fronts for an Iranian energy company, and Singapore- and China-based companies allegedly involved in the obfuscation of the origin or final purchase of Iranian oil and related products.
- On May 14, OFAC sanctioned six individuals and 12 entities for their alleged involvement in efforts to help Iran domestically source the manufacturing of critical materials for its ballistic missile program.
Each of these actions was undertaken in furtherance of Trump's National Security Presidential Memorandum (NSPM-2) reimposing "maximum pressure" on Iran. For its part, Iran has stated that continued sanctions are incompatible with the current negotiations. It is unclear what impact, if any, the Trump administration's increased sanctions will have on the prospects for a new nuclear deal with Iran, which is reportedly under active negotiations.
Treasury Targets Hizballah Financiers
OFAC has sanctioned two Hizballah officials and two "financial facilitators" for their alleged roles in coordinating financial transfers for Hizballah, a Foreign Terrorist Organization and Specially Designated Global Terrorist. According to OFAC, the sanctioned individuals, based in Iran and Lebanon, have worked closely with Hizballah leadership to send money to the group via overseas donations, which comprise a significant portion of its overall budget. OFAC described these designations as being in furtherance of NSPM-2 and the Trump administration's "maximum pressure" on Iran and its terrorist proxies.
DOJ Issues Memorandum Emphasizing Sanctions Enforcement and Whistleblowing
The Department of Justice's (DOJ) Criminal Division issued a memorandum revising its Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) to prioritize investigating and prosecuting crimes that, among other things, threaten the country's national security, including conduct by financial institutions and others that evades sanctions or enables certain transactions by cartels and transnational criminal organizations. The memorandum also amends the Criminal Division's Corporate Whistleblower Awards Pilot Program by adding, among other things, a new whistleblower award category for tips related to corporate sanctions offenses.
Notably, the new CEP commits to declining prosecution of companies for criminal conduct when the following factors are met:
- The company voluntarily self-discloses the misconduct to the Criminal Division;
- The company fully cooperates with the Criminal Division's investigation;
- The company timely and appropriately remediates the misconduct; and
- There are no aggravating circumstances related to the nature and seriousness of the offense, egregiousness or pervasiveness of the misconduct within the company, the severity of harm caused by the misconduct, or criminal adjudication or resolution within the last five years based on similar misconduct by the entity engaged in the current misconduct.
The policy follows a declination by the DOJ's National Security Division (NSD) to prosecute a company under the Export Control and Sanctions Enforcement Policy for Business Organizations on April 30, 2025, which Steptoe covered in a recent blog post.
UK Developments
UK Publishes First Cross-Government Review of Sanctions Implementation and Enforcement
The UK government published its first formal cross-government review of the implementation and enforcement of UK sanctions on May 15. The review, which covers the period from 2022 to 2023, evaluates how sanctions policy is delivered across the UK government and the operational capability of relevant UK government departments and agencies. The purpose of the review was to identify further steps to improve and facilitate compliance, increase the deterrent effect of enforcement, and invigorate the tools available across the UK government to take robust enforcement action against those who seek to evade sanctions.
The review identifies key findings under the themes of compliance, deterrence, and toolkit reform that the UK government is committed to implementing during the current financial year. The notable action items include: (i) creating additional guidance and engagement for sectors less familiar with sanctions compliance; (ii) consolidating the UK sanctions list and OFSI's consolidated list of asset freeze targets into a single sanctions list; (iii) providing further clarity on the UK's ownership and control test for asset freeze and making available sanctions; (iv) increase publication of enforcement outcomes; (v) develop an early civil settlement scheme for breaches of financial sanctions, as well as a fast-track penalty process; and (vi) clarify reporting requirements and pathways to provide additional protection for whistleblowers. The review reflects the UK government's commitment to improving transparency and accountability in the delivery of the sanctions regime and underscores a continued focus on the importance of sanctions enforcement as a driver of sanctions compliance.
Mandatory Reporting Obligations for Art Market Participants and Others Come into Force
After a period of time for industry to adjust to the new obligations, the mandatory reporting obligations under UK sanctions regimes were extended on May 14 to high-value dealers, art market participants, insolvency practitioners, and letting agencies. Those subject to the new reporting requirements are required to report to OFSI "as soon as practicable" if they know or have reasonable cause to suspect based on information coming to them in the course of carrying on their business that a person is a UK designated person, and/or a person has breached a prohibition or failed to comply with an obligation under UK financial sanctions. Failure to comply with these reporting requirements can result in the imposition of a range of penalties.
House of Lords Debates Amendments to Russia Sanctions Regimes
During a recent House of Lords committee debate on the Russia (Sanctions) (EU Exit) (Amendment) Regulations 2025 that came into effect in April under the affirmative procedure, peers focussed on the role of third countries, including India, in facilitating the circumvention of UK and other sanctions targeting Russia and the steps the UK government plans to take to tackle that issue, as well as calling for greater alignment of measures on the Russian shadow fleet by the UK, US, and EU to ensure the maximum effectiveness of the sanctions being imposed against the Russian energy sector.
EU Developments
EU Agrees on 17th Sanctions Package Against Russia
On Wednesday, May 14, the European Union reached an agreement on its 17th sanctions package against Russia, set to be adopted by EU foreign ministers on May 20. The agreement follows growing pressure from European leaders, including those from France, Germany, and Poland, urging Russian President Vladimir Putin to engage in negotiations to end the invasion of Ukraine, which began in 2022. The new sanctions package is reported to introduce measures such as asset freezes and visa bans targeting Russian government officials and business leaders. It is also described to include export restrictions on chemicals used in weapon production and the additional listings of 189 shadow fleet vessels and companies involved in sanctions evasion.
Several European finance ministers have publicly called on the European Commission to intensify pressure on Russia and begin preparations for an 18th sanctions package, potentially starting as early as next week. Proposals for the 18th package have included potential restrictive measures directed at Russia's energy and financial sectors.
EU Council Amends Sanctions Targeting Russia
The EU Council has amended several pieces of sanctions legislation targeting Russia. Regulation 269/2014 has been revised to introduce a new listing criterion, targeting individuals or entities that have participated in the transfer of ownership, control, or economic benefit of business interests linked to prominent businesspersons operating in Russia. Additionally, Decision 2014/145/CFSP, which outlines restrictive measures against individuals and entities involved in actions undermining Ukraine's territorial integrity, sovereignty, and independence, has also been amended.
EU Council Renews Cyber-Attack Sanctions
The EU Council has renewed the restrictive measures on cyber-attacks threatening the EU or its Member States for another year, until May 18, 2026. Additionally, the cyber-attacks sanctions regime has been extended for three more years, until May 18, 2028. Currently, the restrictive measures apply to 17 individuals and four entities, and include asset freezes, prohibitions on the provision of funds or economic resources, and an EU travel ban for the listed individuals.
Third Countries Align with EU Sanctions
The High Representative of the EU has announced that Albania, Bosnia and Herzegovina, Iceland, Liechtenstein, Montenegro, North Macedonia, and Ukraine have aligned themselves with several Council decisions. Specifically, these countries have aligned themselves with Decision 2025/700, which enforces a broadcasting ban on eight Russian entities listed in the annex to Decision 2025/3942, in response to Russia's destabilizing actions in Ukraine.
In addition, the same group of countries, together with the Republic of Moldova, Norway, and Serbia, have aligned themselves with Decision 2025/7741, concerning the listing of individuals and entities subject to restrictive measures for serious human rights violations in Iran. All of these countries have also aligned themselves with Decision 2025/690, which extends the sanctions regime against those involved in serious human rights violations in Iran and updates the list of designated persons and entities in the annex to Decision 2011/235/CFSP.
On May 16, the High Representative of the EU confirmed that Albania, Armenia, Bosnia and Herzegovina, Iceland, Liechtenstein, Moldova, Montenegro, North Macedonia, Norway, Serbia, and Ukraine have aligned themselves with Decision 2025/820, which renews restrictive measures until April 30, 2026 in response to the ongoing situation in Myanmar/Burma, including actions undermining democracy and serious human rights violations.
Asia-Pacific Developments
China Halts Countermeasures Against US Amid Landmark Tariff Deal
The United States and China announced a significant breakthrough in their protracted trade negotiations on May 12, 2025, agreeing to a drastic reduction in tariffs for 90 days. This agreement, disclosed in a joint statement following two days of high-stakes talks in Geneva, Switzerland, marks de-escalation in the trade tensions between the world's two largest economies. Beginning May 14, the US reduced its sweeping 145% tariffs on most Chinese imports to 30%, including a 20% tariff tied to fentanyl. In response, China lowered its 125% tariffs on US goods to 10%. Even if the suspended tariffs are reinstated after this temporary 90-day window, the overall tariff landscape will remain significantly altered, as most of the duties imposed after April 2 have been permanently canceled. As a result, US tariffs on Chinese imports would be 54%, well below the previous 145%, while Chinese tariffs on US goods would return to 34%, significantly reduced from their former 125% levels.
Additionally, the White House issued an executive order reducing duties on low-value packages from China valued under $800, lowering the rate from 120% to 54%. The tariff agreements highlight what officials from both sides described as "substantial progress," with Treasury Secretary Scott Bessent emphasizing that neither side seeks economic decoupling. China's Commerce Ministry praised the agreement as a step toward fostering a stable and sustainable bilateral trade relationship.
Alongside reducing tariffs, China has agreed to either suspend or remove non-tariff countermeasures it implemented against the US since April 2. China's Ministry of Commerce stated on May 14 that it has paused the export controls imposed on 28 US entities for 90 days, easing restrictions on the export of dual-use items. Additionally, measures affecting 17 US entities listed on China's Unreliable Entity List have also been suspended, with the pause lasting 90 days for 11 entities and the timeline for six others unspecified. Chinese companies may apply for government approval to resume transactions with these entities under established regulatory frameworks. However, as noted in the previous newsletter, most US companies targeted by China's countermeasures were already subject to sanctions by the Ministry of Foreign Affairs, or listed on the PRC's Unreliable Entity List or Export Control List. Consequently, the suspension of these countermeasures does not necessarily exempt them from broader PRC sanctions.
Traders Rebrand Venezuelan Oil as Brazilian for Shipments to China, Skirting US Sanctions
A recent report from Reuters reveals that traders have rebranded over $1 billion worth of Venezuelan crude oil as Brazilian to facilitate shipments to China, circumventing US sanctions on Venezuela. Instead of routing through Malaysia, a long-established hub for transshipping sanctioned oil, tankers have been sailing directly from Venezuela to China, reducing voyages by approximately four days. The operation involves tampering with ship tracking signals to make it appear that vessels are departing from Brazilian ports when they are loading in Venezuela. Additionally, certificates of origin are falsified to disguise the oil as Brazilian mixed bitumen—a product that doesn't correspond with Brazil's typical crude exports. Refiners in China continue to take in these mislabeled shipments, partly because mixed bitumen imports bypass government-imposed crude oil import quotas.
This oil rebranding practice has coincided with rising Venezuelan crude exports to China, which averaged 463,000 barrels per day over the first four months of 2025, up from 351,000 barrels per day last year. Internal documents from Venezuela's state-run PDVSA and tanker tracking analysis suggest intermediaries like Hangzhou Energy are key players in facilitating the trade, leveraging falsified documentation and manipulated tracking data. For traders, the strategy of rebranding Venezuelan crude offers logistical advantages and helps secure financing for shipments. Meanwhile, the US is ramping up its measures against Venezuela, with Trump announcing a 25% tariff on nations that continue to import oil from Venezuela.
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