Key Points
- Political transitions in the West notwithstanding, we expect economic sanctions to remain a key response to geopolitical issues.
- Current sanctions policy priorities are unlikely to shift markedly in the near term, and any efforts by the second Trump administration to modify U.S. sanctions against Russia could face political headwinds from Congress.
- China will be an area of increased focus for the incoming Trump administration, with export controls and tariffs rather than sanctions likely playing a leading role.
- The U.S. — and, to a slightly lesser extent, the U.K. and EU — will probably continue to stretch the extraterritorial jurisdiction of sanctions.
The new year brings with it political transitions in the West. A new U.S. administration and a Polish presidency of the Council of the European Union are about to begin their tenure, as the Labour government in the U.K. and the newly elected College of Commissioners in Brussels find their footing.
Despite these changes, we expect economic sanctions to remain a go-to response to geopolitical tensions and crises, with regulators and law enforcement agencies around the globe continuing aggressive enforcement efforts.
Nine Developments To Watch in 2025
1. Sanctions priorities should remain largely the same in the short term
Even if the second Trump administration makes changes to U.S. assistance to Ukraine, the U.S., U.K. and European Union are likely to continue using sanctions to pressure Russia in the near term. Specific goals include cutting off revenue sources, decreasing allies’ reliance on Russian commodities, limiting Russian access to military and dual-use items, and combating sanctions evasion, all while maintaining market stability. Coordination on enforcement actions, sanctions targeting, licensing and derogation decisions and other behind-the-scenes intelligence-sharing will continue.
2. Enforcement actions are likely to continue to rise
If past is prologue, the second Trump administration is likely to continue aggressively pursuing sanctions-related enforcement. Likewise, enforcement of sanctions violations will remain a key priority in many EU member states and in the U.K., aided by changes to the law to make enforcement easier.
3. Expect a multifaceted approach to China
The second Trump administration is likely to use a host of economic and trade policy measures to manage the United States’ position on China, with an emphasis on tariffs, further expansion of export controls and other restrictions that are more nuanced than full-scale sanctions. It remains to be seen whether and to what extent the U.S. will coordinate with the EU, U.K. and other allies on the approach to China. (See “Decoding Tariff Threats: What Importers Can Expect on Day 1 and Beyond” and “In the US and Europe, Export and Import Controls May Be Expanded.”)
4. Other sanctions programs will likely gain greater prominence
Priority areas for sanctions policy-making may shift with the change in administration. The Middle East region, especially Iran, and thematic sanctions regimes — such as those focused on human rights, corruption and cybersecurity — will likely gain greater prominence. This would be in keeping with President-elect Donald Trump’s “maximum-pressure” approach to Iran during his first term and the movement toward using thematic sanctions more frequently to counter threats or highlight particular policy objectives. The U.K. and EU will likely take the second Trump administration’s lead on these points to some extent, for example in relation to extending certain thematic sanctions regimes, but policy divergences will likely remain in respect of Iran. Recent political developments in Syria could also result in a change in the sanctions position in relation to that country.
5. There is potential for disagreements on sanctions between the U.S. political branches
Because the use of sanctions as a foreign policy tool continues to garner broad bipartisan, bicameral support in the U.S., any moves to modify U.S. sanctions on Russia (or in other areas) in the second Trump administration may face pushback from Congress.
6. The use of “extraterritorial” sanctions will be expanded
The U.S. has long viewed sanctions as reaching activities that occur outside the U.S. when they touch the U.S. financial system or cause U.S. persons to violate them. “Secondary” sanctions — for which there is no U.S. jurisdictional nexus — have become a prominent feature in the Russia and Iran sanctions programs, among others, as a means to influence the behavior of non-U.S. persons. The U.K.’s and EU’s broad Russia-related sanctions authorities, coupled with trade and financial measures with extraterritorial reach (including the EU’s focus on non-EU subsidiaries), show they have adopted a similar approach. We expect the U.S., U.K. and EU to continue to push the outer boundaries of sanctions jurisdiction.
7. Compliance challenges will increase under growing regulatory requirements and expectations
As sanctions and export controls have become more complex and nuanced, and as regulators have turned increasingly to financial institutions and other companies to ensure effective implementation of those measures, the costs and operational burden of compliance that fall on the private sector have grown apace. We expect regulators and law enforcement agencies around the globe will continue to view the private sector as the “first line of defense.” Organizations should therefore be proactive in assessing and managing risk and be prepared for worst-case scenarios like dawn raids — unannounced inspections — and government investigations.
8. Whistleblowing will be a key method of intelligence-gathering
Recent whistleblower laws in the U.S. designed to elicit reports of sanctions violations are reportedly bearing fruit, and the U.K. is considering enhancing its legal framework in this respect. Companies should ensure they have strong whistleblower policies in place to encourage the reporting of issues internally so they can be investigated and addressed before they make their way to a government regulator.
9. Sanctions will be one of many national security-related tools for deployment
For more than a decade, sanctions have seemingly been the first port of call for governments when responding to foreign policy and national security concerns. While they will undoubtedly remain a key tool in the foreign policy toolbox for years to come, we anticipate export controls, foreign investment reviews, supply chain regulations and — in the second Trump administration — perhaps other, less predictable methods will become increasingly important in the U.S. and beyond. The use of countersanctions and other similar measures by jurisdictions targeted by the U.S. and its partners will likely grow.
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