US Tariffs, Sanctions and Sale Contracts: The Impact on the Commodities Sector

In our first article, we explored the consequences of tariffs for the commodities sector and considered their impact on commodity sale contracts. In this article, we consider the changing impact of US, EU and UK sanctions on the sector and how traders can respond.

Background

For many years, the US, EU and UK have used sanctions as a foreign policy tool to influence the behaviour of other countries. Sanctions are designed to exert pressure by negatively affecting the economy, political stability and international standing of the targeted country. For example, there are currently US sanctions in place against Iran, Venezuela, and Somalia.

Since 2022, all three jurisdictions have imposed increasing levels of sanctions against Russia following its invasion of Ukraine. Given that Russia is a key jurisdiction for a number of major commodities, including in particular oil and gas, this has had a more widespread impact on the commodities sector than previous sanctions programmes.

Coupled with this, despite some key similarities, there has been a divergence of recent sanctions policy between the US, EU and UK. The general trend in recent years has been a reduction in the number of sanctions with an increased focus on enforcement, but methods of enforcement can differ. 

In addition, we are now seeing more countries, including Russia and China, imposing sanctions. The geopolitical situation is also tense, giving rise to uncertainty which makes the trading environment challenging.

Taken together, these developments have had a major impact on the commodities sector. In this article, we explore some of these developments in more detail and consider how traders can respond.

Recent developments

Two examples of recent developments which demonstrate change, divergence and the impact of geopolitical uncertainty are below:

• The US, EU and UK have all eased sanctions on Syria following the fall of the Assad regime in December 2024. The EU and US have lifted the majority of their sanctions against Syria and the UK has eased its sectoral sanctions. In addition, all three jurisdictions have removed entities and individuals related to Syria from asset freeze lists. This relaxation is aimed at supporting the transitional government and Syria’s economic recovery. However, due to recent escalations in Syria, US Congress is currently divided over whether to pass legislation which would repeal the comprehensive sanctions imposed by the Caesar Syria Civilian Protection Act of 2019 altogether.

• On 18 July 2025, the EU adopted its 18^th sanctions package against Russia since its invasion of Ukraine in 2022, targeting energy and financial transactions as well as particular individuals and entities. We will cover this package of sanctions in more detail in a separate briefing. UK and US sanctions have imposed similar restrictions on Russia. At the time of writing, the EU is in the process of preparing a 19^th sanctions package. However, this has been delayed and in recent days, the US has urged the EU to take more robust measures to increase the pressure on Russia.

Response from other countries

Russia has imposed retaliatory sanctions measures on “unfriendly countries”, including the US, EU countries and the UK. These include export restrictions and measures against Western government officials and companies that oppose its military actions in Ukraine.

China has strengthened its ‘anti-foreign sanctions’ laws amid escalating tensions with the US. A new regulation specifies assets subject to seizure, including cash, securities and bank deposits, and certain activities which may be prohibited under China’s counter-sanctions framework, including transacting or cooperating with parties on the Anti-Sanctions List – which itself has been expanded to include fields like law, economy and trade. Non-compliant entities face restrictions on government procurement, import-export operations, cross-border data transfers and travel.

Limitations on the effect of sanctions

Geopolitical tensions have had an impact on the effectiveness of sanctions. Two examples are below:

• On 30 July 2025, the US Department of State sanctioned 20 entities and 10 vessels involved in transporting Iranian oil to foreign markets. In an accompanying press release, the Department of State indicated that one of the purposes of these sanctions is to disrupt Iran’s ability to use oil revenue for its nuclear programme¹. This move is part of broader efforts to curb Iran’s nuclear ambitions and limit its influence in the region, and further designations followed on 21 August 2025². Despite this, in recent years, China has accounted for around 90% of Iran’s oil exports and continues to be a major importer, although there are signs that US sanctions are having some effect on shipments.³

• Purchasing activity for end-of-life Supermaxes and VLCCs suited for dark fleet operations has increased, indicating competition in the black market from Russia. On 21 July 2025, the UK sanctioned 135 Russian shadow fleet vessels and 2 entities. A further 70 vessels were sanctioned on 12 September 2025.⁴ In its 18^th package of sanctions, the EU targeted an additional 105 shadow fleet vessels, bringing the total number to 444, along with 14 individuals and 41 entities, bringing the total number of individual listings to over 2,500. In its accompanying press release, the European Commission indicated that the aim of these sanctions is to cut off Russia’s access to military technology and curb its energy revenues⁵. However, despite these measures, reports suggest that a significant proportion of the shadow fleet continues to operate outside the scope of sanctions.

Impact on commodities traders and how to respond

Sanctions measures can lead to price volatility, supply shortages, and logistical challenges. In addition, commodities traders may face increased regulatory scrutiny and potential legal challenges. The need for multiple approvals and licences due to layered prohibitions from different jurisdictions can create significant administrative and financial burdens. Banks are particularly sensitive to falling foul of US sanctions and this can create difficulties in obtaining finance and effecting payment for some transactions. It can also be more challenging to obtain insurance cover.

We recommend that commodities traders embed the following practices into their business:

• Carry out due diligence on counterparties, vessels and commodities.
  The level of due diligence necessary is risk based, meaning the greater the sanctions risk, the more due diligence is required. If red flags are encountered or you have any doubts, the transaction could involve an inadvertent circumvention of sanctions. If you cannot be satisfied that a transaction is lawful, seek professional advice. You should also repeat your due diligence checks on a regular basis as circumstances can change quickly.
• Keep good records.
  Many jurisdictions require record-keeping. These rules vary by jurisdiction and the nature of the information recorded. Rules often include a 5-year minimum, although in 2024, the US codified a 10-year minimum for records of any transaction subject to US sanctions regulations.
  
  Leaving aside any mandatory requirements, keeping a clear record of your actions can be extremely useful in dealing with any suggestion that you may have contravened sanctions, or not done enough to avoid a breach.
• Have a clear, regularly updated internal policy and regular staff training.
  This will be helpful to avoid any inadvertent breaches. In addition, counterparties or banks may require you to have robust internal policies and procedures before they will trade with you.
  
  In the event that a breach does occur, it can also be helpful to be able to demonstrate that strong and up to date internal policies and procedures were in place.
• If in doubt, seek advice.
  Whilst excessive risk-avoidance can lead to commercial disadvantages and disruptions, with the potential for missed opportunities, increased costs and strained relationships with potential counterparties, the consequences of getting it wrong can be very severe. Where in doubt, we recommend seeking professional advice before proceeding.
• Negotiate effective sanctions clauses.
  It is important to draft sanctions clauses as clearly and specifically as possible. Generally, a sanctions clause should include the sanctions regimes to be captured, the sanctions restrictions that are within scope, who has the right to exercise the remedy and the remedy itself, and relevant warranties and indemnities.

Conclusion

The sanctions landscape has become increasingly complex and the extent of sanctions on Russia in particular has had a major impact on the commodities markets. As the situation can change rapidly and the consequences of breach can be severe, traders must be diligent in implementing robust policies and procedures, with regular checks and updates, and in considering the effects of sanctions when negotiating future and reviewing existing contracts in order to minimise disruption and avoid a breach.

Charlotte Soanes, Trainee Solicitor, conducted the research for this briefing.

Footnotes

1. Sanctioning Facilitators of Iran’s Petroleum and Petrochemical Trade – United States Department of State.
2. Sanctions on Iran’s Oil Network to Further Impose Maximum Pressure on Iran – United States Department of State.
3. Discounts for Iranian oil widen in China on record stocks, even as sanctions curb shipments.
4. UK ratchets up pressure on Putin’s military machine as Foreign Secretary travels to Kyiv – GOV.UK.
5. EU adopts 18th package of sanctions against Russia.