The evolving landscape of Iran-related sanctions: impacts of U.S. policy shifts on international business

The resumption of hostilities follows recent shifts in U.S. sanctions policy toward Iran, including a June 2026 memorandum of understanding (MoU) and OFAC’s issuance of General License X (GL X), which temporarily authorized certain transactions involving Iranian-origin oil and petroleum products. On July 7, 2026, OFAC revoked those authorizations through General License X1 (GL X1) and granted a ten-day wind-down period for ongoing transactions. EU and UK sanctions regimes have remained in place despite the evolving U.S. position.

General licenses X and X1

On June 17, 2026, the U.S. signed the MoU with Iran, signaling a conditional commitment to terminate sanctions against Iran. Shortly thereafter, on June 22, 2026, OFAC issued GL X to authorize transactions ordinarily incident and necessary to the production, sale, delivery, or offloading of crude oil, petrochemical products, or petroleum products of Iranian origin, including transactions involving vessels blocked under enumerated authorities, until August 21, 2026. GL X specifically authorized importation into the U.S. and payment in U.S. dollar-denominated funds.

Through GL X1, issued on July 7, 2026, OFAC revoked GL X and returned the U.S. sanctions regime to a comprehensive ban on nearly all U.S. trade with or involving Iran. Parties have ten days to wind down transactions authorized under GL X, and any payment to a blocked person must be made into a blocked, interest-bearing account located in the U.S.

The EU, UK, and other allied jurisdictions

The EU and UK currently maintain their own extensive autonomous sanctions regimes against Iran, which go well beyond the baseline United Nations Security Council (UNSC) restrictions.¹ Those regimes have progressively intensified in recent years in light of deteriorating relations between Tehran and the West, and the MoU did not formally alter them.

At present, these autonomous restrictions include asset freezes, sectoral sanctions targeting financial and insurance services, and export controls across a wide range of goods and technology. Notably, the EU designated the Islamic Revolutionary Guard Corps (the IRGC) as a terrorist organization in February 2026,²  and the UK is actively considering proscribing the IRGC as a terrorist organization under its own anti-terrorism legislation.

Neither the EU nor the UK was a party to the MoU, and both have played limited roles in the U.S.-led negotiations with Iran, which were mediated by Pakistan and Qatar. Shortly after the MoU was signed, the UK, France, Germany, and Italy published a joint statement suggesting that they would be “prepared to lift relevant sanctions in response to clear, verifiable steps by Iran on its nuclear program.”³ However, on June 19, 2026, France, in its capacity as a permanent member of the UNSC, appeared to retreat from this position, making clear that it would not approve the lifting of UNSC sanctions unless Iran also made major concessions on its ballistic missile program and support for proxies—neither of which the MoU appeared to address.4 The UK’s position appears aligned with France’s, with HM Treasury’s Office of Financial Sanctions Implementation announcing on June 29, 2026, that it expects to bring several Iran sanctions-related enforcement actions in the near future.⁵

Similar caution is evident across the G7 and other allied jurisdictions. Canada, for example, imposed a full asset freeze on Mohammed Bagher Ghalibaf (the Speaker of the Iranian Parliament and leader of Iran’s negotiating team) in connection with human rights concerns, even though Ghalibaf is not targeted by U.S. sanctions.

Practical considerations

Unstable political positions create an unpredictable and fluid regulatory landscape. Businesses should not assume that any future sanctions relief from Washington will translate into the ability to do business with Iranian counterparties or otherwise engage in Iran-related business – in any event, not anytime soon. The picture is likely to remain complex, particularly for businesses with operations across multiple jurisdictions. The following considerations should be kept in mind as the conflict continues to evolve, especially if there is another attempt to reach a diplomatic resolution.

1. Regulatory fragmentation: Any entity with a nexus to the EU, UK, or other allied states may remain bound by those jurisdictions’ sanctions regardless of U.S. policy changes. Even activities permissible under U.S. law may remain prohibited elsewhere.
2. Geopolitical uncertainty: Sanctions against Iran could be relaxed again, but, as the current situation demonstrates, policy reversals are possible and caution is required.
3. Financing restrictions: Major international lenders routinely restrict the use of proceeds for activities connected to sanctioned territories. Iran has long been within the scope of those restrictions. Businesses considering Iran-related activities should review their existing financing and commercial agreements closely.
4. Wider compliance risks: Sanctions relief would not eliminate anti-bribery, anti-money laundering, and fraud risks. Persons subject to the U.S. Foreign Corrupt Practices Act or the UK Bribery Act would need to exercise heightened caution with respect to Iran.
5. Due diligence challenges: Iran lacks the corporate transparency found in many Western economies. Reliable information on ownership and control is difficult to obtain, particularly for counterparties with IRGC ties. This is a critical factor in calibrating sanctions risk.

The MoU signaled the U.S. willingness, however short-lived, to dismantle its sanctions regime against Iran. If, in the future, the U.S. and Iran reach another deal with broader international support, the EU, UK, and other allied states might be persuaded to revisit their positions. The UNSC’s position, as well as UNSC sanctions currently implemented by UN Member States, will also play a central role.

In any event, geopolitical uncertainty will persist, and a complex, multi-speed picture may emerge. Businesses in different jurisdictions may adopt varied approaches depending on their global sanctions exposure, lender-imposed restrictions, and general level of caution regarding Iran.

Find out more

Should you have any questions, please get in touch with the authors or your key contacts at A&O Shearman.

Footnotes

2. Council of the EU.

3. Embassy of France in the United States.

4. Reuters.

5. OFSI’s interview with the Financial Times.