Global sanctions and their impact on the business environment

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Sanctions are no longer just a legal or compliance issue. They are increasingly being used by governments as tools to assert geopolitical influence. Coupled with rising tariffs and export controls, the way businesses trade is undergoing significant transformation. This new reality poses a geopolitical risk management challenge.

In this article, we identify four key trends and outline how businesses can successfully navigate the shifting geopolitical environment.

1. Sanctions as a strategic tool in US policy

Sanctions remain a common instrument of US foreign policy. Under President Donald Trump, the United States has reaffirmed its commitment to using them as a tool for asserting geopolitical influence.

Although much of the world’s attention has focused on Washington’s tariff announcements, since returning to office in January, the Trump administration has intensified its use of punitive economic measures, including sanctions and tariffs, to target geopolitical adversaries, militant groups and organised criminal syndicates.

The administration frequently uses tariffs as punitive instruments that functionally resemble sanctions, although they are distinct. Tariffs offer legal and political flexibility, allowing for rapid adjustments and domestic framing as part of transactional “deal politics”. Sanctions, by contrast, require rigorous legal justification and are less adaptable in negotiations.

This expanded use of tariffs, and the increasing deployment of export controls by both the US and China is blurring the boundaries between sanctions, tariffs and export controls.

For corporate leadership teams, adapting to this environment requires a cultural shift. Decisions about risk tolerance, when to pause or re-route a trade, and when to end a relationship can no longer sit solely with lawyers. These choices belong at the executive table, tied to margins, cash flow and delivery.

Companies that handle this well define what level of exposure they will carry. They investigate not just names on official lists but who really owns and controls counterparties; and they prepare in advance for the day a key route, bank, insurer or software service becomes off-limits so that the necessary pivot appears rehearsed rather than improvised.

2. Expect more divergence across allied countries

A growing divergence between US and EU sanctions policy is reshaping transatlantic co-ordination, with Brussels expanding its Russia sanctions as Washington pivots towards unilateral tariff diplomacy.

As part of its recent adoption of the 18th sanctions package against Russia, the EU unilaterally lowered the oil price cap on Russian crude. The price cap was originally adopted by all G7 members in December 2022. Washington has not endorsed this adjustment, casting doubt over its global enforcement and signaling a shift away from collective action.

There are also sharper disagreements over multilateral institutions, including United States measures against International Criminal Court judges and a United Nations special rapporteur, which Brussels opposes.

The divergence between the two most important global sanctions actors will not only complicate global compliance but reflects a deeper split in how each side views the role of international institutions, the utility of economic coercion and the future of global governance.

The fragmentation of enforcement frameworks across G7 states complicates the compliance landscape for globally operating companies, presenting not only a diplomatic challenge but also a significant execution hurdle. A transaction that may be permitted under one regime could be blocked or rendered unattractive under another, requiring companies to remain agile and adaptive in their compliance strategies to navigate this complex and shifting terrain.

3. European enforcement is changing the risk equation

The EU is embedding sanctions enforcement into its legal architecture, signaling a long-term commitment to sanctions as a strategic tool of statecraft and compensating for limited military leverage.

Directive 2024/1226 makes violations a criminal offence across all member states and mandates minimum penalties, including prison terms of up to five years and fines of up to five percent of global turnover. It also requires the creation of dedicated national authorities. The Union is pursuing what it calls “anti-circumvention measures”, extending its reach into third-country trade and services.

The operational impact is already evident. Following the European listing of Nayara Energy Limited, an Indian refinery partially owned by Russia’s Rosneft, the company’s CEO resigned. Microsoft reportedly paused services and several shipping firms terminated contracts, citing European insurance concerns.

Two regional Chinese banks were also listed due to ties to Russia, marking the first time Chinese financial institutions have been targeted.

For any organisation with substantial ties to Europe, these developments mean preparing for deeper scrutiny. Expect questions about how you prevent diversion after a sale, how you verify ownership and control, and how you monitor for unusual routes, repeated changes in product codes, or sudden shifts in counterparties.

To mitigate risk, leadership teams should update contracts to include clear exit clauses in case of regulatory changes; train sales, logistics, and finance teams to recognise early warning signs and conduct internal investigation drills before one becomes mandatory. 

4. Resistance from the Global South

Outside the West, many governments have long pointed out that Western sanctions are unilateral actions and breach international law unless they are endorsed by the UN Security Council. Consequently, such sanctions have prompted growing resistance from emerging powers and the wider Global South.

In June 2025, 116 countries in the UN General Assembly voted to designate 4 December as the “International Day against Unilateral Coercive Measures”, underscoring the widespread concern over sanctions imposed outside multilateral frameworks. BRICS+ nations have long opposed these measures. Although deeper BRICS+ trade integration remains slow and hindered by internal divisions, Western sanctions will continue to serve as a unifying force.

Since 2019, Beijing has developed a range of legal and regulatory instruments, including the Anti-Foreign Sanctions Law, Unreliable Entity List and Export Control Law. Its willingness to make use of these tools is steadily increasing.

For businesses, the lesson is simple: diversify and prepare. In practice, this means:

This isn’t a glamorous undertaking, but it is what separates firms that recover quickly from policy shocks from those that stall.

What good practice looks like

The increased use of sanctions, tariffs and export controls does not signal the end of globalisation. Instead, it marks a transition towards a more fragmented and flexible system, one defined by diversification and compartmentalisation of global supply chains. Regulatory frameworks will continue to matter. The ability to operate across multiple, sometimes contradictory, regimes will be paramount in the coming years.

To meet this challenge, compliance and risk teams must work together to incorporate geopolitical analysis into their strategic frameworks. This means going beyond the legal mechanics of sanctions to understand the political drivers behind them. Understanding the geopolitical environment will be key to anticipating and managing sanctions-related risks.