In brief
- On 1 October 2025, the UK and EU reimposed extensive sanctions on Iran, following Iran's failure to meet its commitments under a 2015 nuclear agreement.
- Since 2015, a number of sanctions relating to Iran's nuclear proliferation activities had been suspended, but have now been reintroduced under the "snapback" provisions envisaged in the deal.
- Although aimed at limiting Iran's nuclear activity, these sanctions are wide-ranging and include a significant focus on the Iranian oil and gas industry, as well as Iranian banks. UK businesses and individuals with Iran-related trade or commercial relationships must carefully reassess their operations in light of this, and prepare for further developments.
Background to UN sanctions on Iran
In 1979, the US administration froze all Iranian assets within the jurisdiction of the US following the 1979-81 hostage crisis and the Iranian revolution. Further sanctions were imposed by the US in the 1990s on foreign firms believed to be enabling Iran's nuclear programme.
The UN first imposed sanctions (including export bans, asset freezes and travel monitoring) on Iran in 2006, in response to risks presented by Iran's nuclear programme. UN Member States were required to implement those sanctions through domestic law. This meant that Iran was largely frozen out from global markets, and in particular cut off from legitimate global oil trade. UN sanctions were slowly lifted from 2013 and were lifted entirely in 2015 under the Joint Comprehensive Plan of Action (JCPoA). The JCPoA, between China, France, Germany, Russia, the UK, the EU, the US and Iran, was aimed at ensuring that Iran's nuclear programme was exclusively peaceful. After the agreement was reached, the UK, EU and US subsequently eased or lifted several of their domestic sanctions on Iran. However, in 2018, the US pulled out of the JCPoA under the first Trump administration and independently reimposed sanctions on Iran.
The EU shortly thereafter included the re-imposed extra-territorial US sanctions in its "Blocking Statute" to protect EU companies with direct or indirect business in Iran from the application of renewed US sanctions by prohibiting compliance with these specified sanctions. The Blocking Statute nullifies the effect of foreign court rulings based on certain foreign specified laws and allows EU operators to recover damages caused by the extra-territorial application of those laws. The UK, France and Germany (the E3) created a payment system allowing for trade of certain products, such as pharmaceuticals and agri-food goods, in light of the potential for EU companies to breach US sanctions.
The "snapback" mechanism
The 2015 agreement contained a "snapback" mechanism allowing for sanctions to be reimposed on Iran if any JCPoA participant reported a “significant non-performance of commitments under the JCPoA".
In August 2025, the E3 foreign ministers made a joint statement regarding Iran's failure to meet its JCPoA commitments, citing examples of Iran's uranium enrichment programme, uranium and heavy water stockpiling, and lack of access to its nuclear programme for the International Atomic Energy Agency (IAEA).
This joint statement came just two months after the US launched a series of airstrikes on three of Iran's nuclear sites in June. In the aftermath of these strikes, the E3 foreign ministers agreed that Iran should not be allowed to obtain nuclear weapons.
UK sanctions reimposed
The UK has now made an additional 114 sanctions designations, meaning that a total of 304 individuals and entities are currently designated under the Iran nuclear sanctions regimes. A further eight individuals and entities were designated under the UK's separate Iran human rights sanctions regime, which operates in parallel to the nuclear sanctions, bringing the total number of designations under this regime to 243.
The sanctions imposed by the UN, and subsequently by the UK and EU, are largely focused on Iran's nuclear programme. The people and entities that have been designated include nuclear scientists, members of the Iranian Revolutionary Guard, and the Atomic Energy Organisation, as well as government departments. However, a large number of banks and oil companies connected to the Iranian state have also been sanctioned, and it is likely that these will cause the most disruption to wider markets and businesses with operations or other connections to Iran.
Designation under the UK financial sanctions regime means that UK persons or entities have wide obligations to freeze any accounts, funds or resources belonging to the designated persons or entities, and must avoid dealing with, or providing services to them, unless authorised to do so under a licence or an applicable exemption.
The UK has issued four general licences to enable the winding down of transactions involving certain Iranian banks (both UK and worldwide), UK-based Iranian firms and the Shah Deniz Project (an offshore gas project), but these are due to expire within the next month. The UK has also issued a general licence allowing designated persons or those acting on their behalf to make certain employment and IT or accountancy services related payments.
An evolving landscape
The recent reimposition of sanctions on Iran represents a dramatic shift in the legal and geopolitical landscape – and is likely to result in many Western businesses having to withdraw from the country once again, after a period of UK and EU businesses cautiously returning to do business with Iran. The impact on the oil and gas sector is further amplified by the UK and US' recent sanctioning of Rosneft and Lukoil, the two largest Russian oil companies.
What remains to be seen is whether Iran's other trading partners, notably China, will be deterred by the West's hardened stance and, should Iran continue to flout its UN nuclear commitments, whether we will see a full-scale return to a ban on nearly all dealings with Iran.
For individuals and businesses with assets or operations in the Middle East, now is a key time to refresh your customer due diligence, consider your contractual protections and assess whether you are impacted by the new restrictions. Sanctions can evolve on a daily basis, so it will be important to monitor the changing legal position and seek guidance where needed.