Legal Limbo: Surviving the US-EU Sanctions Tug of War

As geopolitical tensions intensify and sanctions become an increasingly prominent tool of foreign policy, multinational organisations are grappling with the complexities of complying with divergent sanctions regimes. Among the most significant challenges is navigating the growing divergence between US and EU sanctions, especially in terms of listing criteria and delisting mechanisms. These differences are not just technical distinctions. They create substantial compliance risks, legal uncertainties and reputational exposures for global firms operating across jurisdictions.

Diverging Philosophies: Political Instrument vs Legal Measure

At the heart of the divergence is a fundamental difference in the nature and purpose of sanctions in each regime. The US, through the Office of Foreign Assets Control (OFAC), applies sanctions primarily as an instrument of foreign policy. The US model is inherently strategic, often unilateral, and underpinned by executive discretion. Listings are based on broad national interest grounds, with expansive definitions such as 'threats to national security' which enable rapid action against designated persons, entities or sectors.

In contrast, the EU treats sanctions as legal measures subject to judicial oversight and proportionality principles. EU sanctions are adopted through a complex legislative process involving unanimous agreement by all Member States. Listing criteria must be explicitly tied to the objectives of the relevant Council Decision or Regulation. This procedural formality reflects the EU’s emphasis on rule of law. However, it also means that its sanctions architecture is slower, more predictable and arguably more restrained.

The Trump Legacy: Renewed Divergence in the First 100 Days

While sanctions divergence between the US and EU is rooted in longstanding structural differences, the early days of President Trump’s second term have already accelerated that rift. Although the first 100 days of his renewed presidency have not introduced sweeping new sanctions frameworks, the tone is once again unmistakable. The Trump White House has reaffirmed its preference for aggressive unilateralism, favouring economic coercion over coordinated multilateral diplomacy.

This approach builds directly on precedents set during his first term, particularly the 2018 withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and the reimposition of secondary sanctions on Iran. Those measures led the EU to revive and strengthen its Blocking Statute, creating long-standing tension between US and EU frameworks. Even before that, Trump’s administration had relied heavily on broad Executive Orders and discretionary listing powers that disrupted compliance certainty worldwide.

In this second term, OFAC listings have already expanded rapidly, often without prior coordination with international partners. New measures targeting Chinese tech firms, Russian financial intermediaries and sanctioned shipping networks reflect a return to unilateral assertiveness. The EU, maintaining its commitment to legal proportionality and judicial redress, remains cautious and process-driven by comparison. This renewed divergence, signalled clearly in Trump’s first 100 days back in office, is reshaping the compliance landscape once again, forcing global firms to navigate increasingly conflicting legal regimes.

Listing Criteria: Breadth vs Specificity

OFAC’s listing criteria are characteristically broad, enabling the US to impose sanctions swiftly in response to perceived geopolitical threats. Executive Orders such as EO 14024 (targeting Russia) and EO 13818 (Magnitsky sanctions) allow designations based on wide-ranging justifications, including corruption, human rights abuses and destabilising activities. Moreover, OFAC can impose secondary sanctions, penalising non-US persons for engaging with sanctioned entities, even where the conduct is lawful under local law.

In contrast, EU listings require a demonstrable link to specific conduct and a clear legal basis under EU law. Individuals and entities must be shown to meet the precise conditions set out in the relevant sanctions legislation. This narrower scope limits arbitrary or political listings but also restricts the EU’s agility in imposing sanctions quickly. It also means that individuals and businesses can challenge listings before the General Court of the European Union, a right unavailable under the US system.

Delisting Mechanisms: Transparency & Redress

The process for delisting also reveals stark differences in approach. OFAC’s delisting process is opaque and highly discretionary. A designated party may submit a request for reconsideration under 31 CFR 501.807, but OFAC is under no obligation to respond within a fixed timeframe or to provide substantive reasons for its decisions. Appeals are not subject to judicial review unless there is a constitutional claim, which is difficult to establish. In practice, delisting from the US SDN list can take years, if it happens at all.

The EU regime, by contrast, incorporates more transparent delisting procedures. Listed parties must be given reasons for their designation and may apply to the Council for removal. Critically, they also have recourse to judicial review before the General Court. This legal remedy has led to numerous annulments of EU listings on procedural and evidentiary grounds, including high-profile cases such as Yukos and Rosneft. While this judicial oversight enhances legitimacy, it also weakens the EU’s ability to maintain politically sensitive designations when legal thresholds are not met.

Multinational Compliance Risks

The divergence between OFAC and EU sanctions presents acute challenges for multinational compliance programmes. Companies with global operations must navigate dual obligations that are not only different but occasionally in direct conflict. For example, an entity may be subject to OFAC sanctions but not listed under the EU regime, forcing EU-based firms to choose between complying with US secondary sanctions or violating EU Blocking Statute provisions.

The EU Blocking Statute (Regulation 2271/96) prohibits EU firms from complying with certain extraterritorial US sanctions and nullifies the legal effect of foreign judgments enforcing them. This places companies in an impossible position. Either they risk US penalties for non-compliance or EU enforcement for compliance. The rise in unilateral US designations, particularly against entities in Iran, Russia and China, has only sharpened these dilemmas.

Moreover, the practical aspects of compliance such as screening, due diligence, contract management and reporting, are complicated by inconsistent list formats, differing identifiers and varying definitions of ownership and control. The challenge is not just knowing who is on a list, but determining whether indirect exposure through subsidiaries or beneficial owners triggers restrictions under one or both regimes.

The Case for Greater Harmonisation

For multinational firms, the lack of harmonisation between OFAC and EU sanctions creates regulatory fragmentation, increases compliance costs and raises the risk of enforcement action. There is a growing call for transatlantic cooperation to align sanctions policy more closely, particularly in relation to Russia, where unity is politically essential.

While full convergence may not be realistic given the institutional differences between the US and EU systems, targeted coordination such as common definitions, clearer ownership rules and shared due diligence guidance, could significantly ease the compliance burden.

Conclusion: Between Two Powers, One Compliance Dilemma

The renewed divergence between OFAC and EU sanctions regimes in the opening phase of President Trump’s second term is not simply a matter of legal nuance. It is a strategic fault line with tangible operational and reputational risks for multinational firms. As the US reasserts a unilateral, hardline approach, and the EU maintains a rule-of-law-based model with judicial safeguards, global businesses are caught in the middle.

In this environment, there is no room for passive compliance. Firms must adopt sanctions strategies that are agile, intelligence-led and jurisdiction-aware. Dual screening, conflict-of-law analysis and political risk forecasting are no longer optional but essential. Compliance teams must prepare not just to follow the rules, but to defend their choices in forums where those rules may be in direct contradiction.

As sanctions continue to evolve into frontline instruments of geopolitical influence, the cost of divergence will not only be legal exposure but strategic misalignment. Navigating this fragmented landscape requires more than regulatory interpretation. It demands foresight, coordination, and the courage to operate between competing sovereign wills.

Struggling to Navigate Sanctions Divergence?

Are conflicting US and EU sanctions pulling your compliance team in opposite directions? As the geopolitical climate hardens and enforcement risk intensifies, guessing your way through OFAC and EU divergence is no longer an option.

OpusDatum is here to help. Our specialist team delivers clear, actionable guidance grounded in decades of cross-border financial crime expertise. We help multinational firms build sanctions frameworks that are resilient, defensible and strategically aligned with today’s complex global environment.

Whether you need to assess risk exposure, benchmark controls, or respond to rapidly changing sanctions, we bring clarity where others see only confusion.