Aviation Finance: 2025 Sanctions Update and 2026 Outlook

Export controls and economic sanctions have remained an active and evolving area of laws and regulations that continue to impact the aviation industry in 2025 – both contributing to and arising as a result of an increasingly uncertain global geopolitical landscape. Since assuming office in January 2025, President Donald Trump has significantly relaxed sanctions on Syria while continuing to target China through U.S. export control regulations, albeit in an oftentimes uneven manner that is also significantly impacted by larger U.S.-China trade negotiations. The European Union has also forged ahead in adopting its 18th package of economic sanctions measures against Russia's energy, banking and military sectors as it continues to ramp up pressure on Russia to end the war in Ukraine. Many recent developments in the regulatory landscape (as well as companies' ongoing compliance with existing regulations such as Article 12g of Council Regulation (EU) No 833/2014) continue to necessitate that companies in the aviation industry have adequate compliance programs and due diligence processes in place. The sections that follow highlight key recent developments in 2025 that impact aviation finance and leasing transactions, as well as lessons that can be learned as companies look forward to 2026.

Russia Sanctions and Export Control Restrictions

Following Russia's invasion of Ukraine in 2022, the U.S. and EU have both implemented sanctions and export controls-related measures against Russia and Belarus, which has assisted Russia in its wartime efforts. In particular, the EU imposed no Russia and Belarus contractual prohibition requirements on EU exporters (including sellers and lessors of aircraft, engines and parts) in Article 12g of Council Regulation (EU) No 833/2014 and Article 8g of Council Regulation (EC) No 765/2006, respectively. Aircraft leasing companies, along with maintenance, repair and overhaul firms (MROs) and airlines alike have continued to develop their form sanctions language (or determined what constitutes acceptable language given current flight operations) in response to the EU regulations. Negotiating the specific contractual prohibition clauses remains a key point in aviation finance and leasing transactions.

While the EU has recently adopted its 18th package of economic sanctions measures against Russia, the Trump Administration's actions against Russia have been more inconsistent. The Trump Administration previously threatened a range of punitive measures for Russia's ongoing war in Ukraine, from sanctions on Russia's "shadow fleet" of oil tankers to secondary tariffs of up to 100 percent on countries that still trade with Russia. However, President Trump has most recently backed away from such threats following his summit with Russian President Vladimir Putin in Alaska on Aug. 15, 2025. Thus, any potential for additional U.S. sanctions against Russia is subject to change and must be considered against the backdrop of larger U.S. efforts to secure a peace deal in Ukraine.

Despite such developments, the U.S. has continued to require a license to export, reexport or transfer (in-country) to or within Russia or Belarus any item subject to the U.S. Export Administration Regulations (EAR) and specified on the Commerce Control List. While the License Exception Aircraft, Vessels and Spacecraft (AVS), commonly known as the "temporary sojourn" exception, remains available for flights to Russia that comply with the relevant conditions under 15 C.F.R. § 740.15, U.S. government agencies continue to focus enforcement efforts on the illegal smuggling of U.S.- origin aircraft parts to Russia. Specifically, in April 2025, as a result of a joint investigation between the U.S. Department of Commerce's Bureau of Industry and Security (BIS) and FBI, a Russian national was sentenced to 70 months in prison for his role in a conspiracy to export controlled aircraft parts and components from U.S. suppliers to Russia and launder money in connection with such scheme. In addition, in February 2025, an Israeli freight forwarder was sentenced to two years in prison for illegally exporting aircraft parts and avionics equipment from U.S. manufacturers and suppliers to Russia, including for the benefit of certain sanctioned Russian airline companies. Such smuggling schemes oftentimes involve a sophisticated network of freight forwarders, shell companies and third-country parties that obscure the ultimate destination for such aircraft parts and components. The heightened U.S. enforcement focus on the illegal export of U.S. aircraft parts to Russia will likely continue in 2026 and is yet another reason companies should ensure screening and due diligence processes remain robust and are able to identify red flags in any potential transaction.

China Military End User Restrictions

In recent years, the U.S. has become increasingly focused on controlling exports to China and Hong Kong, especially in high-tech industries such as semiconductors and, more recently, aircraft engines and parts and avionics equipment. Though the export of U.S.-origin aircraft engines, parts and equipment to civilian end users in China is generally not subject to U.S. export licensing requirements, the EAR in 15 C.F.R. § 744.21 prohibits the export, reexport or transfer (in-country) of civil aircraft parts and components if such items are for a "military end-use" or a "military end-user" in China (among other countries). The terms "military end-use" and "military end-user" are defined broadly, and the Military End-User List in the EAR is not exclusive. As a result, if certain Chinese entities or counterparties engage in both civil and military activity (i.e., Chinese MROs who may service both civilian aircraft and military assets) or have ties to the military (i.e., the Commercial Aircraft Corp. of China (COMAC)), there is an increased risk that transactions with such entities could be scrutinized.

In recent months, the Trump Administration has reportedly suspended export licenses to GE Aerospace for the sale of aircraft engines to COMAC but then subsequently permitted GE to restart such shipments following ongoing trade negotiations with China. There have also been further reports of the Bureau of Industry and Security (BIS) notifying U.S. companies that certain of their aircraft parts or avionics equipment destined for China now require a license for export due to the risk of such items being exported for a "military end-use" in China. U.S. measures against the export of U.S.-origin aircraft parts and equipment to China are constantly evolving and remain subject to larger negotiations with China on trade policy. However, the EAR grants BIS broad authority to restrict such exports if the U.S. views there to be a risk that such exports will be destined for a military end use or military end user in China. This is in addition to the U.S. Department of the Treasury's and U.S. Department of Defense's inclusion of certain Chinese aviation entities, including COMAC, on other lists that restrict U.S. investment or impose restrictions on such entities participating in U.S. defense contracts. Potential inclusion on these other restricted party lists could also constitute a red flag that such entities may be considered a military end user by BIS. As a result, U.S. companies should continue to closely monitor developments and conduct adequate due diligence on any exports destined for China.

Lifting of Syria Sanctions

On June 30, 2025, President Trump issued Executive Order (EO) 14312, which removed U.S. sanctions on Syria effective July 1, 2025, following the Treasury Department's Office of Foreign Assets Control's (OFAC) previous issuance of General License 25, which had authorized transactions otherwise prohibited by the Syrian Sanctions Regulations. Sanctions, however, remain on Bashar al-Assad and his associates, human rights abusers and persons linked to Syria's past proliferation activities, among other parties. The EO also directed further actions to be taken, including with respect to Syria's State Sponsor of Terrorism designation that, once finalized, will revoke the vast majority of U.S. trade restrictions imposed on Syria. Thus, at this time, the full impact of the EO on U.S. export controls restrictions on Syria remains unclear and the comprehensive controls on exports to Syria under the EAR appear to remain in place. The EU has similarly lifted most of its economic sanctions against Syria.

As a result of recent developments, there has been an uptick in requests from airlines to aircraft lessors to operate flights to Syria. While U.S. sanctions against Syria have been removed, as noted above, comprehensive U.S. export controls remain on Syria at this time. The temporary sojourn exception under the EAR remains available for flights to Syria; however, the exception is quite restrictive with respect to the export of U.S.-origin spare parts to Syria, which may significantly limit the ability of airlines to recover aircraft on ground (AOG) in Syria. That, coupled with potential issues in obtaining adequate insurance coverage for flights to Syria, may cause aircraft lessors to more closely scrutinize such requests.

Conclusion

Due to the ever-changing geopolitical landscape, companies in the aviation industry should remain vigilant and closely monitor regulatory changes. In addition, companies should ensure their compliance programs remain robust and that employees are conducting sufficient screening and know your customer (KYC) diligence on new counterparties in transactions. Any red flags or sanctions risks should be adequately addressed before proceeding with such transactions. In addition, each company should continue to review and update required or best practice sanctions language in its agreements.