A New Sanctions Landscape in the Middle East

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) followed President Donald Trump's warning of an "Economic D-Day" on Iran with the August 24, 2026, implementation of additional sanctions designed to "sever the economic lifelines that sustain the Iranian regime and the Islamic Revolutionary Guard Corps (IRGC)." Although the number of new sanctions paled in comparison to the "maximum pressure" campaign initiated last year, the new measures provide a "warning shot" to third countries that continue to deal with Iran.

At the same time, the U.S. Department of State removed Syria's designation as a State Sponsor of Terrorism (SST) and revoked the designation of the al-Nusrah Front, also known as Hay'at Tahrir al-Sham (HTS), as a Specially Designated Global Terrorist (SDGT) organization – signaling that even the most robust economic restrictions imposed by the United States can be removed. After comprehensive sanctions on Syria were revoked in 2025 following the fall of the Assad regime, the country has emerged as a strategic alternative to Iran, providing an overland trade and pipeline corridor that could bypass the Strait of Hormuz.

Iran: Operation Economic Outcast

The Treasury Department described "Operation Economic Outcast" as a whole-of-government economic campaign aimed at cutting off Iran's financial and commercial networks worldwide, although the measures paled in comparison to prior rounds of sanctions. The Treasury Department expanded secondary sanctions risks for third countries doing business with Iran, indicating that the pace of U.S. enforcement would increase and that third countries had a "defined timeline" to end Iran-related activity. China, Turkey and the United Arab Emirates (UAE) are Iran's largest trade partners, and the UAE announced that it had suspended all trade and financial transactions with Iran until further notice.

The August 24 action included the following:

• expanded categories of Iran-related conduct that may be subject to secondary sanctions, including determinations pursuant to Executive Order 13902 of five sectors: digital assets, technology, gold, aviation and shipping
• designations of nearly 60 entities, individuals and vessels in multiple jurisdictions, including those involved in illicit nuclear and missile technology procurement, cyber operations and oil revenue generation networks
• suspension of five broad authorizations (or general licenses) that previously allowed certain remittance payments to Iran and Iranian access to cultural and academic activities
• additional guidance on sanctions risks related to shipping in the Strait of Hormuz. OFAC warned that U.S. and non-U.S. persons risk sanctions – including secondary sanctions and civil or criminal liability – by engaging with Iran's designated entities or paying "tolls" for passage through the Strait of Hormuz; companies with exposure to these maritime risks should conduct enhanced due diligence and consider voluntary self-disclosure of any past activity

Syria: Removal of SST Designation

Also on August 24, the State Department removed Syria's SST designation, having informed the U.S. Congress of the administration's intent to rescind the designation last month.

Until 2025, Syria was subject to punishing U.S. sanctions imposed in response to the Bashar al-Assad regime's violent repression of civilians, support for terrorism and weapons proliferation-related activities. Following the fall of the Assad regime in late 2024 and subsequent actions by the new Syrian authorities, the U.S. revoked comprehensive sanctions targeting Syria and replaced them with more targeted measures on members of the former Assad regime and supporters of terrorism.

The State Department also revoked the SDGT designation of the HTS, and OFAC removed HTS from the Specially Designated Nationals and Blocked Persons List.

Concurrently, the U.S. Departments of Commerce, State and Treasury issued an updated Tri-Seal Advisory regarding sanctions and export controls relief for Syria. With respect to export controls, the recission of Syria's SST designation will allow for the Commerce Department's Bureau of Industry and Security (BIS) to remove Syria from the Export Administration Regulations (EAR) Country Group E, relaxing a blanket export license requirement for items on the Commerce Control List whose reason for control is Anti-Terrorism (AT) and allowing exporters to utilize additional license exceptions that were previously unavailable. It will also allow BIS to raise the EAR's de minimis threshold for U.S.-origin content in foreign-made items destined for Syria from 10 percent to 25 percent, narrowing the scope of items that would be considered subject to the EAR when exported to Syria.

The Tri-Seal Advisory notes that following the August 24 rescission, "further regulatory adjustments to the Export Administration Regulations (EAR) are expected" from the Commerce Department and also notes that "the Department of State will publish a regulatory amendment to the ITAR eliminating the policy of denial for licenses and other approvals for exports and imports of defense articles and defense services destined to or originating in Syria, once all relevant statutorily imposed restrictions are resolved."

Syria has emerged as a strategic alternative to Iran, providing an overland trade and pipeline corridor that could bypass the Strait of Hormuz.

Holland & Knight Can Help

Holland & Knight's International Trade Group is monitoring these developments closely. For any questions about the potential impact to your business, contact the authors.