What Founders Need to Know About Sanctions, Trade Bans, and Political Risk

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The 2022 invasion of Ukraine prompted major firms like Oracle and Microsoft to exit the Russian market. Smaller tech startups were less prepared. Grammarly, founded by Ukrainians with a global user base, had to cut off access in Russia and Belarus to meet sanctions and stay true to its values — despite having many users there. It wasn’t a planned move but a response to sudden geopolitical pressure.

Sanctions, trade bans, and political risk have become central to startup strategy. If you operate across borders, you need a system to spot and manage these threats early.

The Global Chessboard Is Shifting

Sanctions and trade bans are no longer just a multinational issue. Startups now face exposure through global users, cross-border operations, and remote teams — often without realizing it.

Consider these global shifts:

• Sanctions as a core foreign policy tool — The U.S. issued over 17,000 new designations in 2022–2023, compared to just hundreds per year in the past decade.
• Fragmentation of global markets — U.S.–China tensions, the Russia–Ukraine war, and tech sovereignty efforts have created new fault lines.
• Regulatory expansion — Compliance expectations now extend to early-stage companies.

If you’re raising capital, expanding internationally, or working with sensitive tech, understanding these dynamics is essential.

Cut Through the Jargon: What You’re Dealing With

Understanding key terms helps you evaluate your exposure quickly and avoid surprises when entering new markets or dealing with international partners. These aren’t abstract legal concepts — they directly affect product access, payments, partnerships, and investor relationships. 

Sanctions

Sanctions refer to legally binding prohibitions issued by state or multilateral authorities against specific countries, organizations, or individuals. They can block all activity with a nation like North Korea or target specific people, industries, or assets. Comprehensive sanctions stop nearly all business with a country. Targeted sanctions focus on certain entities or sectors. Violations can freeze your transactions, trigger investigations, and damage access to partners or markets.

Trade Bans

A trade ban limits international commerce by blocking certain items from being sold or transferred across borders. Governments often use them in response to national security threats or human rights issues. Common targets include AI tools, chips, and crypto infrastructure. Startups that ignore trade bans may face criminal charges, large fines, or blacklisting that disrupts growth and investor confidence.

Political Risk

Political risk refers to any uncertainty that arises from political changes, conflict, or instability. This includes:

• Regulatory overhauls
• Currency controls
• Government seizures of assets
• Civil unrest

Your business becomes vulnerable when you depend on infrastructure, talent, or markets in unstable or unpredictable jurisdictions.

Where Startups Face Elevated Sanctions Risk

Certain industries and markets are high-risk by nature. If your startup touches any of the following areas, step up your awareness and screening processes.

High-Risk Industries Under Scrutiny

Some verticals attract heightened regulatory attention due to their potential for misuse or their role in sensitive global dynamics:

• Cryptocurrency platforms: Frequently used to evade financial sanctions.
• Fintech and neobanking: Exposed through international transaction channels.
• AI and dual-use technologies: Subject to export restrictions even when used for civilian purposes.
• Logistics and shipping: High exposure to embargoes and customs detentions.

These industries face complex regulations, where even minor compliance errors can result in blocked payments, frozen assets, or lasting reputational harm.

Volatile Regulatory Environments

Geography matters. Countries like Russia, Iran, and Belarus are subject to ongoing sanctions linked to geopolitical tensions. Venezuela and North Korea remain under long-standing embargoes. In parts of Africa, South Asia, and the Middle East, legal conditions can shift with little notice, which impacts licensing, financial flows, and operational stability.

Founders targeting international growth should assess risk at the country level, not just the market size. One way to reduce risk exposure is to open company in Bulgaria, where you gain EU access, regulatory stability, and a more neutral geopolitical footprint, especially valuable if you’re working in high-risk sectors.

Red Flags You Shouldn’t Ignore

Beyond your industry and region, operational indicators often reveal hidden compliance risks. These signals typically appear in your data, transactions, infrastructure, or partnerships.

If any of these signals appear in your operations, treat them as a prompt for immediate review — not a problem to deal with later. Early action is far less costly than regulatory fallout.

3 Startup-Smart Strategies for Mitigating Political Risk

Risk doesn’t mean avoidance; it means strategic insulation. Founders can set up a leaner, smarter framework to anticipate and absorb shocks.

1. Diversify Your Market and Supply Base

Relying on a single region increases exposure to geopolitical risks. Founders should expand supply chains across multiple jurisdictions and choose cloud platforms that allow flexible data residency. Aligning your market strategy with a political risk map helps identify safer growth opportunities.

2. Establish Legal and Operational Flexibility

The choice of incorporation jurisdiction affects how a startup navigates sanctions and trade restrictions. Choosing stable regions with strong international ties reduces operational risks. Options include Bulgaria for its EU membership and favorable tax environment, UAE Free Zones with business-friendly regulations, and Estonia’s e-Residency program for digital entrepreneurs. Align your corporate structure with your risk profile and growth strategy to stay flexible.

3. Use Political Risk Insurance

While more common among larger firms, political risk insurance is accessible to some startups through specialty brokers. It covers events like expropriation, war, or currency inconvertibility. This protection can be essential for businesses with physical infrastructure or ongoing contractual obligations abroad.

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Cover Photo by RDNE Stock project