“Russia – a sponsor of terror?” What is being prepared in the US Senate and how this could affect Israel

Currently, only Cuba, Iran, North Korea, and Syria are on this list. Brief announcement: A bill has been launched in Washington: Russia will receive the label “state sponsor of terrorism” if it does not return more than 19,000 Ukrainian children. For Israel, this is not a theory — banks, diamonds, exports, and even air traffic will feel the effect.

Introduction

The US is actually preparing a mechanism by which Russia will receive the status of “sponsor of terrorism” if it does not return the abducted Ukrainian children. For Israel, this means tightening compliance, effectively severing remaining economic ties with the Russian Federation, and synchronizing with American sanctions rules.

What exactly is happening in the US

Who and what was introduced

On Thursday, September 11, 2025, senators from both parties Lindsey Graham (Republican), Richard Blumenthal (Democrat), Amy Klobuchar (Democrat), and Katie Britt (Republican) introduced a bill that provides for the inclusion of Russia and Belarus in the list of sponsors of terrorism if they do not return more than 19,000 Ukrainian children taken during the war.

Graham emphasized that getting there is not easy, but Russia’s actions have “earned this right.”

Graham said he had a constructive conversation with the White House and most disagreements have already been resolved. He also plans to discuss with Republican Majority Leader John Thune the issue of bringing the document to a vote.

Graham also stated that congressmen and senators who refuse to vote for the bill will be “made known.”

According to Thune, there is “increased interest” in the Senate in adopting this initiative. Graham himself explained that the new bill opens another front against Russia, which invaded Ukraine and kidnapped thousands of children.

“We will try to create another front against Putin’s Russia. What is the right answer? Do something about it. Let’s as a world stop sitting idly by and make it unacceptable,” he urged.

They urge the US to recognize the Russian Federation as a “state sponsor of terrorism.” The idea simultaneously increases pressure and sets a clear “exit criterion” — return the children.

“What does it mean to be a state sponsor of terrorism under US law? Your economy is radioactive. Doing business with you is at your own risk. We have laws that punish state sponsors of terrorism. It’s hard to get on this list. Russia has earned the right to be on this list. So today we are going to present our bill. We are going to ask the leaders of both parties to give us the opportunity to discuss it and vote on it,” Graham said at the presentation of the initiative.

The senators emphasize that this is about a systemic mechanism, not a political gesture for one day. The official press release speaks of the goal of “exerting maximum pressure for the safe return of children.”

Axios writes about this, emphasizing that against the backdrop of this initiative, a “big bipartisan package of sanctions against Russia is gaining momentum again.”

Why specifically children

The source of the impulse was materials on the deportation of Ukrainian children: from the official initiative Bring Kids Back UA to studies by Yale’s HRL laboratory, which record a network of relocations, “adoptions,” and “re-education” camps. Estimates range from confirmed 19,546 children to possibly ~35,000 missing. As of September 11-12, 2025, Ukraine reported 1,605 returned children.

In addition, in March 2023, the ICC issued arrest warrants for Putin and the Commissioner for Children’s Rights Maria Lvova-Belova — precisely because of the illegal deportation of children. This legal background makes the children’s issue an “anchor” for sanctions escalation.

What does the label “state sponsor of terror” (SST) mean

SST is not just a “political blacklist.”
It is a legal regime that the US State Department assigns based on laws FAA §620A, AECA §40, and export control regulations. From this moment, the country receives a whole set of automatic sanctions.

Main consequences of SST

• Aid ban — most US economic and military support ceases (except for rare humanitarian exceptions).
• Arms embargo — any supply of weapons and military equipment is blocked.
• Technology control — even civilian dual-use goods (such as electronics or software) are subject to strict prohibition.
• Financial sanctions — banks and companies risk secondary sanctions, the country is effectively cut off from the dollar system.

What is added in practice

To the main restrictions are added:

• US Treasury orders through OFAC;
• norms of Executive Order 13224 against terrorism financing.

This means freezing assets, blocking transactions, and visa bans for officials and businesses from the listed country.

Examples

• Iran
• Syria
• North Korea
• Cuba

For these countries, SST status has become a real barrier: they lost access to investments, loans, and modern technologies.

SST is not a symbolic label, but a powerful legal mechanism.

It makes the country toxic for the global economy. Any business working with such a state risks being hit by US sanctions.

Therefore, Washington’s allies, including Israel, are forced to take these rules into account even without formal recognition at home.

What is the current context in Congress

American publications note that there is momentum in the Senate: a large package of Russian sanctions is moving in parallel, with dozens of co-sponsors. The trigger was recent incidents with the violation of Polish airspace by Russian drones. Thus, the “children’s” story fits into a broader context of pressure on Moscow.

Media and Ukrainian resources state: if the law is passed, Russia will join the current “sponsors” like Iran, North Korea, and Syria. But for business, the “consequence regime” is more important than the list.

What Israel will have to do if the status for the Russian Federation comes into force

Experts note that if the US officially recognizes Russia as a state sponsor of terrorism, the following consequences are possible for ordinary Israelis:

• Banks: transfers from Russia will be difficult or completely blocked, account checks will be tightened.
• Flights: direct flights to Russia may disappear, flights will become longer and more expensive.
• Work: in the diamond industry of Ramat Gan, the number of orders will decrease, some companies will lose clients.
• Real estate: Russian buyers will leave the market, and transactions involving them will decrease.
• Insurance and travel: trips to Russia may be without insurance coverage, making them risky.
• Bureaucracy: even for ordinary operations, banks will require more documents and delay transfers.
• Family ties: for those with relatives in Russia, helping with money and visits will become more complicated due to expensive and risky routes.

Recognition as a “state sponsor of terrorism” does not oblige the US to automatically sever diplomatic relations. But the level of contacts sharply decreases: new agreements are blocked, visits are curtailed, economic cooperation freezes. US allies, including Israel, will have to effectively support these restrictions, even if embassies and formal relations are maintained.

1) Banks and finance: “de facto synchronization with OFAC”

Israeli banks live in a dollar ecosystem, with correspondent accounts in the US. SST for the Russian Federation sharply increases the risk of secondary sanctions for foreign financial institutions, so compliance services in Israel will switch to a “no-Russia by default” mode: strict screening of clients/beneficiaries, blocking transfers of Russian origin, and closing trade finance. This follows from updated OFAC advice on risks for foreign banks.

The Bank of Israel already has a regulation on AML/CFT risk management (Directive No. 411), and IMPA is the national financial intelligence center. Based on them, regulators quickly deploy circulars: enhanced due diligence (EDD), reporting suspicious transactions, and “red flags” for sanctions evasion.

2) Legal framework within the country

Israel has two key tools: the Prohibition on Terror Financing Law (5765-2004) and the Anti-Terrorism Law of 2016. They allow freezing assets, prohibiting transactions, and expanding lists of related persons/entities. Under US SST pressure, these mechanisms become the “mandatory minimum” to protect banks from secondary risks.

It is important to understand: even without a formal decision to “recognize the Russian Federation as a terrorist state,” Israel acts through the AML/CFT platform. Dollar settlement dependence and US compliance documents for non-American entities will push the market towards effectively mirroring sanctions.

3) Diamonds: Ramat Gan moves away from Russian raw materials

Since 2024, the G7 and EU have introduced phased restrictions on Russian diamonds, including those “polished” in third countries. The threshold has been lowered to 0.5 carats, and traceability is developing. For Israeli exchanges, this means: Russian stones become toxic assets, and banks do not process payments due to their sanctioned origin.

Even where the regulator allows “exceptions,” compliance risks and origin requirements often make deals impossible. Combined with SST, this practically closes the turnover of Russian diamonds through Israel.

4) Export, technology, and re-export “US-origin”

SST status traditionally strengthens export control on “dual-use” technologies. For Israeli companies, there is an added obligation to carefully check supply chains and re-export: any US-origin software/hardware towards the Russian Federation is a risk. Practically, this means freezing supplies to the Russian Federation and refusing routes through third countries.

Companies in Israel adapt contracts: “no-Russia” clauses, re-export bans, mandatory KYC/UBO checks of counterparties, geoblocks. Otherwise, there is a high risk of “stuck” payments and bank blocks on sanction codes.

5) Investments, funds, and “Russian capital”

Funds with Russian beneficiaries will receive increased filtering. Banks and brokers will require proof of the source of funds and the absence of ties to lists. Suspicious assets — freeze until clarifications from IMPA/courts. Israel has previously worked out this logic in AML/CFT regimes.

6) Aviation and “on-ground” payments

SST itself does not introduce an automatic flight ban, but it hits infrastructure: insurance, leasing, US-origin spare parts, and payments to airports/providers in the Russian Federation fall into the “red zone.” Most often, routes are curtailed not by a legal “ban,” but by the inability to safely and legally service flights.

7) Foreign economic frameworks with the US

Israel has the first-ever Washington Free Trade Agreement (1985) and an active Defense Memorandum for $38 billion (2019–2028). This is not a “sanction agreement,” but a political-economic foundation: ignoring American sanction policy means risking trade preferences and defense programs.

8) What regulators and businesses will do — “checklist”

Israeli regulators:

• Bank of Israel circulars: EDD for Russian Federation risk, KYC/UBO review, suspension of correspondent relations “by risk.”
• IMPA: distribution of “red flags” for evasion, strengthening reporting on suspicious transactions.
• Export control: ban/licensing of “dual-use” goods and services towards the Russian Federation and for re-export.

Banks/fintech:

• Full screening of clients and payments for ties with the Russian Federation/”shells”; refusal of trade finance with Russian origin.
• Blocking dollar, and often euro, transactions at the slightest risk of secondary sanctions; escalation of cases to IMPA.

Companies:

• Inventory of sales and supply geography; re-export ban, mandatory distributor checks in UAE/China/Caucasus.
• For diamonds — evidence-based traceability, otherwise — stop.

What this means in numbers for the Israeli economy

Large direct trade flows with the Russian Federation have almost disappeared for Israel after 2022, but specific sectors will feel the impact. First of all — diamonds (Ramat Gan), where G7/EU restrictions will be joined by the “toxicity” of payments. Next — pharma exports and IT services, which will effectively cease support for Russian clients. Banking compliance costs will rise, and deals with “gray” geography will be automatically rejected.

Conclusions

1. The American bill is not about “symbolism,” but about a tough legal funnel: if you don’t return the children, you will get SST with all the consequences. This is supported by the legal framework of the US State Department and Treasury.
2. For Israel, this means a mandatory compliance turnaround: banks, importers/exporters, and jewelry houses must act as if the sanctions are already here. SST will only accelerate the already ongoing “de-risking” of Russia in the Israeli economy.
3. Politics ≠ economy: Israel may publicly avoid loud formulations, but the financial system, FTA with the US, and the Defense Memorandum create practical dependence on American rules. Therefore, the course towards synchronization is inevitable.

Brief checklist for Israeli business right now

• Recheck counterparties and beneficiaries for Russian Federation risk.
• Include “no-Russia / no-re-export” in contracts.
• For diamonds — include traceability under G7/EU standards.
• Train the team on sanction “red flags.”

Sources and primary materials: official press release of Senator Graham; State Department/OFAC reference on terror regimes; data from Bring Kids Back UA, Children of War, and HRL Yale; EU/US documents on diamonds; Israeli IMPA/Bank of Israel; FTA references and US-Israel Memorandum for $38 billion.

NAnews — Israel News will continue to monitor the development of the bill and its consequences for business and the Jewish community in Israel and abroad.