First of all, saying “based on their country of residence” is either grossly uninformed or (most probably) plain dishonest.
Ignoring that, the GPL-freedoms of companies subject to sanctions are still preserved, so… having established that your “free” is not the same “free” as in “free and open source software”, what the hell are you talking about?
It nails a different problem on the head.
You don’t have to convince the US government to allow you access to classified information, you just have to convince a lawyer that their (possibly non-US) client won’t be liable in case you are lying.