I had the same experience as the OP.
Having lost my wallet, I cancelled my cards and requested three new cards from Lloyds - an MBNA (UK card business now owned by Lloyds) credit card, a Lloyds UK credit card and a Lloyds UK debit card. The two credit cards arrived in Thailand without any problem, but I received the same 'embargo' letter in relation to the debit card. As I was due to visit the UK a few weeks later, I called to arrange for that card to be sent to a branch - needless to say, it didn't arrive there either, despite Lloyds' systems apparently showing that it had been sent there.
As I also have accounts with Lloyds International, I called my relationship manager there to ask if he knew anything about such an 'embargo'. He confirmed my understanding that there are only 5 formally embargoed countries - Iran, Syria, North Korea, Cuba and the Russian-held areas of Ukraine - and that to his knowledge there were no other countries declared or treated as embargoed by Lloyds. He couldn't explain why I received such a letter.
Regarding UK accounts held by non-residents, most if not all UK banks require a UK address for opening an account but retaining UK accounts as a non-resident depends on the individual bank's policy. In my experience, Barclays cancelled my account referring to their 'know your customer' process, despite me banking with them for 42 years! Lloyds were happy for the UK accounts to be retained, and my teenage son was able to retain his UK account at HSBC.