United States: U.S. Imposes "Unprecedented Sanctions" Against Syrian Regime

On August 18, 2011, President Obama issued an Executive Order imposing far-reaching sanctions that effectively prohibit U.S. companies or individuals from conducting most business with Syria. The long anticipated sanctions are directed against the Syrian regime of President Bashar al-Assad. As part of the United States' effort to pressure Assad to "get out of the way" of a democratic transition, the U.S. seeks to isolate the regime financially and further disrupt its ability to finance violence against the Syrian people. Notable prohibitions applicable to U.S. persons, wherever located, include restrictions on providing services to Syria and restrictions on transactions or dealings involving the Syrian petroleum industry.

The August 18 Executive Order represents a continuation and expansion of sanctions involving Syria. Beginning in December 1979, the U.S. designated Syria as a State Sponsor of Terrorism. In 2004, the U.S. imposed sanctions under the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003, which included a general ban on exports from the U.S. to Syria and specifically prohibited the export or re-export to Syria of any item on the U.S. Munitions List or the Commerce Control List (except food and medicine). The sanctions also blocked the property of certain persons whose activities, for various reasons, were contrary to U.S. national security and foreign policy interests. Over the years, additional persons were subject to the blocking order but the overall scope of the sanctions did not change. After the unrest in Syria began in March 2011, the U.S. once again blocked the property of additional persons in April 2011 for their role in human rights violations. In May 2011, the U.S. directly targeted the Syrian government by blocking the assets of the Syrian government (including any owned or controlled entities or entities acting on the government's behalf) as well as certain Syrian government officials. The U.S. Department of Commerce also suspended export licenses related to Syrian Air's Boeing aircraft and has revoked licenses for Syrian official VIP aircraft.

The Executive Order signed by President Obama on August 18 includes the following measures:

• Property Blocked. All Syrian government property and interests in property that come within the U.S., or within the possession or control of any U.S. person, are blocked. The property and interests in property of any person that has materially assisted a blocked person, and of any person owned or controlled by a blocked person, are also blocked. Blocked property may not be transferred, paid, exported, withdrawn, or otherwise dealt in. In connection with this prohibition, five new Syrian entities — General Petroleum Company, Syrian Company for Oil Transport, Syrian Gas Company, Syrian Petroleum Company, and Sytrol — have been added to the Office of Foreign Assets Control's (OFAC's) list of Specially Designated Nationals. Additional entities could be added at any time and without prior notice.
• Prohibition on New Investment. The new sanctions prohibit U.S. persons, wherever located, from making any new investments in Syria.
• Prohibition on Providing Services. The export, re-export, sale, or supply, directly or indirectly, of any services from the U.S. or by a U.S. person, wherever located, to Syria is prohibited.
• Prohibitions Related to Syrian Petroleum Products. The Executive Order prohibits the importation into the United States of petroleum or petroleum products of Syrian origin. It also prohibits any transaction by a U.S. person, wherever located, related to petroleum or petroleum products of Syrian origin, including purchasing, selling, transporting, swapping, brokering, approving, financing, facilitating, and guaranteeing.
• Prohibition on Facilitation. The sanctions prohibit U.S. persons from approving or facilitating a transaction by a foreign person if a U.S. person would be prohibited from performing the same transaction. Transactions by U.S. persons that are designed to evade or avoid the sanctions are also prohibited.
• U.S. Government Transactions Authorized. Transactions "for the conduct of the official business of the Federal Government by employees, grantees, or contractors" are not prohibited.

Although the Obama administration has described the new sanctions against Syria as "unprecedented," they share a number of important similarities with some of the other U.S. sanctions regimes, including those imposed on nearby Middle East and African nations. For example, the Syrian sanctions are targeted against the government, as is the case with sanctions directed against Iran, Libya, and Sudan. The Syrian sanctions also specifically target the petroleum industry as is the case with Iran and Sudan explicitly (and Libya implicitly, due to the country's reliance on the petroleum industry). While the Syrian sanctions restrict imports of petroleum products, the Iran and Sudan sanctions contain general import prohibitions. Finally, the Syrian sanctions prohibit the provision of services and new investment, as is the case with the Iran sanctions.

We anticipate that in the near future OFAC will begin issuing additional guidance and perhaps a number of general licenses (as the agency recently did with Libya) to account for certain financial and commercial repercussions that undoubtedly will result from the Syrian sanctions. In the meantime, due to the overarching effect of the new prohibitions, combined with pre-existing prohibitions that include restrictions on exports of products and technology, U.S. companies with any business related to Syria should be mindful of the sanctions.

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