In response to recent events in Syria and in order to place increased pressure on the Syrian regime, the United States government has imposed new sanctions on transactions involving Syria, the government of Syria and Syria’s energy sector. On August 18, 2011, President Obama signed an Executive Order “Blocking Property of the Government of Syria and Prohibiting Certain Transactions with Respect to Syria” (the “EO”). Further, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) placed several Syrian state-owned entities in the energy sector on its Specially Designated Nationals and Blocked Persons List (“SDN List”). OFAC has also issued General Licenses authorizing certain activity covered by the EO.
The primary impacts of the EO are as follows:
Blocking Property of the Government of Syria
- The EO blocks the property and interests in property of the Government of Syria, including its “agencies, instrumentalities, and controlled entities.”
- Such property and interests in property cannot be “transferred, paid, exported, withdrawn or otherwise dealt in” pursuant to the EO.
- The EO makes clear that the blocking provisions prohibit the provision of funds, goods or services to, or the receipt of funds, goods or services from, the government of Syria or any entity owned or controlled by the government of Syria.
- The EO therefore effectively bars any unlicensed payment from the U.S. or a U.S. person1 to the government of Syria in the form of taxes, import or export duties, payment of utilities, commissions, registration fees, or any other governmental fees while the sanctions are in effect.
- Companies currently in possession of blocked property may be subject to OFAC’s reporting and recordkeeping requirements.
Prohibiting the Provision of Services, New Investments and Facilitation by U.S. Persons
- The EO broadly expands the existing export and reexport ban against Syria by prohibiting the provision of any services from the United States or by U.S. persons to Syria.
- The EO also bans new investment in Syria by U.S. persons.
- The EO prohibits U.S. persons from approving, financing or otherwise facilitating transactions that a U.S. person would not be permitted to engage in directly.
Prohibiting Certain Transactions in the Energy Sector
- The EO targets the Syrian energy sector by prohibiting the importation into the United States of, and any transaction or dealing by U.S. persons related to, petroleum and petroleum products of Syrian origin.
- This provision defines covered transactions broadly, including “purchasing, selling, transporting, swapping, brokering, approving, financing, facilitating or guaranteeing.”
- The EO therefore effectively bars U.S. persons, wherever located, from engaging in unlicensed transactions involving the Syrian petroleum industry while the sanctions are in effect.
In conjunction with the EO, OFAC took the following additional actions:
Designation of Specific State-Owned Entities
- OFAC has placed several Syrian state-owned entities in the energy sector on its Specially Designated Nationals and Blocked Persons List (“SDN List”).
- Among them are the General Petroleum Corporation, which controls Syria’s oil and gas industry, Syrian Petroleum Company, which is responsible for the country’s upstream oil production and development, and Sytrol, which markets and sells Syrian crude to foreign buyers.
- The Syrian Company for Oil Transport and Syrian Gas Company have also been placed on the SDN List.
- As a result of these designations, U.S. persons are prohibited from engaging in transactions involving any of these entities, and assets these entities may have under U.S. jurisdiction are frozen.
Issuance of OFAC General Licenses
- General License No. 1: Authorization of the provision of and payment for goods or services in the United States to the diplomatic missions of the Government of Syria to the United States and the United Nations.
- General License No. 2: Authorization of the provision of certain legal services with respect to Syria.
- General License No. 3: Authorization of U.S. financial institutions to debit blocked accounts held at those financial institutions in payment or reimbursement for “normal service charges” owed by the owner of that blocked account.
- General License No. 4: Authorization of the exportation or reexportation of items licensed or otherwise authorized by the Department of Commerce to the government of Syria or to persons whose property and interests in property are blocked pursuant to executive order.
- General License No. 5: Authorization of the exportation to Syria of certain services incident to internet-based communications, provided that such services are publicly available at no cost to the user.
- General License No. 6: Authorization of U.S. depository institutions, U.S. registered brokers or dealers in securities, and U.S. registered money transmitters to process transfers of funds for noncommercial, personal remittances to or from Syria.
Please note that the preexisting U.S. government ban on the export or reexport to Syria of goods, technology or software subject to U.S. export jurisdiction continues in effect.