In the latest of a series of steps to strengthen sanctions against the regime of Syrian President Bashar al-Assad, the United States Government announced a substantial expansion of sanctions against Syria effective on August 18, 2011. These new sanctions will affect the activities of US citizens, US residents, and US businesses (collectively, “US Persons”) not only with the Syrian government but also with Syrian customers, suppliers, and financial institutions.
The United States first imposed sanctions on Syria in 1979, when it was designated a state sponsor of terrorism. Additional sanctions were imposed in 2004 under the Syria Accountability and Lebanese Sovereignty Restoration Act, which had been enacted the previous year. During the past six months of protests in Syria, the US Government has intensified the economic pressure on the Syrian regime by freezing the assets of, and prohibiting US persons from doing business with, 32 Syrian and Iranian entities and individuals, including Syrian officials, Syrian businesses, and, on August 10, the Commercial Bank of Syria and its subsidiary, the Syrian-Lebanese Commercial Bank.
The new sanctions announced on August 18 (see http://www.treasury.gov/resource-center/sanctions/Programs/Documents/syria_eo_08182011.pdf) include the following:
- freezing the assets of the Government of Syria (including its agencies, its instrumentalities, and its controlled entities) that are subject to US jurisdiction;
- freezing the assets of several additional Syrian individuals and entities, including major petroleum-related businesses (see http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110818.aspx);
- prohibiting new investments in Syria by US Persons;
- prohibiting the exportation, reexportation, sale, or supply, directly or indirectly, of any services to Syria from the United States or by a US Person (supplementing an already existing ban on the exportation or reexportation to Syria of US-origin goods, software, and technology);
- prohibiting the importation into the United States of any Syrian-origin petroleum or petroleum products;
- prohibiting US Persons from engaging in any transactions relating to Syrian-origin petroleum or petroleum products, including purchasing, selling, transporting, swapping, brokering, approving, financing, facilitating, or guaranteeing such transactions;
- prohibiting US Persons from contributing funds, goods, or services to, or receiving contributions of funds, goods, or services from, the Government of Syria or any designated persons; and
- prohibiting US Persons from facilitating any transactions by foreign persons that could not be undertaken directly by US Persons.
These new sanctions have yet to be expressed in administrative regulations, which eventually will be promulgated by the US Department of the Treasury’s Office of Foreign Assets Control, so the interpretation of some of these provisions remains uncertain. Nevertheless, prudent US businesses, including their overseas branches, as well as US citizens and residents wherever located, should examine activities relating to Syria carefully to ensure their compliance with the new sanctions. In particular:
- US businesses with operations in Syria should not make new investments in those operations until clarity about the scope of the “new investments” prohibition is obtained.
- US businesses with contracts or other dealings with Syrian entities or individuals should be certain that none of those entities or individuals is designated under the Syria sanctions, or is an instrumentality or controlled entity of the Government of Syria; US businesses should also avoid any dealings relating to Syrian-origin petroleum or petroleum products and any dealings that call for US financing or other facilitation.
- US financial services firms, including banks, brokers, and insurers, should avoid any transactions with the Commercial Bank of Syria, with any other designated entities or individuals, and with any entities or individuals in Syria, because the prohibition against the exportation to Syria of services likely extends to financial services.
- US financial services firms should avoid swapping, brokering, financing, guaranteeing, or otherwise facilitating transactions involving Syrian-origin petroleum and petroleum products.
- US transportation firms should avoid providing marine or other transportation and related services for Syrian-origin petroleum and petroleum products.
- US citizens and residents, whether located in the United States or abroad, who are employed by firms engaged in Syria-related transactions should be careful not to facilitate transactions that are prohibited to US Persons.
- Although foreign subsidiaries of US companies are not directly subject to the new sanctions, a US parent company should refrain from facilitating the Syria-related business of a foreign subsidiary if that business would be prohibited to the US parent company. Operational, managerial, or financial support of Syria-related transactions could be considered facilitation.
- Foreign firms should consider whether to adjust their practices where their Syrian-related business involves any US Persons. In recent years, the U.S. Government has imposed severe penalties on foreign firms whose lack of transparency with respect to transactions with sanctioned parties has led US Persons unwittingly to facilitate those transactions, such as US banks processing US dollar denominated transfers where the underlying transaction involved Cuba, Iran, Sudan, or other sanctions targets. Now that Syria is the object of broader sanctions, foreign firms should be sure that the Syrian aspect of transactions in which US Persons play a role is disclosed to the US Persons.
The US sanctions against Syria may continue to evolve as the situation in Syria develops, and the US Government often provides no advance notice of the imposition of sanctions. Accordingly, US Persons should be attentive to any expansion or interpretation of the new sanctions in guiding their business dealings, direct or indirect, with Syria.