On August 18, 2011, President Obama signed a new Executive Order imposing significant new sanctions on Syria with immediate effect. The Executive Order was accompanied by a Memorandum to Congress, President Obama’s Statement on the Situation in Syria, and a Fact Sheet on Syrian Sanctions.

The new Executive Order prohibits the following activities:

  • Any transactions by US persons involving the Government of Syria, its agencies, instrumentalities, or controlled entities -- specifically, all property and interests in property of the Government of Syria are now blocked (frozen) and may not be transferred, paid, exported, or otherwise dealt in;
  • New investment in Syria by US persons;
  • Export and direct or indirect supply of services by US persons to Syria;
  • Importation of Syrian-origin petroleum or petroleum products into the United States;
  • Any transaction or dealing by US persons related to petroleum or petroleum products of Syrian origin; and
  • Facilitation by US persons of otherwise prohibited transactions by foreign persons

In addition, the Executive Order authorizes OFAC to designate as Specially Designated Nationals (SDNs) any person or entity it determines to have: (one) materially assisted, sponsored, or provided financial, material, or technological support to the Government of Syria (which may include its instrumentalities); or (two), to be owned, controlled or acting on behalf of the Government of Syria.

Today’s prohibition on transactions involving the Government of Syria is the culmination of a gradual escalation of US sanctions against Syria. As we recently reported, in May of this year, OFAC designated the President and Vice-President of Syria as well as several other high-ranking officials as SDNs, prohibiting US persons from engaging in financial transactions with them.

Given that US law already prohibits the export and re-export of nearly all goods subject to US jurisdiction (i.e., items of US origin, items that have been exported from the United States, foreign-produced items containing more than 10% US content, or the foreign-produced “direct product” of US technology), today’s Executive Order amounts to a near-complete embargo of trade and financial transactions involving Syria. Even in cases where goods are not subject to US jurisdiction, the practical effect of the blocking of transactions with the Government of Syria and owned or controlled entities thereof is to prohibit business involving Syria. Recall, that OFAC adopts a very broad definition of “property interest” to include any property in which the targeted government has an interest of any nature whatsoever – present, future, contingent, direct or indirect.

Finally, it is important to note that the US Government neither acted alone in imposing sanctions against Syria nor limited itself to the immediate sanctions. In his statement announcing the sanctions, President Obama noted that the European Union is also imposing sanctions on Syria and “expect(s) today’s actions to be amplified by others.” Thus, companies with operations outside of the United States should stay abreast of changes in local law to ensure compliance.