On April 22 the Foreign Affairs Council of the EU agreed to soften sanctions against Syria and to introduce further waivers in a calculated move to recognise the Syrian National Coalition for Opposition and Revolutionary Forces (SNCORF) as the “legitimate representatives of the Syrian people.”
At the same time the Council also agreed to lift all sanctions against Myanmar/Burma, except a continuing embargo on arms.
Council Decision 2013/186/CFSP (April 22, 2013) is the second amending decision providing waivers of the sanctions under Council Decision 2012/739/CFSP (November 29, 2012), which provides the current sanctions framework applicable to Syria and the Government of Syria.
The earlier Decision 2013/109/CFSP (February 28, 2013) as implemented by Council Regulation 325/2013 (April 10, 2013), introduced the following waivers, all of which require prior authorization by a Member State for particular transactions:
- sale, supply, transfer of or export of equipment intended for the SNCORF (and other humanitarian organizations) and for the protection of civilians;
- technical assistance, financing and financial assistance intended for the SNCORF and for the protection of civilians;
- release of certain frozen funds or economic resources necessary to satisfy the basic needs of designated natural or legal persons, entities or bodies, and the delivery of assistance for humanitarian purposes; and
- release of certain frozen funds or economic resources which are required to satisfy a judicial or administrative decision rendered in the Union or a judicial decision enforceable in a Member State.
Relaxing the oil embargo
The purpose of new Decision 2013/186 is to relax certain key restrictions of Decision 2012/739 to the extent they prohibit transactions that would benefit SNCORF. The Decision allows waivers of the restrictions on the following activities, again subject to prior authorization of a Member State:
- Crude oil and petroleum products: purchase, import or transport from Syria of crude oil and petroleum products and the provision of related financing or financial assistance, including financial derivatives, insurance and reinsurance;
- Key equipment for the oil and gas industry: sale, supply or transfer of key equipment and technology for the key sectors of the oil and natural gas industry in Syria, or to Syrian or Syrian-owned entities engaged in those sectors outside Syria as well as the provision of related financing or financial assistance;
- Investments in the oil industry: granting of any financial loan or credit or the acquisition or extension of a participation in enterprises in Syria that are engaged in the Syrian oil industry sectors of exploration, production or refining, or Syrian or Syrian-owned enterprises engaged in those sectors outside Syria, including the creation of joint ventures with enterprises in Syria that are engaged in the Syrian oil industry sectors of exploration, production or refining and with any subsidiary or affiliate under their control.
All three waivers are subject to the same conditions:
- the SNCORF must be consulted in advance by the Member State concerned;
- the activities must not directly or indirectly benefit persons or entities listed in Annexes I and II of Council Decision 2012/739/CFSP; and
- the activities concerned must not breach any of the restrictions set out in the decision.
Likely limited impact of the waivers
While at first sight the decision appears to present business opportunities for EU companies in Syria, the on-going conflict, and the strict conditions attached to the waivers mean there is probably limited scope for investment in the short to medium term. Quite apart from serious security concerns, companies will be required to conduct thorough due diligence to ensure that any proposed transaction complies with the EU sanctions regime and does not benefit any sanctioned person or entity. Prior to seeking approval of any transaction, companies would also need to consider how the approving Member State will conduct the consultations with SNCORF that are required as a condition of the waivers.
In any event, the exact conditions and the full effect of the new waiver regime will not be known until the Council issues further implementation measures in the form of a regulation. The delay in adopting such measures illustrates the difficulty in tailoring rules for the sole benefit of the opposition and the civilian population in Syria.
Overview of US sanctions in comparison
In comparison to the EU, the US government has implemented no change or easing of international trade controls directed against Syria.
As discussed in our previous advisory, the United States prohibits the export or re-export to Syria of US-origin items (commodities, technology, and software) or services to Syria, as well as imports of Syrian-origin petroleum products into the United States. US persons cannot make new investments into Syria, conduct business dealings related to petroleum products of Syria origin, or facilitate or approve any of these restricted transactions or with Specially Designated Nationals and Blocked Persons (SDNs) named under the Syrian embargo. In addition, US persons must block and cannot deal in the property of the Government of Syria, which are subject to a “freezing” order, except under certain limited general licenses or specifically licensed by the US Office of Foreign Assets Control (OFAC).
In addition, US export enforcement authorities may sanction non-US, foreign persons who are deemed to be evading US sanctions and export controls against Syria, or facilitating deceptive transactions related to US-origin goods or services with the Government of Syria or Syrian SDNs named by OFAC under Executive Order 13608.
Finally, under the Iran Threat Reduction and Syria Human Rights Act of 2012, issuers on US stock exchanges must, in their annual and quarterly filings with the Securities and Exchange Commission, report whether they or any affiliate knowingly conducted any transaction or dealing with any SDN that was designated for reasons of terrorism under Executive Order 13224 or weapons proliferation under Executive Order 13382. There are numerous SDNs falling into these categories, whether individuals or entities, that can be located anywhere, including in Syria or in the EU. The disclosure, which is made publicly available, must include a detailed description of the relevant activity, including the gross revenues and net profits gained, and the President is required to initiate an investigation based on the disclosure to determine whether to impose sanctions in relation to the disclosed activity.
On April 22, the Foreign Affairs Council of the EU also adopted Council Decision 2013/184/CFSP, formally ending all economic sanctions against Myanmar/Burma. An arms embargo remains in place.
Lifting of all economic sanctions
The sanctions regime was already temporarily suspended by Council Decision 2012/225/CFSP April 26, 2012) and Council Regulation 409/2012 (May 14, 2012) in response to the country’s nascent political reforms. This suspension expired on April 30, 2013. The suspension permitted limited import, export and investment in Myanmar/Burma’s timber and mineral industries and released funds and economic resources belonging to, owned by, or held by Myanmar/Burmese Government or associated designated persons. It also temporarily lifted EU travel bans on listed Myanmar/Burmese officials and their families (see our International Law Advisory of May 31, 2012).
The new decision repeals Council Decision 2010/232/CFSP (April 26, 2010) and ends the temporary suspension set out in Council Decision 2012/225/CFSP. Council Regulation 401/2013 (May 2, 2013) adjusts existing implementation measures to the new decision.
The arms embargo
Council Decision 2013/184/CFSP and Council Regulation 401/2013 renew the existing arms embargo set out in Council Decision 2010/232/CFSP and Council Regulation 194/2008 (February 25, 2008). These cover the sale, supply, transfer or export as well as the financing or financial assistance of arms and related materials of all types of arms, whether or not originating in the Union. The prohibition includes weapons and ammunition, military vehicles and equipment, para-military equipment and spare parts that are intended directly or indirectly to any natural or legal person, entity, or body, in or for use in Myanmar/Burma. A waiver is available, subject to prior authorization by a Member State, for the sale, supply, transfer or export of equipment which might be used for internal repression as listed in Annex of Council Regulation 401/2013, if actually destined for humanitarian or protective use.
The decision to maintain the arms embargo will apply until April 30, 2014, and will be kept under constant review.
Prospects for new EU business opportunities
The removal of all economic sanctions against Myanmar/Burma, without conditions, presents a new business opportunity for EU companies. However, this resumption of good relations with Myanmar/Burma is highly dependent on political progress. Council conclusions adopted at the same time as the Council Decision congratulates the Myanmar/Burmese government on its achievements towards democracy, freedom of expression and the fight against corruption, but sets out a (rather long) list of issues on which the EU expects to see further progress.
In return, and specifically on trade matters, the Council conclusions confirm the EU’s policy to support economic reforms, notably through the reinstatement of the Generalised Scheme of Preferences, so that Myanmar/Burmese exporters can pay lower duties on their exports to the EU. The Council states that the EU will explore the feasibility of a bilateral investment agreement, which would set out the terms and conditions for private investment by EU and Myanmar/Burmese nationals and companies. Finally, the Council affirms that it will maintain increased development assistance, in coordination with other donors.
Overview of US sanctions in comparison
The United States and EU are closely aligned in ending most economic sanctions and trade controls, except for defense articles and defense services, directed at Myanmar.
Subject to certain reporting requirements to the US State Department that may apply, US persons can provide financial services to or make new investments to develop economic resources of Myanmar, except where SDNs or the Myanmar military are involved with the transaction. Also, the US import ban against certain Myanmar origin precious stones has been eased. A US arms embargo is still in place against Myanmar.