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Newly Issued United States Economic Sanctions Against Syria Significantly Expand Restrictions on U.S. Firms and Impact Syrian Energy Sector

August 18, 2011

 

In response to the on-going repressive violence in Syria, President Obama imposed sanctions pursuant to an Executive Order today. The Executive Order took immediate effect.

The United States has maintained limited sanctions targeting Syria for a number of years. Most notably, in 2004, it imposed a virtual ban on the export and re-export of U.S. origin goods and technology to Syria. In 2011, the President has imposed additional measures, responding to the repressive violent actions of President Bashar Al-Assad’s regime. These included blocking orders freezing all U.S. property interests of key Syrian Government officials, including President Al-Assad, as well as the Commercial Bank of Syria and the state-owned telecommunications firm, Syriatel.

The European Union is also reportedly poised to expand its economic sanctions targeting Syria.

Scope of New U.S Sanctions

Today’s Executive Order includes a broad blocking order freezing the property interests of the Government of Syria, its agencies, instrumentalities, and controlled entities. In connection with the Executive Order, the Office of Foreign Assets Control (“OFAC”), which administers the U.S. economic sanctions laws, has specifically designated several entities in the Syrian petroleum sector as coming within the scope of the order, including the Syrian Petroleum Company, the Syrian Company for Oil Transport, and the Syrian Gas Company. The order effectively prohibits all transactions with these blocked entities, including any transfers of funds, goods and services. The order applies to U.S. persons, which includes U.S. citizens and permanent residents, entities organized under the laws of the United States (including foreign branches), or any person in the United States.

In addition to the blocking order, the Executive Order prohibits all U.S. investment in Syria, the export of services to Syria, and any dealing in Syrian origin petroleum products. In this sense, it is broader than the sanctions imposed on Libya in February. No U.S. person may engage in any transaction involving Syrian origin petroleum products, even if such products remain outside of the United States.

In addition, as most commercial activity in Syria involves state-owned entities, the U.S. blocking order has very broad effect.

Violations of the sanctions can lead to significant criminal and civil penalties. Companies with on-going business related to Syria should review their existing and projected activities to determine how the new economic sanctions impact their business. In some circumstances, specific license requests may the appropriate course.