The Scope of the US Sanctions Against Syria
The entire framework of the US sanctions program against Syria dates back to 1979 when US arms sales were prohibited. The Syria Accountability Act followed in 2003 and was implemented through various executive orders starting in May 2004, which were ramped up in 2011 and beyond. The Syria Accountability Act and its executive orders, which barred US persons from trading and investing in Syria, must be read in conjunction with the International Emergency Economic Powers Act 1977, which provides legal authority for US sanctions against foreign governments and persons. There are two types of sanctions which are enforced by the Office of Foreign Assets Control in the US – those imposed on activities and on persons. If a US person undertakes a sanctioned activity, such as trading or investing in Syria, or deals with a designated person, they open themselves up to criminal liability under US law. US law also imposes civil and criminal liability, separate from sanctions, on foreign persons if they induce US persons to break US sanctions law.
The Syria Accountability Act 2003 was first implemented in May 2004. It restricted the trading of goods between the US and Syria. Nevertheless, it provided an exemption for the export of food and medicine from the US to Syria. Moreover, any goods anywhere in the world containing at least 10% US-made components are not allowed to be exported to Syria. The provision of commercial services by US persons to clients and customers in Syria was eventually blocked, and new investments by US persons in Syria were prohibited as of mid-2011. US persons are also prohibited from dealing with legal entities such as companies in which a sanctioned individual has an interest of 50% or more. US Dollar transactions originating from Syria are no longer processed. Certain transactions pertaining to the legal protection of intellectual property are however permitted. Depending on specific factors, some restrictive measures do not necessarily apply to the foreign subsidiaries of US companies.
Prior to the Caesar Act 2019, non-US persons faced Syria-related sanctioning as a result of Executive Order 13608 issued in 2012 pursuant to the International Emergency Economic Powers Act. It mandates the levying of sanctions against non-US persons who deal with sanctioned persons. Executive Order 13608 provides for secondary sanctions to be imposed on any non-US person who conspired to evade or undermine the US sanctions program against Syria. The US also used elements of the Iran sanctions program to deter the shipment of petroleum products from Iran to Syria by non-US persons.
The Syria sanctions framework was enhanced by the US in December 2019 with the passage of the Caesar Act to put in place further mechanisms. The Caesar Act, which was first implemented on June 17, 2020, expands the scope of the sanctions against Syria to cover non-US persons by deterring them from pursuing dealings with the Syrian government and their allies operating in Syria, including in the oil, aviation, military and construction sectors. The Caesar Act differs from the previous sanctions in that the US President is technically obliged to impose sanctions on non-US persons undertaking any of the said activities. Prior to its enforcement, the US President had some discretion when it related to the sanctioning of non-US persons in accordance with Executive Order 13608 issued in 2012. Furthermore, the Caesar Act applies to territories under the control of the Syrian government, meaning that northern Syria and northeast Syria are technically exempt.
According to the Caesar Act, the US may impose sanctions against non-US persons if they ‘knowingly support’ or ‘deal significantly’ with the Syrian government or its allies in Syria. The US may also impose sanctions against non-US persons if they ‘knowingly’ sell or provide ‘significant’ goods or services to the Syrian government in the oil, aviation, military and construction sectors. Whereas secondary sanctions prior to the Caesar Act targeted those doing business with sanctioned Syrian parties, they required proof of such direct dealings by law. The threshold for the Caesar Act however is ‘knowing’ or ‘significant’ involvement per se by non-US persons with the Syrian government or in the designated sectors of the Syrian economy.
The US Treasury Department refrained from designating the Central Bank of Syria a financial institution of primary money laundering concern pursuant to the Caesar Act. Although the Central Bank was sanctioned by the US in 2011, a further designation as a financial institution of primary money laundering concern would in practical terms mean that US financial institutions must undertake additional and specific due diligence in order to ensure that the Central Bank cannot access the US financial system whether directly or through nested correspondent relationships.
After the Biden Administration took office, the page on the US State Department website pertaining to the Caesar Act secondary sanctions regime was archived. The significance of this move is yet premature to analyse as it may have been a technical measure. Furthermore, the US issued a one-year general license authorizing the exportation of US goods and services related to the prevention, diagnosis and treatment of coronavirus in Syria, including via certain blocked entities. The US is also expected to either grant a sanctions waiver to facilitate the transfer of gas and electricity from Egypt and Jordan to Lebanon via Syria or deem the underlying transactions as not ‘significant’ for the purposes of the Caesar Act.