Doing Business with the Syrian Regime

Late last night, the Financial Times reported that the Syrian regime has stopped payments to European oil giants Royal Dutch Shell and Total. Shell and Total are two of more than fifteen companies that operate in Syria’s petroleum sector. Many of these companies are European, but the list also includes companies from Canada, China, India and Russia. This news is significant as it raises questions about the future of oil operations in Syria and the state of the regime’s finances.

There are frequent and widespread reports that Syrian Army tanks have been deployed and used in civilian areas.

Violence against Civilians and Oil

Despite the outbreak of violence against civilians and suspected crimes against humanity, companies have continued to operate in Syria. The Syrian oil sector has been a key target because oil revenue directly supports the regime. Although Syria’s economy was fairly well diversified, it was estimated that–before violence broke out in March–the oil sector provided the government with $7 to $8 million a day. As other sectors of the economy like tourism have collapsed, oil revenue has become even more important.

Sanctions by the European Union

The news that the Syrian Government has stopped payments comes shortly before key European Union (EU) sanctions banning the importation of Syrian oil are set to take effect on November 15. The ban on the importation of Syrian oil is significant because EU countries purchase about 95% of Syria’s oil exports. However, European companies are legally able to continue oil exploration and production in the country.

In light of ongoing violence, the EU also announced yesterday that they plan to further sanction between fifteen and twenty individuals.

Sanctions by the United States

The United States has sanctions on Syria that predate the recent atrocities. In testimony before the Senate Subcommittee on Near Eastern and South and Central Asian Affairs, a Treasury Department official stated that “[U.S.] sanctions currently already do prohibit any new investment in the Syrian oil sector. [Sanctions] prohibit all transactions between U.S. persons and the Government of Syria.”

In order to provide additional pressure on non-U.S. companies, Senator Kirsten Gillibrand introduced legislation earlier this year that would provide penalties in the United States for any foreign company that continued to operate in Syria’s petroleum sector. The bill has twelve co-sponsors and has continued to gain momentum in the Senate.

The Need for Additional International Pressure

Just as the European Union and the United States have been leading efforts to pressure the Syrian regime, other countries like China and Russia have been lagging far behind. The United States, France and the United Kingdom have led attempts at the United Nations Security Council to pass a resolution that would impose further sanctions, including an arms embargo. However, in an unusual move, China and Russia cast a double veto of the measure. It’s important to note that Russia is a significant arms supplier to the Syrian Government and has said that unless the UNSC adopts an embargo they will continue to sell arms to the regime. There is still strong interest from western countries in the passage of a resolution, but Russia and China continue to pose a major challenge.

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