By: Curtis Dombek and Dan Brooks
On January 18, 2012, the European Union adopted Council Regulation No. 36/2012 (“Regulation 36/2012”), which imposes new restrictions on companies doing business in Syria. Regulation 36/2012, which repeals and replaces previous measures adopted by the EU in May 2011, has particular implications for companies operating in the oil and gas, energy, and telecommunications sectors.
Regulation 36/2012 prohibits the sale, supply, transfer, or export to any Syrian person, entity, or body of key equipment and technology used in the oil and gas industry, including equipment and technology used for refining, liquefaction of natural gas, and the exploration and production of natural gas and crude oil. Regulation 36/2012 also prohibits the provision of technical assistance, brokering services, financing, or financial assistance related to such equipment and technology for use in Syria or to any Syrian person, entity, or body. These prohibitions do not apply to the performance of an obligation required by a contract that was awarded or concluded prior to January 19, 2012, provided that the party seeking to rely on the exemption notifies the applicable authority in the EU member state in which the party is established at least 21 days in advance.
With respect to the energy sector, Regulation 36/2012 prohibits the sale, supply, transfer, and export of certain steam turbines, gas turbines, electric motors, and generators for use in the construction or installation of new power plants for electricity production in Syria. Any financial or technical assistance related to such projects is similarly prohibited. As with oil and gas, Regulation 36/2012 exempts contracts concluded prior to January 19, 2012, provided that the party seeking to rely on the exemption notifies the applicable authority in the EU member state in which it is established at least 21 days in advance.
With respect to the telecommunications sector, Regulation 36/2012 prohibits the sale, supply, transfer, or export of equipment, technology, or software that could be used for monitoring or intercepting Internet or telephone communications in Syria by or on behalf of the Syrian government. The provision of technical assistance, brokering services, financing, or financial assistance related to such equipment, technology, and software is similarly prohibited. In addition, companies may not provide any telecommunications or Internet monitoring services of any kind to (or for the benefit of) the Syrian government or any of its public bodies, corporations, or agencies.
Regulation 36/2012 also prohibits the provision of insurance and reinsurance to the Syrian government and its public bodies, corporations, and agencies and to any person or entity acting on their behalf, unless the insurance or reinsurance contract was concluded before January 19, 2012. The Wall Street Journal recently reported that the U.S. Treasury Department also has begun targeting the insurance and registration of international tankers shipping oil in violation of U.S. and EU sanctions.
In addition to the foregoing, Regulation 36/2012 retains many of the earlier restrictions on Syria that the EU adopted in May 2011. These include prohibitions on: the sale, supply, transfer, and export of equipment that might be used for internal repression; the provision of technical assistance related to goods or technology listed in the EU’s Common Military List (or related to the provision, manufacture, maintenance, and use of such goods) to any person, entity, or body in Syria or for use in Syria; and the purchase of crude oil or petroleum products that are located in or originated in Syria.
U.S. and EU sanctions have become increasingly restrictive since a popular uprising against the Syrian government began in early 2011, resulting in a Syrian government crackdown against protesters. The current U.S. sanctions against Syria, initiated in 2004 and most recently enhanced by Executive Order in August 2011, bar many transactions by U.S. persons with Syria or Syrian persons, including any transactions with the Syrian government, new investment in Syria, the export of services to Syria, and transactions related to petroleum products of Syrian origin. Reports suggest that the measures have severely affected Syria’s economy. Sufian Allaw, Syria’s Minister of Oil and Mineral Resources, recently declared that oil sanctions alone have cost the country approximately $2 billion since September 2011. It is unclear at this time what effects the EU’s new sanctions might have on the country’s government. We will continue to monitor the situation and provide updates as warranted.