August 3, 2011 | The Hill Blog

Congress Should Consider Syrian Energy Sanctions

August 3, 2011 | The Hill Blog

Congress Should Consider Syrian Energy Sanctions

The Assad regime’s ruthlessness is on vivid display as the Syrian security forces, with Iranian assistance, continue their bloody campaign to crush a four-month long democracy uprising.

This week, members of Congress are waking up from a debt-ceiling hangover to consider a bipartisan energy sanctions bill that would exert peaceful pressure on Bashar Assad’s regime in an effort to stop the bloodshed. Sens. Kirsten Gillibrand (D-N.Y.), Mark Kirk (R-Ill.) and Joseph Lieberman (I-Conn.), as well as Reps. Ileana Ros-Lehtinen (R-Fla.) and Eliot Engel (D-N.Y.) have introduced bills targeting investment in Syria’s energy sector, as well as petroleum exports and imports, and the transfer of technology. These bills are modeled on Iran sanctions laws that are successfully squeezing Iran’s energy sector.

Will President Obama move quickly to sign this bill into law and use a peaceful instrument of pressure to try and stop the killing? Or will he yield to the argument of Robert Ford, his ambassador to Syria, who argued in his confirmation hearing Tuesday that, “additional American measures probably aren’t going to have that big of an impact. The big companies working in the energy sector in Syria are from Europe or Syria’s neighbors.”

Ambassador Ford is right that Syria is heavily dependent on European and other international energy companies. But he is wrong in arguing that U.S sanctions won’t work. On Iran in particular, Washington has convinced companies that it is better to do business with the United States than spend their scarce capital operating in rogue regimes.

Royal Dutch Shell is Syria’s second-largest oil and gas producer, having done business there for 25 years. Yet its Syrian business represents only about 2 percent of its total global oil production. Its local affiliate, Syria Shell Petroleum Development B.V. (SSPD), is a shareholder in the state-owned Al Furat Petroleum Company, and contributes about 6 percent of total Syrian oil production. According to the international humanitarian group Pax Christi International, as much as 80 percent of the revenue from Shell’s extraction products goes to Syrian state coffers.

Through SSPD, Shell also owns a 31 percent interest in Al Furat Petroleum Company. The crude oil produced by Shell’s investments in Al Furat is sold directly to Syria’s state-owned General Petroleum Corporation. In 2008 and 2009, SSPD paid upwards of $280 million in taxes to the Syrian regime.

According to the U.S. Energy Information Administration, as of January 2010, Shell contributed over 55,000 barrels daily of high quality sweet Syrian light crude to Syrian refineries, which have a refining capacity of around 240,000 barrels per day. These refineries supply fuel for the Syrian military, police, and other security forces that are killing protesters.

The British group PLATFORM, which monitors international energy companies, estimates that 17 percent of Syrian tanks run on fuel derived from Shell’s stocks. The organization also says that 4 percent to 8 percent of Syrian tanks used to repress the population are “financed through revenue from crude extracted by Shell and its partners.” PLATFORM estimates that terminating Shell operation in oil fields would cut 5.8 percent – 8.1 percent from the Syrian government’s budget.

Congressional sanctions on Iran show how much Washington can accomplish. The Comprehensive Iran Sanctions Accountability and Divestment Act, which President Obama signed into law in July 2010, providing crucial leverage to persuade the EU to pass its own sanctions, to avoid the extraterritorial application of U.S. sanctions.

Iran sanctions legislation also persuaded scores of companies that were concerned about losing access to the U.S. market to terminate their ties with Iran. Companies that chose to run the risk of punishment and remain in Iran began demanding a risk premium of 25-30 percent for the sale of refined petroleum there, making life considerably harder for the Iranian regime.

Sanctions have frozen over $60 billion in foreign investment in Iran’s energy sector and made it enormously complicated for Chinese, Indian and South Korean energy companies to pay the approximately $40 billion they owe for Iranian crude.

Sanctions have also denied Tehran the ability to access European and U.S. liquefied natural gas technology to develop its enormous proven natural gas reserves, which are second only to Russia’s, and could be worth as much as $4.4 trillion if Iran could get them out of the ground.

Iran has reportedly promised Assad $5.5 billion in loans and 290,000 barrels of oil each day, further underscoring how concerned Tehran is about his survival. The presence of companies connected with Iran’s Islamic Revolutionary Guard Corps in Syria — like the recently State Department-sanctioned Iranian ports operator Tidewater — also suggest that the IRGC understands the importance of Syrian energy to Assad’s survival.

Syrian energy sanctions could thus be useful by both tightening the screws on Assad and costing Iranian Supreme Leader Ayatollah Khamenei resources he needs to withstand western pressure on his battered regime.

It’s time to persuade Assad’s energy partners that their support for the regime is bad for business — not to mention their reputations.

Mark Dubowitz is executive director of the Foundation for Defense of Democracies.

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Issues:

Iran Iran Sanctions Syria