Lights On in Lebanon: Limiting the Fallout from U.S. Sanctions on Syria

November 10, 2021
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Lebanon has gone dark. Nearly two years into a cataclysmic economic collapse, the country has recently been beset with near-total electrical blackouts. Now the Biden administration has endorsed a World Bank project that would power Lebanon using Egyptian natural gas and Jordanian electricity.

The problem, for critics, is that this energy would be delivered via Syria, which is why Biden’s support for the project has prompted an outcry in Washington. Opponents of the energy deal believe it would contravene U.S. sanctions on Syria — particularly the 2019 Caesar Act — and encourage regional states to normalize relations with the Syrian government.

 

 

A close reading of existing sanctions regulations, however, appears to confirm that the project is permissible. Indeed, the administration’s handling of this project’s sanctions implications seems to fit into a broader effort to interpret U.S. sanctions on Syria more precisely so as to mitigate their ancillary “chilling effect” on permitted, non-sanctioned activities. In this, the Biden administration’s approach to Syria sanctions represents a departure from that of the Trump administration before it. Trump officials played up U.S. sanctions’ reach as part of their campaign of unremitting economic and political pressure on Damascus. Biden officials are implementing existing sanctions but trying to ensure their impact does not exceed their original written scope.

That shift is good for ordinary Syrians  —  across the country’s front lines  —  for whom conditions have never been so dire. And it is an overdue correction to a U.S. sanctions policy that has become unbalanced, tilted towards deploying ever more intense measures without fully considering their human consequences.

Energy for Lebanon, Objections in Washington

The project in question, which Washington officially endorsed in August, would provide Lebanon with an additional eight hours of electricity daily. It would be financed by the World Bank and has the support of U.S. allies and partners in the region. It has also necessitated regional contacts with the Syrian government. ln September, Lebanon sent a ministerial delegation to Damascus to secure an official Syrian agreement. Lebanese, Syrian, Jordanian, and Egyptian ministers have met in Amman to work out the project’s details.

Alongside meetings specifically related the World Bank deal, America’s regional allies and partners have also stepped up other engagements with Damascus. Jordan has more fully reopened its border with Syria, and Jordanian and Emirati officials have met with Syrian counterparts to discuss bilateral ties and economic cooperation. Jordan’s King Abdullah and Abu Dhabi Crown Prince Muhammad bin Zayed have both taken calls from Syria’s President Bashar al Assad, and on Nov. 9, the Emirati foreign minister visited Damascus and met Assad.

Critics in Washington have treated the Lebanon energy deal as part and parcel of this regional trend towards normalization with Damascus. What’s more, they have conflated the issue of normalization with the question of whether the Biden administration’s support for the project contravenes U.S. sanctions on Syria.

In their statement condemning Arab states’ normalization with the Syrian government, several Republican foreign policy leaders in Congress voiced special concern about U.S. partners’ participation in “energy deals that would involve payments to the Assad regime.” Another Republican senator accused the Biden administration of “shredding Assad regime sanctions.” In the Washington Post, Josh Rogin highlighted the energy project in a column denouncing Biden’s “tacit endorsement” of normalization. The project, Rogin wrote,

will surely result in cash payments to Assad. Rather than stand in the way, the Biden administration advised the participating countries that they could avoid sanctions by financing the deal through the World Bank, essentially promoting a loophole in U.S. law.

U.S. officials have stressed they did not support King Abdullah’s call with Assad, and that they discourage normalizing steps with Damascus. On Oct. 13, Secretary of State Antony Blinken reiterated that the United States will not support regional efforts at normalization, will not lift sanctions, and will not change its opposition to Syria’s reconstruction absent progress toward a political solution to the conflict.

At the same time, administration officials have stood by their support for the energy project, pending its approval by the World Bank. The project’s details have yet to be finalized. But U.S. officials have encouraged regional partners to proceed with discussions and offered provisional assurance that the project will not violate Syria sanctions, including the Caesar Act.

Policy Rationales and ‘Loopholes’

In terms of policy, the Biden administration has important Lebanon-related reasons for supporting this World Bank energy project.

The Biden administration aims to prevent Lebanon from devolving further into a failed state and adding to regional instability. Lebanon’s energy needs are related directly to the country’s all-consuming fiscal crisis. The country’s inefficient and corrupt energy sector has been a massive drain on public finances for years.

The Biden administration’s backing for the project also has a counter-Hizballah rationale. U.S. officials voiced their support for the energy deal shortly after the  Lebanese political party and paramilitary force said it would begin importing U.S.-sanctioned Iranian fuel to Lebanon. U.S. officials have presented the World Bank project as a more sustainable, worthwhile solution to Lebanon’s energy needs than Hizballah’s unilateral imports.

Legally, administration officials maintain that this energy deal is not subject to U.S. sanctions — apparently because of the World Bank’s involvement.

Since 2014, the U.S. government’s Syria Sanctions Regulations have authorized otherwise prohibited transactions with the Syrian government that are necessary for the work of the United Nations and related organizations. According to the definition provided by these regulations, the World Bank is part of the “U.N. system” and therefore benefits from this authorization. These regulations govern the enforcement of all U.S. sanctions on Syria, including the 2019 Caesar Act. Judging by criticisms of this project, this exemption for the World Bank’s work is not widely known. U.S. officials have alluded to this rationale for why the World Bank project is permitted but have not spelled it out explicitly and publicly.

This authorization for the World Bank’s work seems sufficient to exempt the energy deal. In addition, though, the project also seems likely to offer the Syrian government in-kind compensation — electricity and natural gas, rather than cash. Relatively small quantities of electricity and gas could reasonably qualify as “nonsignificant” support to the Syrian government and would therefore not fall under the Caesar Act or other U.S. sanctions.

This exception for the World Bank is what Josh Rogin called a “loophole.” But a “loophole,” in less pejorative terms, is just something permitted — something outside sanctions’ mandatory scope.

The United States and its Western allies have extensively sanctioned Syria, prohibiting dealings in key sectors and with economically pivotal state-controlled entities such as Syria’s national oil company. But while these sanctions are expansive, they are not all-encompassing. They cover specific, if numerous, entities and sectors. They do not apply to every Syria-related transaction that Damascus’s opponents find objectionable.

These sanctions include exceptions — “loopholes” — for desirable activities such as humanitarian assistance. Yet sanctions have an additional “chilling effect,” which discourages transactions that are technically legal but that businesses judge to be unacceptably risky and therefore avoid. This chilling effect means that exemptions written into ostensibly “smart” sanctions can prove unusable in practice. For example, humanitarian organizations working in Syria often struggle with cautious banks whose “overcompliance” and “de-risking” lead them to avoid any transactions related to Syria.

To the extent that there is ambiguity or lack of clarity about the precise scope of sanctions, that uncertainty necessarily reinforces this chilling effect. Trump administration officials regularly emphasized that Syria sanctions included provisions for humanitarian assistance. Yet the administration also played up sanctions’ reach as part of its broader strategy of “maximum pressure” on Iran and its regional allies. Trump officials trumpeted the rollout of successive batches of sanctions on Damascus and emphasized their extensive scope. They warned regional businessmen, in the broadest terms, against doing Syria-related business and even threatened U.S. partners such as the United Arab Emirates with sanctions. Administration officials demonstrated they would go to extraordinary lengths to enforce Syria and Iran sanctions, at one point even texting and e-mailing the captains of tankers carrying Iranian oil to Syria to intimidate them into turning back.

In short, the Trump administration’s Syria sanctions policy was not just about its many new sanctions designations but also the administration’s aggressive sanctions messaging. Western diplomats and international humanitarian actors working on Syria told me they believed Trump officials’ menacing, sanctions-ready posture — what one diplomat called their “‘nobody is safe’ attitude” — further enhanced sanctions’ chilling impact.

Thus, it seems impossible to imagine the Trump administration supporting this World Bank project as Biden has. Trump administration Syria envoy James Jeffrey has said the administration considered issuing a waiver for a similar project, but that it would have been conditioned on Russian cooperation with Syria’s U.N.-sponsored peace talks. The senior administration official responsible for Syria and Lebanon, Joel Rayburn, warned in 2019 that if Lebanon’s government dealt with its Syrian counterpart to secure fuel, it would be exposed to sanctions. More recently, Rayburn has objected vociferously to the World Bank project, insisting that the transaction is subject to the Caesar Act and that the Biden administration’s assurances to Lebanese officials are in error. He has tweeted that the project “won’t stand up to Congressional scrutiny and isn’t in U.S. interests.”

Sanctions’ Real Limits

The way the Biden administration has approached the sanctions implications of this World Bank project seems indicative of the administration’s more careful and precise approach to Syria sanctions, and of a larger administration effort to mitigate their collateral damage.

The Trump administration’s “maximum pressure” approach to Syria failed to extract concessions from Damascus. It did, however, exacerbate Syria’s economic collapse last year after Lebanon’s crisis and the COVID-19 pandemic hit a country already devastated by almost a decade of conflict. By early 2021, humanitarian conditions in Syria had reached new levels of extremity. Roughly 90 percent of Syrians now live  below the poverty line, and more than 60 percent of Syrians are “food insecure.”

Instead of pushing for more dramatic political change in Syria, as the Trump administration did, the Biden administration’s Syria policy has focused on more limited priorities: securing humanitarian access and alleviating suffering across Syria, combating ISIL, and preventing a resumption of more open conflict. The Biden administration has evidently opted not to expend substantial diplomatic capital pressuring friendly countries not to engage with Damascus. The objective, one senior administration official told the New York Times, is a “humane, sensible policy.”

Part of that “humane, sensible policy” is being candid about the actual scope of existing U.S. sanctions on Syria. The Biden administration is not lifting sanctions on Syria. What it seems to be doing, instead, is trying to restrict sanctions’ impacts to their original written extent. The administration is also exercising restraint in issuing new sanctions, so as to avoid exacerbating Syrians’ desperate economic circumstances. All this is consistent with the Biden administration’s newly published review of U.S. sanctions policy broadly, which acknowledges sanctions’ unintended impacts and the need to account for them.

To that end, the Biden administration is also trying to dispel ambiguity about the reach of U.S. sanctions on Syria. Under Biden, the Treasury Department has issued additional and more explicit clarifications of sanctions regulations for humanitarians and financial institutions. This includes clarifying whether non-U.S. NGOs benefit as U.S. NGOs do from humanitarian exemptions in the Caesar Act. In addition, the administration has issued new general licenses and related guidance for COVID-19-related assistance to Syria.

Administration officials have also attempted to mitigate bank “de-risking,” which has led banks to shy from even permitted transactions related to humanitarians’ work in Syria. In September, a senior Treasury official traveled to Turkey to meet with representatives of NGOs working in Syria and Turkish financial institutions. The official encouraged Turkish banks not to shun humanitarians doing Syria-related work and emphasized that, while banks will do their own risk calculus, the United States looks favorably on sanctions-compliant humanitarian aid to Syria.

The United States and Russia’s July agreement to extend the U.N. mandate for cross-border humanitarian assistance to Syria’s rebel-held northwest also clarified and broadened the bounds of permitted humanitarian assistance. The compromise Security Council resolution that renewed the cross-border authorization also endorsed a broader definition of humanitarian aid, expanding it from just emergency assistance to “early recovery” projects meant to restore essential services. For years, humanitarians have argued for “early recovery”-type projects that were arguably non-sanctionable but were seen as too close to reconstruction and therefore discouraged. Now early recovery assistance has the Security Council’s imprimatur and is explicitly legal. On Nov. 8, the U.S. Treasury further affirmed that the UN, the U.S. government, and their contractors and grantees are permitted to conduct “early recovery” and “stabilization” activities.

Finally, when the Biden administration has issued new Syria sanctions over the past year, it has narrowly targeted human rights offenders. The administration’s Syria sanctions announced to date have included Syrian prisons and detention facilities, leading officers in Syria’s security services, and an armed opposition group implicated in assorted offenses. These sanctions convey America’s condemnation of the Syrian government’s behavior but target entities with little systemic impact on the country’s economy. As a result, their designation is unlikely to do added harm to ordinary Syrians.

A Welcome Change

The effects of U.S. sanctions on Syria have gone well beyond what those sanctions require, and Syrians civilians have paid the price. The Biden administration’s support for this World Bank energy project figures into a broader effort to limit sanctions’ incidental harm. That effort should be understood in humanitarian terms, not as an abrogation of U.S. sanctions or an endorsement of normalization.

Of course, this Biden administration effort to reduce the chilling effect of sanctions will not itself be sufficient to stabilize Syria’s economy. There are other, more important reasons why Syria will continue to be economically depleted and grim — notably the Syrian government’s own policies. And it seems inevitable that any U.S. sanctions will produce some collateral chilling effect, no matter how “smart” they are or how conscientiously they are administered. For the Biden administration, further alleviating Syrians’ suffering may require actually lifting some sanctions, including sanctions on economically crucial state-controlled entities such as Syria’s Mediterranean ports.

For now, though, the Biden administration’s approach to this World Bank deal and its other efforts to check sanctions’ unintended effects are a good start. For Syrians who have weathered a decade of war, it is the least the United States can do.

 

 

Sam Heller is a Beirut-based researcher and analyst focused on politics and security in Lebanon, Syria and their regional neighborhood. He is a Fellow with Century International, The Century Foundation’s center for international research and policy. Follow Sam on Twitter: @AbuJamajem.

Photo by Dar Al Mussawir