Focus on: sanctions against Iran, Libya and Syria July 2011

The worsening situation in Libya and Syria and the need to prevent sanction busting by Iran have provoked further tight- ening of international sanctions. The main measures approved by the EU, UN and US in recent months will have im- pacts on the economies and diplomatic relations of the above-mentioned countries.

Iran

. Iran’s efforts to bypass international sanctions by using foreign companies and other countries (a practice known as sanction busting) have resulted in the EU and US tightening sanctions and adding more institutions and indi- viduals to their blacklists. The aim of the sanctions, which target Iran’s finances, is to force Tehran to re-open ne- gotiations on its nuclear development programme and resolve the stalemate.

. Having adopted Regulation 961/2010 in October 2010, in May 2011 the European Council approved Council Im- plementing Regulation (EU) No. 503/2011 adding more people and entities to its blacklist. Among theme is the Iranian Europäisch-Iranisch Handelsbank (EIH) bank based in Hamburg, Germany, accused of breaching EC regulations and UN Security Council resolutions.

. In a move to raise pressure on Iran, at the beginning of June the US also decided to apply the principle of extra- territoriality. Having imposed sanctions against seven foreign companies (including the PDVSA and an Israeli group) for supplying fuel to Iranian companies, the US has continued to revise its blacklist, which includes the Iranian state-owned Bank of Industry and Mine accused of providing services to Bank Mellat and EIH already subject to US sanctions. Recently have also been backlisted two key companies in the transport sector, Tidewa- ter Middle East Co., the country’s main port operator, and Iran Air, the state-owned national airline, already the subject of an embargo imposed by the US and now banned from entering into any kind of agreement whatsoever (including contracts to purchase fuel for passenger aircraft).

. The US is thus clearly set on imposing sanctions that penalise any entities of any nationality that continue to support the Iranian energy sector or Tehran in its efforts to sidestep the US trade embargo. Although Iran is the world’s fourth-biggest oil producer, it’s oil refinery sector is inadequate and the country therefore import as much as 40% of the fuel it needs.

Libya

. As the situation in the country worsens, at the end of February several members of the international community, the UN, EU and US in particular, gradually started to extend sanctions against an increasing number of in- dividuals and institutions. These include embargoes on the sale of arms, travel ban and asset freeze.

. In an effort to cut off potential sources of funding to Colonel Gadaffi’s regime, the European Union has imposed sanctions against a number of Libyan companies including the Central Bank, Libyan Investment Authority, Libyan Foreign Bank, Libyan African Investment Portfolio and Libyan National Oil Corporation. In mid-June the EU also decided to freeze the assets of six Libyan port authorities.

. The US has toughened sanctions by adding to its blacklist a number of foreign banks owned or controlled by Lib- yan banks subject to sanctions and engaged in activities that could be a potential source of funding for the re- gime.

. In addition to these sanctions, on 27 June the International Criminal Court issued a warrant for the arrest of Muammar Gaddafi, his second son and Libya’s intelligence chief, accused of human rights abuses.

. Despite NATO intervention, advances by opposition forces and sanctions, the Libyan conflict appears far from resolution. The situation continues to be very unpredictable. Possible scenarios include the dragging out of the current level of conflict, acceptance of an agreement to split the country between the current government and the opposition and, lastly, the fall of Colonel Gadaffi’s regime.

Syria

. The country continues to be the scene of violent clashes between government forces and civilians, which could degenerate into civil war. The international community has condemned Syria’s use of its armed forces to crackdown on protesters and imposed sanctions at the end of April.

. The restrictive measures imposed by the EU on 9 May and subsequently extended provide for an embargo on the sale of arms, an assets freeze and a visa ban which targets associates of the regime who have in any way materially, financially or politically contributed to the repression against the population. The sanctions target gov- ernment officials such as President Bashar al-Assad and the Interior Minister, as well as businessmen and local representatives of foreign companies. The list includes representatives of the main companies in the telecoms, construction and oil sectors.

. In the middle of June, a report by the UN High Commissioner for Human Rights denounced the Syrian govern- ment’s violent crackdown on protesters. However, the Security Council is unlikely to issue a formal condemnation of Syria due to lack of agreement among its members and, in particular due to the fact that Russia and China are opposed to interfering in the country’s internal affairs.

. The country has been subject to sanctions since 2004 and there is little likelihood of these new restrictions and diplomatic isolation forcing Assad’s regime to call for an end to the violence. If the situation in Syria worsens it could have a negative impact on the internal stability of neighbouring countries. Large numbers of refugees are fleeing the country and the build-up of Syrian troops along the Lebanese and Turkish borders could spark ten- sions in the region.

Economic Research and Institutional Relations Clementina Colucci (Middle East desk) e Federica Pocek (Meditarranean desk) e-mail: [email protected]; [email protected] ; [email protected].