EU sanctions on Syria oil and gas industry come with loopholes

The European Union, which buys 90% of Syria’s oil exports, has slapped sanctions on the nation’s oil and gas industry, but loopholes allow European energy companies to pull back only gradually from buying heavy crude or doing lucrative work in Syrian oil fields.

Syria’s other key trading partners, including Turkey, Iraq, Jordan and Lebanon, have maintained economic ties with Damascus even as Syrian troops and tanks have killed thousands of people since a popular uprising began in March.

As a result, ongoing efforts to marshal international economic pressure against Syrian President Bashar Assad and his bloody crackdown on demonstrators continue to move slowly, or not at all.

President Obama last month imposed a series of U.S. economic and travel sanctions on Syria and demanded that Assad step down. America’s economic and political ties to Syria are minimal, but White House aides said at the time that America’s allies in Europe would apply more powerful pressure by cutting Syrian oil imports.

That hasn’t happened and Susan Rice, the U.S. ambassador to the United Nations, this week urged America’s allies to tighten the squeeze on Syria. She told reporters in Washington that the Obama administration intends to add more sanctions “and we expect others to do the same.”

European and Middle Eastern officials, however, appear reluctant to damage their own domestic industries.Some officials also argue that trade embargoes and other punishments hurt ordinary Syrians more than government leaders, and warn that if their companies pull out of Syria, other countries will eagerly snap up the business.

They note that China and Russia, which have energy and other business interests in the region, continue to block Western efforts to craft United Nations sanctions on Syria.

The 27 governments in the European Union are divided on Syria, and made several compromises to get sanctions approved. As a result, when the European Union agreed this month to bar purchases of Syrian oil, it added a provision allowing member states to continue importing the oil until mid-November, a grace period that will give Damascus time to find replacement customers.

The International Energy Agency, an autonomous intergovernmental group based in Paris, said Tuesday that with Syria scouting new customers in China and other Asian markets, “these [oil] volumes should find other customers elsewhere.”

The EU appears close to approving new sanctions that would bar European companies from new investments in the Syrian energy sector. But companies may continue working under existing contracts, a loophole that may be large enough “to sustain Syria’s energy sector for the short to medium term,” said Mark Dubowitz, executive director of the Foundation for Defense of Democracies, a nonpartisan policy institute in Washington.

Oil industry advocates in Europe argued during the EU debates that they needed protection, and that yielding to American calls for another set of energy sanctions — like those on Iran — would just encourage Washington to seek similar punishments against other governments that fall out of favor.

Saket Vemprala, a London-based oil and gas analyst with Business Monitor International, said EU officials have moved cautiously because “they’re trying not to damage the position of European oil and gas companies that have already invested in Syria. They don’t want them to lose their licenses.”

Obama and other administration officials have sought to enlist support from Turkey, which in recent years has developed close links to the Assad government. Prime Minister Recep Tayyip Erdogan has been increasingly strident in his criticism of Assad’s crackdown, but his government, which has $2 billion in trade with Syria, has drawn the line at economic pressure.

Sanctions “only hurt the people,” said one Turkish official, who declined to be identified because he was not authorized to speak publicly on the issue.

Some major projects from Persian Gulf states have been put on hold in Syria. But experts are divided on whether this is because of official action or simply reflects private investors’ worries that Syria is a poor financial risk at the moment.

Other nations have increased their economic ties as the Syrian crisis has continued.

Iran has sent billions to Syrian banks to bolster the regime, for example, and Iraq recently struck a deal for a $10-billion oil pipeline to Syria. Iraqi Prime Minister Nouri Maliki has shown sympathy for the Damascus regime, warning Syrian protesters not to “sabotage” their state.

Iraq has helped Syria with “sharply increased oil, money, trade and official political support,” said David Pollock, a former State Department official who is now at the nonpartisan Washington Institute for Near East Policy.

Richter reported from Washington and Chu from London.

paul.richter@latimes.com

henry.chu@latimes.com