Iraq and Syria Update 2003

The geopolitical events of the past few months have spurred speculation on country export control policy in the Middle East, particularly as related to Iraq and Syria.

At this time, there are feverish reviews underway at the Office of Foreign Assets Controls (OFAC) regarding Iraq sanctions and even new potential Syria sanctions.

Currently, Iraq remains fully embargoed. That means that a license from OFAC is required for virtually all exports to Iraq. The regulations appear likely to change in the near future, though in what form remains to be seen.

Some speculate that future Iraq sanctions will be similar to those on Yugoslavia. Those sanctions focus on Milosovich and his cronies. Likewise, the Iraq sanctions may well largely be lifted and wind up with a focus on Saddam and company. One sticking point on any change is the United Nations. The UN imposes multilateral sanctions on Iraq, so any change in US policy will likely need to be coordinated with a UN change. OFAC officials would not provide any guidance on timelines or changes, only confirming that a review is underway.

Likewise, speculation is increasing as to whether Syria will step deeper into the US Government export control poop pile. Syria is about the most export controlled country that is not embargoed, with anything but EAR99 items requiring licensing. So the next step down for Syria would be to join the hapless club of OFAC embargoed destination, like Iran, Iraq, Libya, Sudan and Cuba.

Companies with Syria sales, particular industrial companies selling EAR99 items that go license free now, should pay close attention to Federal Register Notices and/or the OFAC website (www.ustreas.gov/offices/enforcement/ofac/) and be prepared to halt shipments immediately in case a notice appears. Likewise, those companies should be particularly vigilant in identifying and analyzing Red Flags in any Syria transaction. In the current regulatory environment, these transactions may be more scrutinized than ever.

We have a work saving tip for Government regulators. Rather than write new Iraq and Syria rules, perhaps the Government can just swap the Iraq and Syria regulations. All they would have to do is search and replace Iraq for Syria in the OFAC embargo regulations, and Syria for Iraq in the EAR. That way Iraq gets upgraded, Syria gets downgraded, and no one needs to write anything new.