Western countries are at loss about how to pressure Bashar al-Assad to end the brutal crackdown on protestors. They do not know whether or not to sanction Syria’s oil and gas industry. They often ask first whether sanctions will end up harming civilians, and second, will they actually work? These questions have relevance but they demonstrate poor understanding of sanctions as a foreign policy instrument.
Sanctions, defined as an economic instrument used to influence the political behaviour of an opponent state, are premised on the logic that the legitimacy and survival of the regime rest on its economic strength. For the sanctions to have their supposed coercive effects, economic hardships inflicted on citizens are inevitable; otherwise the regime remains unaffected and is therefore unlikely to alter its behaviour. In other words, by design, sanctions target society at large in order to indirectly put pressure on the regime.
Generally speaking, the impact of the measure depends on several circumstances: the intensity of trade between the parties, the economic structure of the parties, and the ability of the target country to countermeasure or bypass the restrictions.
Syria has important energy ties with western countries. Much of Syrian oil, 155,000 bbl/day out of total production of 400,400 bbl/day, is currently exported to the west, mainly to France, Germany, Italy, and the Netherlands. Western oil companies such as Royal Dutch Shell, the UK's Gulfsands Petroleum, and France's Total own large stakes in Syria’s energy sector.
From the perspective of importing countries Syrian oil can be easily replaced. Moreover, since Syrian oil exports add up to a mere drop in the ocean within the larger international oil market, boycotting Syrian oil can hardly impact on international oil prices. And if western oil companies were forced to divest, sure, they will incur economic losses – but yet again their losses in Syria are easily compensated for by record-high oil prices. Divesting from Syria will not undermine western economic interests even in the long term; given that the rate of decline in Syria’s oil exports suggests that the country will soon be importing, rather than exporting oil.
For the Syrian regime, sanctions have different consequences. Oil and gas are critical for the Syrian economy. According to the 2009 Syria Report of the Oxford Business Group, the oil sector accounted for 23% of government revenues, 20% of exports, and 22% of GDP in 2008. This means oil exports constitute about a third of the Syrian budget, accounting for an estimated $7m-$8m a day. To make matters worse for Syria’s Assad, as the cycle of protests and government crackdown has dried up revenues from tourism - and given the government urgent need for extra cash to afford diesel subsidies, cut food taxes, and meet rises in civil servant salaries - oil revenues have become essential for the survival of the regime.
Still, a western imposed oil and gas sanction capable of impacting on Assad’s regime is not certain to succeed. It hinges on conditions that may well be beyond the reach of western countries. To begin with, non-western countries, especially China and India, hungry for energy and with refineries to process heavy oil, are more than likely to increase their share of Syrian oil. It is equally likely that their national oil companies would be happy to take over western oil company operations in Syria. Already, China National Petroleum Corp and India's Oil and Natural Gas Corp run several exploration and development operations in Syria.
But assuming that domestic or international pressure curtails Chinese and Indian (and even Russian) energy ties with Syria, the Assad regime is secured by mammoth reserves of $18 billion held by the Syrian Central Bank and Commercial Bank of Syria. This kind of money will keep the regime afloat for a while but cannot keep the country running for long. With domestic banks’ limited capital and international borrowing out of the question, Syria has no option but to turn to friends with deep pockets. Iran is the only country ready and willing to volunteer assistance. Tehran is reportedly considering a package of $5.8 billion in financial aid to Syria, and even oil shipments. No doubt this will reaffirm the Syrian-Iranian axis, but at a huge cost for Syria – total isolation in the Arab world.
In the final analysis, sanctions are unlikely to produce the desired effect in time. Assad’s killing machine will continue to target civilians, but sanctions will suck the economic and political oxygen out of the regime. Most important of all, sanctions will demonstrate that western countries are serious about ending the brutal crackdown on the protests.