ASSESSMENT OF TARGETED FINANCIAL SANCTIONS AGAINST

C O N F I D E N T I A L SECTION 01 OF 03 DAMASCUS 000605 SIPDIS SIPDIS NEA/ELA TREASURY FOR GLASER/SZUBIN/LEBENSON NSC FOR ABRAMS/DORAN/SINGH EB/ESC/TFS FOR SALOOM E.O. 12958: DECL: 02/07/2016 TAGS: EFIN ECON ETTC SY SANC SUBJECT: ASSESSMENT OF TARGETED FINANCIAL SANCTIONS AGAINST SARG OFFICIALS REF: A. DMS 5567 ¶B. DMS 0276 ¶C. DMS 0068 ¶D. DMS 0003 ¶E. DMS 6224 Classified By: Charge d'Affaires Stephen Seche, reasons 1.4 b/d ¶1. (C) Summary: Post offers the following observations based on its experience thus far with targeted financial sanctions against SARG officials and other Syrian entities. First, maximizing media coverage of the designation increases the "name and shame" effect. The designation of Asif Shawkat under Executive Order (EO) 13338 received the most positive reception in Syria due to Shawkat's high domestic profile, the various public statements made in Washington on the day of the designation, and the broad coverage the designation and statements received in regional media. Second, multilateral sanctions increase our chances of seizing pools of assets. Although the EU seems most willing to impose targeted sanctions against individuals implicated in the UNIIIC investigation, the recent violence in Damascus against the missions of several EU member states may make the EU more amenable to targeted sanctions outside the rubric of a UNSCR. Third, using the designations to highlight regime corruption would undermine popular support for the SARG. End summary. HIGH-LEVEL ANNOUNCEMENTS MOBILIZE COVERAGE IN REGIONAL MEDIA ¶2. (C) Most contacts with whom Post interfaces consider targeted financial sanctions as the most legitimate international tool for pressuring the SARG (ref A). However, to date, unilateral USG designations against SARG officials and other Syrian entities have had an uneven effect. The designations of Rustum Ghazali, Ghazi Kanaan and Asif Shawkat under EO 13338, which specifically addresses SARG behavior toward Iraq, Lebanon, support for terrorism and development of WMD, have garnered the most attention. Of those, Shawkat's received the most notice domestically for a number of reasons (ref B). The White House and the departments of State and Treasury made public statements on the day of the designation, which were covered by regional print and television media, including Sharq al-Awsat, al-Hayat and al-Arabiya. This ensured that a range of Syrians from the business elite to the street knew about Shawkat's designation immediately. ¶3. (C) Additionally, Shawkat was the best known of all the designees and the closest to the Asad family itself. Even though Ghazali and Kanaan were influential members of the regime, contacts contend that average Syrians were relatively unaware of their names or level of influence at the time of the designations. Contacts say that Shawkat's designation suggested to the average Syrian that the US was beginning to go after members of the family and pillars of the regime. ¶4. (C) Previous designations under EO's 13315 (targeting Iraqi FRE's and their supporters),13224 (targeting members and associates of al Qaida, the Taliban and Usama bin Laden), and 13382 (targeting WMD proliferators) have had less of an isolating and limiting effect on Syrian designees. Most Syrians and members of the Western diplomatic community with whom Post has spoken were unaware that the US had designated Syrian entities under those EO's (ref C). One reason is that Syria is not mentioned specifically in the EO language. Therefore, Syrians and Western diplomats have been less likely to tie these EO's to the behavior of SARG officials and other Syrian entities. Another reason is that these designations received almost no local or regional media coverage, partially, we suspect, because of the absence of USG statements that might have drawn attention to them. ¶5. (C) These factors limited the designations' "name and shame" effect, and allowed designees like Dhu al Himma Shaleesh and his company SES International to successfully DAMASCUS 00000605 002 OF 003 continue soliciting international business even though the Shaleeshes are known among Syrian businessmen to be furthering the regime's worst policies (ref D). The Economic/Commercial officer at the British Embassy stated that a British company had opened contract negotiations with SES International without knowing that the US had designated the company and its leadership. The British firm eventually decided to end negotiations not because of the potential consequences of doing business with a USG designated entity, but because of its own negative perceptions of the Shaleesh family's business practices. MULTILATERALIZE TO SEIZE ASSET POOLS ¶6. (C) Seizing large pools of assets from designated individuals would be a next step in enhancing the impact of targeted financial sanctions. Both Ghazi Kanaan and Asif Shawkat publicly expressed disdain for the USG action and brazenly challenged the US to find any of their assets in US financial institutions. Contacts have reported that other potential targets already have moved their assets out of the US (ref E). Future sanctions that are implemented multilaterally in conjunction with European allies have the greatest possibility to identify and freeze assets. Previously, developing multilateral sanctions seemed most likely through the UN. Western diplomats based in Damascus have told us that European governments are not likely to follow the US lead in imposing targeted sanctions against SARG officials and entities unless they are implicated in the UNIIIC investigation into the assassination of Rafik Hariri. ¶7. (C) However, recent violence in Damascus against the missions of several European countries may have created an opening in which EU member states would be willing to expand their thinking on targeted sanctions against SARG officials and other entities outside the UNIIIC track. A diplomat at the EU mission in Damascus stated that the mood in Brussels now is much less forgiving toward Damascus, and that the EU may consider suspending development and technical assistance if there are future instances of violence. There have been circumstances in which the EU has imposed targeted- or "smart sanctions"- on non-member states without UN mandate, and local EU interlocutors have commented that the EU primarily has used sanctions to promote regional stability and support democracy, as well as to protect EU staff stationed abroad. In one case, the EU sanctioned officials of the government of Belarus (GOB),arguing that the GOB had violated the Vienna Convention for shutting off electricity and water to the diplomatic compound. USE REGIME CORRUPTION TO FRAME DESIGNATIONS ¶8. (C) Syrian interlocutors have asked us to tie targeted sanctions to regime corruption in order to amplify the "name and shame" effect. Corruption among regime officials is widely recognized and resented. The Abdel-Halim Khaddam interview, in which the former Vice President criticized the Bashar government from a lavishly appointed Parisian apartment, gave Syrians the most recent excuse to rhetorically question how government officials could become so rich on their meager salaries. Syrians are particularly frustrated with not having realized any tangible benefit from their country's oil exports, even though oil is hovering around $60 a barrel. They complain that a few businessmen with ties to the regime, including President Bashar's maternal cousin Rami Makhlouf, have grown rich off Syrian oil revenues at the economy's expense. Even though corruption alone is insufficient to trigger targeted sanctions under current US law, we may be able to prove- as in the case of Shaleesh and SES International, which set up a front company to funnel arms to Iraq- that the corruption is directly tied to activities that are inimical to US interests and security. ¶9. (C) Several contacts even have floated the idea of setting up a fund for the development of the Syrian economy, modeled DAMASCUS 00000605 003 OF 003 after the DFI, which would be financed by the frozen assets of regime officials. The Syrians with whom Post speaks are anxious to see the tangible results of targeted sanctions and often question us on whether or not any funds actually have been seized. The publicized seizure of funds belonging to Shawkat, Ghazali, or one of the Shaleeshes, combined with placing the assets in a fund for the people of Syria, could change the nature and tenor of the way Syrians talk about the SARG's confrontation with the international community. Using our public statements to highlight the corruption of the designees would complicate Bashar's constant use of the patriot card to counter external pressure. ¶10. (C) Comment: Based on our experience with targeted financial sanctions in the Syrian context, when the USG makes a big deal about new designations, coverage in regional media correspondingly increases. This is the easiest way to increase the impact of the designations. In addition, going after the main pillars of the regime, like Asif Shawkat but including Maher Asad and Rami Makhlouf, and calling attention to their corruption, weakens the regime and reminds Syrians that it is this regime that is stealing their national patrimony. Further, in the wake of recent violent attacks on European embassies in Damascus, now may be an appropriate time to revisit targeted sanctions against SARG officials with our EU allies in order to improve the effectiveness of what has been until now unilateral action. SECHE