Preemptive contract sanctions: A new tool to squeeze Bashar al-Assad
Bashar al-Assad. (Getty Images)
March 19th, 2012
10:00 AM ET

Preemptive contract sanctions: A new tool to squeeze Bashar al-Assad

Editor's Note: Owen Barder and Kimberly Ann Elliott are Senior Fellows at the Center for Global Development based in London and Washington, DC, respectively.

By Owen Barder and Kimberly Ann Elliott - Special to CNN

U.S. President Barack Obama and British Prime Minister David Cameron presented a unified front during Cameron’s recent visit to Washington, calling on their governments and allies to ratchet up pressure on the Bashar al-Assad regime to stop the violent crackdown in Syria.  But with existing economic sanctions undermined by the willingness of others to continue doing business with the al-Assad regime, and little appetite for military action, how will their rhetoric play out in reality?

It’s time for the international community to try a new tool that would reinforce existing measures: Preemptive contract sanctions. This would take the form of a declaration that any contracts with the al-Assad regime are illegitimate and need not be honored by a legitimate successor.  Such a declaration would discourage new contracts with or loans to the al-Assad regime because of the increased possibility that that they would be repudiated by a legitimate successor government.

Discouraging new contracts would make it harder for the regime to sustain itself. It could encourage senior officials or military officers to abandon the regime and cause outsiders considering doing business with the regime to drive a harder bargain. If contracts are signed despite such a declaration, it would lighten the burden on a legitimate successor government, which could repudiate such contracts without endangering Syria’s access to international credit markets.

Here’s how it would work: The United States and the United Kingdom, which are home to the world’s leading financial centers, acting with support of the European Union and the Arab League, would announce that any new contracts with the al-Assad regime relating to arms transfers or the oil sector are illegitimate.

How would governments and firms considering doing business with al-Assad respond? Would Russians continue to sell weapons, knowing they might not get paid and that their contract could not be enforced? Would China or other countries buy the Syrian oil that the United States and EU are boycotting, or consider investing in Syria’s oil sector, knowing that the contracts could be repudiated when the al-Assad regime falls?

Such a declaration might not have large, immediate effects.  But it would complement sanctions already in place, further isolate the regime and signal that the economic squeeze will get tighter over time.

If there was ever a time and place to try this new approach, that time is now, and the place is Syria. Since we first wrote about the potential application of this proposed new tool in Syria last August the situation has deteriorated sharply and the United States, European Union, Arab League, and other countries have imposed strong sanctions against Syria’s oil sector and the central bank. But Russia and China continue to block action by the U.N. Security Council that could extend sanctions globally, even on arms and munitions.

Unlike traditional trade sanctions, preemptive contract sanctions are self-enforcing and can help bypass this U.N. bottleneck. Trade sanctions offer those who violate them a windfall: Potential profits increase since competition from those who comply with the sanctions has been eliminated. In contrast, preemptive contract sanctions increase the risk for those who would violate them and decrease the incentive to sign a long-term contract with the target regime.

Preemptive contract sanctions also don’t require international unanimity - or a U.N. Security Council resolution - to be effective.  In theory, they could work even if the declaration were made only by the governments of the United States and the United Kingdom, home to the world’s leading financial centers and the courts that are the most common venue for adjudicating international contracts. But such a declaration would be greatly strengthened by an international consensus that includes key developing countries and the endorsement of relevant regional bodies, in this case the Arab League.

As Arab and Western governments continue to ponder what further measures can be taken to pressure the Syrian government, we hope they will consider this proposal. In the midst of such violence, calling contracts signed with the al-Assad regime what they are - odious and illegitimate - and raising the risk for companies or governments willing to sign them is surely worth a try.

The views expressed in this article are solely those of Owen Barder and Kimberly Ann Elliott.


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soundoff (20 Responses)
  1. almahdi is lusefer

    SQUEEZE HIS NECK THIS WAR CRIMINAL SHIIA THUGS ARE HELPING THE TERRORISTS HIZBOALLAH AND BEEN HELPED BY EVIL IRAN AND IRAQI SHIIA, those evil now killing the jews in france and carry on assasinations..israel must attack iran now to end the evil....

    March 19, 2012 at 10:06 am |
  2. bobalu

    This is a very good idea. Why should the Syrian people in the future have to pay for the tools that Assad purchased to kill them?

    March 19, 2012 at 10:23 am |
    • j. von hettlingen

      The tightening of the economic noose might be the most effective tool to bring the regime to fall. Russia might send the arms but not money, food and branded goods. Iran is feeling the squeeze itself and wouldn't have much to spare. Assad's loyalists would jump the sinking ship, when the sea gets tough.Make sure the oppostion reaches out for them.

      March 19, 2012 at 6:48 pm |
      • AlexShch

        Did not you realize that in the city of Homs it is pretty much over right now, and elsewhere as well: there are no strongholds for the opposition any more? The Assad's regime in a much better shape right now than it was one month ago.

        March 20, 2012 at 11:38 pm |
  3. Deborah Brasher

    I totally agreed with Fareed's analysis of the Iran situation as hie outlined it on the GPS show Sunday, March 18th. If the US or Israel bombs Iranian nuclear facilities, the countries dropping the bombs are the aggressors and Iran is the victim. Iran might very well see such a strike as a reason to develop actual nuclear weapons rather than the break-out capacity that it appears to be pursuing.

    March 19, 2012 at 10:28 am |
  4. George Patton

    It seems like these two thugs(Barack Obama and David Cameron) are always thinking up ways of applying the politics of hunger in order to force their will on other countries. Like I said before, a third country needs to come forward and get Bashar al-Assad and the Syrian rebels to try to get a cease fire going. The problem being that the current European leaders won't come out of their ivory towers long enough to do that. All these bureaucrats do is to preach "unity with the United States". This is quite revolting!

    March 19, 2012 at 2:50 pm |
    • Rz

      Syrian preemptive contracts ?? Hmmm, almost sounds like PUT or CALL options or some kind of war torn derivative product for hedge fund traders at the new Vulture Exchange! I wonder if Wall Street might get in on it?

      March 20, 2012 at 1:15 am |
      • AlexShch

        Good point.

        March 20, 2012 at 11:39 pm |
  5. Brian Barder

    This seems an ingenious and elegant proposal for adding substantially and non-violently to existing pressure on Assad to stop the slaughter of his own compatriots and to look for a peaceful political settlement. Anything that might help to stave off a catastrophic conflict along Shia-Sunni lines throughout the middle east is surely to be welcomed. (Full disclosure: I am the father of one of the authors of this article.)

    March 19, 2012 at 5:28 pm |
  6. matt

    Their are at least 8 family members and business associates controlling the majority of Syrian interests.

    I suggest asking for Mossad's help in taking out the "associates" or business brokers, and then work toward the in-laws.

    March 19, 2012 at 6:21 pm |
  7. Rz

    What's this I hear ? Place your bets, winner takes all? Does that contract come with any austerity measures in the fine print, by any chance ? Just in case they spend all the prize money trying to kill each other.

    March 20, 2012 at 12:28 am |
  8. S.V.P.YADAV

    Respected, Mr.Owen Border Garu and Mr. Kimberly Ann Elliott Garu,
    MALICE ON OIL.........I prey to U S donot do malevolent activities.

    March 20, 2012 at 2:27 am |
  9. S.V.P.YADAV

    Respected, Mr. Owen Border Garu, and Mr.Kimberly Ann Elliott Garu, U N is orbitrator for only U S.
    U N is doing illegitimate practies on Democratic World.

    March 20, 2012 at 2:34 am |
  10. S.V.P.YADAV

    Respected, Mr. Owen Border Garu and Mr. Kimberly Ann Elliott Garu, If china and Russia will not co-operate to Syrean Govt. Automatically Mr. Rasheed Al Assad Garu will killed by U S and his counter part. And Syrean people used like a Water-melon for U S and his counter part.

    March 20, 2012 at 2:57 am |
  11. tony

    It is very clear now to the whole world that the UN, and most of the western world including US are giving Al Assad thugs and criminal Alawites to continue the killing machine of innocent unarmed civilians in syria. Not only that ...they are preventing Turkey and the Arab countries from any action including humaitarian aids to syrian people. The whole world should be ashamed of watching syrian children, women and young people been slaughtered by Assad. Obama the black slave of USA showed his submission to to his white master the AIPAC who are not denouncing the Assad modern holocast. The ememies you control is better than the one whom you donot. All drivien by hate to arabs and muslims inparticular. So much hate shown on all CNN SENT COMMENTS from fanatic individual as well as Assad thugs

    March 20, 2012 at 4:03 pm |
  12. duke

    Would like to see a social networking campaign against buying China goods, till China stops supporting Syria leaders!

    March 20, 2012 at 8:16 pm |
    • therodman54

      Careful there duke, China will cut us off of the rare earth minerals and we won't be having these online exchanges without them.

      March 21, 2012 at 7:20 pm |
  13. feres abou

    respect the ideas of others I have mine, I repeat what the final common purpose? weaken the country by any mechanism, who will pay the Syrian people. I understand the anger ethnic, political, democratic, loss of valuable human lives, anyone would say it's not fair. – my question is who will receive the command after the change which of course will be a hundred times more violent, with hundreds of thousands of lost. – who will pay for that 4 or 5 people in government, such as Libya or Iraq. – because I'm also Venezuelan and I am Syrian Druze, who now defend the Christians, Druze and Alawites United States or England or the European Union. – in homs city kills people according to religion that is the small scale civil war of what comes after, there will be a overwhelmig civil war proportions and everyone mostly pro-government will be armed and ready to fight for my people and that quacks calling for democracy only they want is revenge. – I do not think as yet another solution than dr. bashar by his on the wright time, words alone are leaves blowing in the wind without compass. – to my fellow Syrians or foreigners my advice is to stop talking and shoot into the air and learn from others living examples in the Middle East. -the regime simply does not fall even most of the Syrian people is still supporting the president's figure not because are afraid is because until now there is no an efficient transition program on the ground. There is a saying better known evil than good to know, is why when the time comes I will fight for my people who made history by given freedoom on the hands of our commander Syrian sultan al Atrash, I do not mind england european union because they are only birds of prey brothers confront using television, videos, true or false testimony, and those arab plastic people from the gulf God willing the punishment of the power of God will come to them relentlessly. – I am a peaceful person my family is there in Syria and if something wrong happens to them i will have an answer not with words but with facts and there are thousands like me willing to give his life not by the regime but for my Syrian people. – the Sunni majority in Syria calling for blood, I am calling for peace.- i dont care what they are willing to do which is obvius supported by outsiders besides they are a lot of heavy arms crossed since long time and we know that.- do not forget the sirian army is still 10 percent activity, do not let the other 90 to crush wherever is an evil guy , just because the press pressure are still quiet under just an order to smash whoever wants to kill the great history of my country.- i am talking as a free man democratic with the picyure of the future between my eyes.- if anybody wants to spell bad words go ahead, i am ready for your stupid believes about democracy in siria , so far is not possible unless lybian procedure will take place in siria.- so be very carefull

    respect the ideas of others I have mine, I repeat what the final common purpose? weaken the country by any mechanism, who will pay the Syrian people. I understand the anger ethnic, political, democratic, loss of valuable human lives, anyone would say it's not fair. – my question is who will receive the command after the change which of course will be a hundred times more violent, with hundreds of thousands of lost. – who will pay for that 4 or 5 people in government, such as Libya or Iraq. – because I'm also Venezuelan and I am Syrian Druze, who now defend the Christians, Druze and Alawites United States or England or the European Union. – in homs city kills people according to religion that is the small scale of what comes after, there will be a civil war proportions and everyone ininmaginables mostly pro-government be armed and ready to fight for my people and that quacks calling for democracy they want is revenge. – I do not think as yet another solution than himself dr. bashar on your own time, words alone are leaves blowing in the wind without compass. – to my fellow Syrians or foreigners my advice is to stop talking and shoot into the air and learn from others living examples in the Middle East. – by that the regime simply does not fall even most of the Syrian people is still supporting the president's figure is not afraid is because until now there is an efficient transition program. There is a saying better known evil than good to know, is why when the time comes I will fight for my people who made history by releasing our commander Syrian sultan to Atrash, I do not mind used england european union because they are the only birds of prey brothers confront using television, videos, true or false testimony, and those in name only Arabs who are called God willing the punishment of the power of God will come to them relentlessly. – I am a peaceful person but if you'll come back my family goes in Syria something happens ininmaginable will have an answer not with words but with facts and there are thousands like me willing to give his life not by the regime but for my Syrian people. – the Sunni majority in Syria calling for blood, I am calling for peace

    respect the ideas of others I have mine, I repeat what the final common purpose? weaken the country by any mechanism, who will pay the Syrian people. I understand the anger ethnic, political, democratic, loss of valuable human lives, anyone would say it's not fair. – my question is who will receive the command after the change which of course will be a hundred times more violent, with hundreds of thousands of lost. – who will pay for that 4 or 5 people in government, such as Libya or Iraq. – because I'm also Venezuelan and I am Syrian Druze, who now defend the Christians, Druze and Alawites United States or England or the European Union. – in homs city kills people according to religion that is the small scale of what comes after, there will be a civil war proportions and everyone ininmaginables mostly pro-government be armed and ready to fight for my people and that quacks calling for democracy they want is revenge. – I do not think as yet another solution than himself dr. bashar on your own time, words alone are leaves blowing in the wind without compass. – to my fellow Syrians or foreigners my advice is to stop talking and shoot into the air and learn from others living examples in the Middle East. – by that the regime simply does not fall even most of the Syrian people is still supporting the president's figure is not afraid is because until now there is an efficient transition program. There is a saying better known evil than good to know, is why when the time comes I will fight for my people who made history by releasing our commander Syrian sultan to Atrash, I do not mind used england european union because they are the only birds of prey brothers confront using television, videos, true or false testimony, and those in name only Arabs who are called God willing the punishment of the power of God will come to them relentlessly. – I am a peaceful person but if you'll come back my family goes in Syria something happens ininmaginable will have an answer not with words but with facts and there are thousands like me willing to give his life not by the regime but for my Syrian people. – the Sunni majority in Syria calling for blood, I am calling for peace

    March 22, 2012 at 3:02 am |
  14. Frank Alabi

    Syria i feel should make sure they get rid of asaad regime and look forward to democracy because that is how every resident in the country get their fair share. It is a lot of lives lost so far so I believe they should fight hard and get it done once and for all.

    March 22, 2012 at 9:44 am |

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