West needs to treat sanctions against Syria with caution

Oil sanctions on Syria should be ready for use. But they have to be used, not to salve the consciences of western activists, but to give the final push to a tottering tyranny.

Syrian nationals shout slogans against Bashar Al Assad, the Syrian president, during a demonstration outside the Syrian embassy in Amman last week.

More than 75,000 people in Syria's oil hub of Deir Al Zor were reported to have demonstrated on Friday against the government of Bashar Al Assad.

Oil could be a key factor in pushing the financially shaky regime over the edge.

Syria is not an oil exporter on the scale of Libya; less than half of its declining production of 400,000 barrels per day is exported.

Yet oil remains highly significant, with annual earnings of some US$4 billion (Dh14.69bn) at current prices representing a third of government budget receipts. With tourism, another major revenue source, at a near standstill, the government's lavish promises of social spending to appease the population can only be paid for by printing money and stoking inflation.

A strike in Deir Al Zor or the ports at Latakia, Banias and Tartous, where there have also been protests, could interrupt oil exports. But if the opposition cannot achieve this themselves, what leverage does the outside world have?

Syria's heavy, high-sulphur exports can only be handled by a few refineries, mostly in Western Europe. The EU can contemplate a loss of Syrian crude - by using Iraqi, Russian and Saudi substitutes - with more equanimity than that of high-quality Libyan oil.

There are reports that crude loadings have fallen sharply, with the violence, existing financial sanctions and limited bank credit deterring traders and shipowners. And the US was reported last month to be considering oil sanctions.

Oil production is dominated by the state-owned Syrian Petroleum Company, and some foreign companies: Royal Dutch Shell with partners the China National Petroleum Corporation and India's Oil and Natural Gas Corporation; France's Total; Canada's Suncor; and the small, Syria-focused Gulfsands Petroleum. Mr Al Assad's cousin, Rami Makhlouf, a businessman widely reviled by the opposition who accuse him of corruption, owns 6.5 per cent of Gulfsands.

Shell, which attracted criticism in May when chartering a tanker to lift Syrian crude, is under fire from human-rights organisations for its involvement in the country.

Yet sanctions and pressure for corporate withdrawal are far from panaceas. Sanctions were arguably effective, eventually, in apartheid-era South Africa and to some extent in Muammar Qaddafi's Libya.

But in Sudan and Myanmar, long-running campaigns over human-rights abuses led to the withdrawal of Western oil companies. They were replaced by Asian companies with far less shareholder or regulatory oversight, the abuses continued and both countries' well-connected elites were barely inconvenienced.

The Chinese in particular learnt the lesson that avoiding competition by dealing with such regimes could be highly lucrative, and went on to repeat the strategy in Zimbabwe, Iran and Syria.

Long-running sanctions on Iran, Cuba, North Korea and Saddam Hussein's Iraq failed noticeably to change regime behaviour, while impoverishing the middle class, the key constituency for creating democracy. Autocracies manipulate sanctions and smuggling to enrich their supporters; criminalisation and corruption become pervasive; and countries isolated from the outside world are unlikely to liberalise or democratise.

Private companies are not a vehicle for moral crusades. Oil and mining companies must go where the resources are; consumers, however, should not simultaneously enjoy the fruits of those resources and complain about where they are extracted.

Numerous energy or mineral-rich states in central Asia, parts of the Middle East and Africa have grim human-rights records, as does the world's leading exporter of manufactured goods, China.

Of course, companies should not actively provide weapons or other tools of repression, but oil production is not such a situation, regardless of the campaign group Platform's unfeasibly precise calculations of how many Syrian tanks are fuelled with Shell oil.

If Shell or Total were to suspend operations in Syria, the regime would no doubt expropriate them. The regime will not be pressured by handing it a valuable asset. Staffed mostly by Syrians in any case, oil production would continue unabated in the short term. In the longer term, the Chinese companies already in the country, or others, would be invited to take over.

For these reasons, oil sanctions should be multilateral, focused on preventing exports, and used to achieve an immediate objective, not to express generalised disapproval of the brutal regime in Damascus. But, once imposed, sanctions are almost impossible to repeal, as the 50-year-old US embargo on Cuba shows.

Given the particular situation of Syrian oil, the EU and US could apply significant pressure, but such a coalition would be politically much stronger with Turkey and Arab nations. Egypt could cut off gas supplies. Iraq has given some signs of support for Mr Al Assad, probably under Iranian influence, but should recall that it suffered under its own pre-revolution government.

Oil sanctions on Syria should be ready for use - but not to salve the consciences of western activists.

Robin Mills is a Dubai-based energy economist, and author of The Myth of the Oil Crisis and Capturing Carbon