"The Caesar Act": Nature, Goals, and Potential Consequences

EPC | 23 Jun 2020

The US sanctions law against the Syrian regime, called the Caesar Syria Civilian Protection Act, or the Caesar Act for short, entered into force on 17 June 2020. The Act targets several sectors of the Syrian economy and sanctions entities, businesses and individuals, both regional and international, that provide military and economic support to the Syrian regime. The Act is estimated to have significant economic and political impact that would change the balances among actors in the Syrian issue and bring about new dynamics that could affect the outputs of the promised political solution.

This paper sheds light on the nature, goals and economic and political implications of this Act.

What is the Caesar Act?

The Act is named after a Syrian army officer who defected from the Syrian regime and leaked nearly 55 thousand pictures of nearly 11 thousand detainees who were killed under torture in Syrian prisons. The pictures were validated by the Federal Bureau of Investigation (FBI). The Congress with both its chambers endorsed the Act that was incorporated into the National Defense Authorization Act for Fiscal Year 2020 and signed by President Donald Trump on 20 December 2019.

1- Stages of implementation of the Act

The implementation of the Caesar Act passes through several stages. The list of sanctions will be updated and new entities will be added either by an ad hoc committee for monitoring and following the extent of commitment by countries, firms and individuals, or by the US President Donald Trump who is mandated to determine, 180 days after the Act enters into force, whether the Central Bank of Syria constitutes a tool for money laundering.

The first stage started on 17 June 2020 when the US imposed sanctions on 39 entities and figures associated with the Syrian regime. The US Department of State said in a statement issued the same day that the sanctions cover the “architect[s] of this suffering” Bashar al-Assad, his wife Asma, the funders of the “atrocities” Mohammed Hashmo and the Iranian militia Fatemiyoun Division, in addition to Maher al-Assad along with his Fourth Division of the regime’s troops and his two commanders Ghassan Ali Bilal and Samer al-Dana. The sanctions also extend to Bushra al-Assad (Bashar al-Asaad’s sister), Manal al-Assad (Maher al-Asaad’s wife), Ahmad Sabir Hamsho, Amr Hamsho, Ali Hamsho, Rania al-Dabbas, and Sumaia Hamcho.

The implementation of Phase Two starts between July and August 2020. During that phase, sanctions will be imposed on military, financial and economic associates of the Syrian regime, such as the Wagner Group, pro-Iranian militias, partisan entities, and individuals. Sanctions will also be imposed on firms and individuals violating the decision in neighbouring countries. The sanctions will extend to whoever provided economic, political and military support to the Syrian regime starting from 19 December 2019, which is the date of signing the Act.

2- Sectors targeted by the Act

The Caesar Act’s sanctions target entities working for the Assad regime in four sectors, namely: oil and natural gas, military aircraft, construction and engineering, and goods, services and technology. This includes both direct and indirect support provided to the regime, such as the support by Iranian- and Russian-backed militias operating in Syria. In addition, the Act requires that the Trump administration determine whether the Central Bank of Syria constitutes an entity of “primary money laundering concern” pursuant to Section 311 of the USA Patriot Act.

The three main domains liable to the sanctions are the following:

  • Foreign trade, through banning the supply of the equipment, spare parts and non-food goods required by the Syrian institutions.
  • Local or joint foreign or regime-supportive investment, especially in the areas of construction, engineering and energy.
  • Sectors related to finance that covers loans and financial assistance and transfers directed to government institutions or through them.

3- Who might be targeted by the sanctions?

  • Whoever provides significant financial, material or technological support to or knowingly engages in a significant transaction with the Government of Syria (including any entity owned or controlled by the Government of Syria) or a senior political figure of the Government of Syria, or a foreign person that is a military contractor, mercenary, or a paramilitary force knowingly operating in a military capacity inside Syria for or on behalf of the Government of Syria, the Government of the Russian Federation, or the Government of Iran.
  • Whoever knowingly sells or provides significant goods, services, technology, information, or other support that significantly facilitates the maintenance or expansion of the Government of Syria’s domestic production of natural gas, petroleum, or petroleum products.
  • Whoever knowingly sells or provides aircraft or spare aircraft parts that are used for military purposes in Syria for or on behalf of the Government of Syria to any foreign person operating in an area directly or indirectly controlled by the Government of Syria or foreign forces associated with the Government of Syria.

4- Goals of the Act

  • Isolating the Assad regime: in a virtual meeting with the Syrian community in the US on 8 June 2020, the US Special Envoy to Syria James Jeffrey explained that the US seeks to isolate the regime and ensure that no one deals with it as a normal regime because “it’s not so”. The Act seeks to deprive the Syrian President Bashar al-Assad of any chance of converting the military victory that he has achieved on the ground into political capital to establish and enhance his chances of stay in power indefinitely.
  • Driving the regime towards the political solution: Jeffrey had underlined in an interview with Ashark al-Awsat newspaper on 2 May 2020 that Washington will continue to exercise economic pressure on the Assad regime, to isolate it diplomatically and to impose sanctions on the regime and its supporters until a political solution is reached in Syria based on United Nations Security Council Resolution (UNSCR) 2254 (2015) which calls for “free and fair elections, pursuant to the new constitution”. Furthermore, the US Department of State has underlined in its aforementioned statement that the US will not stop until “the Syrian government agrees to a political solution to the conflict as called for by UNSCR 2254”.
  • Blocking Assad’s reconstruction road by depriving him of benefitting from reconstruction projects that the US thinks will be used by him to enhance his position in power.
  • Besieging Assad’s allies: the Act seeks to besiege the Syrian regime’s allies, namely Russia and Iran, with a view to forcing it to accept the political solution to the Syrian crisis based on UNSCR 2254 and depriving them of benefitting from the privileges they accessed in terms of Syria’s wealth and infrastructure, particularly oil and gas.

5- Conditions of suspending the sanctions

The Act has determined the duration of the sanctions by five years, but it has also granted the US President the power to lift the sanctions provided that the following demands are met:

  • Cessation of the bombing of civilians by Russian and Syrian aircraft, and cessation of the targeting of medical facilities, schools, residential areas, and community gathering places, by Syrian, Russian and Iranian troops and groups loyal to them.
  • Lifting the siege of areas besieged by the Syrian, Russian and Iranian troops and permitting the passage of humanitarian aid, free movement of civilians, and access to Syrian prisons and detention facilities by human rights organizations.
  • Release of all political prisoners and permitting the safe, voluntary, and dignified return of displaced Syrians.
  • Holding perpetrators of war crimes to account and establishing justice for victims of war crimes committed by the regime.

The Syrian regime cannot fulfil those conditions, particularly the condition of holding perpetrators of war crimes to account because this charge extends to all pillars of the regime, from Bashar al-Assad and his brother Maher to all heads of the security services and military divisions, which would mean that the regime would destroy its structure by its own hands.

Possible implications of the Caesar Act

As planned, the implementation of the Caesar Act threatens to have numerous implications for all levels of life in Syria, including:

1- Collapse of the economy

The Act is expected to greatly contribute to the collapse of the Syrian lira in light of the disruption of all sources of production, the shortage of income sources, and the regression of the allies, particularly Iran on which the regime used to rely in injecting hard currency into Syria, as a result of Iran’s deteriorating economic conditions. Besides, the energy sector, which is the top target of the sanctions, is associated with a large number of productive sectors that will consequently be disrupted, thus intensifying the economic collapse. The Syrian lira had lost nearly 70 percent of its value since April 2020. While its value was nearly 1,600 Syrian liras against the dollar in mid-May 2020, that value declined to nearly 3,000 liras immediately before the release of the Act. While this decline is attributable to multiple factors, mainly the crisis of Lebanese banks that have limited the volume of foreign currency withdrawals for their clients, some of whom are Syrians, the struggle within the Syrian regime between Bashar al-Assad and Rami Makhlouf, which made a number of businessmen smuggle their capital out of the country, the start of implementation of the Caesar Act will lead to a further collapse of the Syrian currency, which would necessarily lead to a significant decline in the purchasing power of Syrians.

2- Disruption of the regime functions

The sanctions will lead to a decline in the national income to its lowest levels. This would mean that the regime will go bankrupt and become incapable of carrying out its functions, as its capacity to pay the salaries to the bulk of its civilian and military staff will be undermined. This would have serious implications at multiple levels, as follows:

  • The Act will weaken the regime’s capabilities to re-produce its social base and control the war’s negative consequences. The decline in the value of the lira has rendered the salaries of the supportive environment, namely coastal Alawites and members of minorities, almost valueless. Besides, these do not have any resources other than their salaries even as they expect to be rewarded for their sacrifice by fighting at the side of the regime and losing thousands of men and breadwinners. The Caesar Act would eliminate any hope of changing the conditions of the regime’s supporters at the short to medium terms even as their savings have been depleted by the war and they became poorer. While many analyses warn against betting on a revolution against the Assad regime by its supporters, the sanctions will cause the public to turn against the regime, as was the case during the demonstrations that took place in recent days in As-Suwayda and Daraa.
  • The Act will cause investors to stay away. Businessmen and companies are expected to refrain from investing in Syria and taking part in any economic projects, either for fear of being affected by the sanctions or because the Syrian market would not be attractive in light of the decline in the purchasing power to its lowest level.
  • The Caesar sanctions would force the regime to continue to adopt the pattern of the “war economy” which has largely been based on smuggling and nepotism. Corruption has become widespread as warlords and mediators have taken control of particular economic sectors and exploited the population’s basic needs. There are estimations that the Caesar Act will contribute to making the Syrian economy more corrupt than it is at present because economic transactions will increasingly depend on personal networks under limited or even no official supervision.
  • The deteriorating economic conditions are likely to cause a wave of displacement from regime-controlled areas as people would take refuge in Lebanon, areas controlled by the Syrian opposition or Kurdish-controlled areas. With more than 80 percent of Syrians living under poverty line and UN expectations of numerous deaths as a result of hunger, families or individuals may be forced to try to earn their livelihood in the said areas as long as the road to Turkey and Europe is closed.

Winners and losers from the Act

The Caesar Act is expected to have a significant impact on the power balances with respect to actors in the Syrian political scene. The Act lays the foundations for a new pattern of power equations based largely on the actors’ economic effectiveness while greatly weakening the military conflict pattern that was advantageous to the Assad regime and its Russian and Iranian allies. This equation brings about both winners and losers.

1- Winners

  • The United States tops the list of winners. It is engaged in a war of attrition against Assad and his allies without firing a single shot. The key to any settlement in Syria is now in the hands of the US that has increased its leverage in Syria to the extent of becoming a main player in the form and output of the upcoming political settlement.
  • Turkey: the Caesar Act offers Turkey more power cards to the same extent that it deprives Turkey’s adversaries (Assad and Russia) of the capability to regain the areas it controls in Idlib and northern Syria. The Act also offers Turkey the opportunity to raise the level of the “Turkification” of those areas that have declared their intention to adopt the Turkish lira in everyday dealings. This would help establish the Turkish occupation and the robbery of the areas’ wealth. Turkey has started to buy the harvests of wheat, barley and lentils in the areas of Tal Abyad and Ras al-Ain in Turkish liras, in addition to its ensured access to the dollar remittances sent by Syrians to their relatives that used to go to the treasury of the Syrian regime.
  • The Kurds: considering that all the commodities needed for living, such as cereals, agricultural commodities, water and oil are located in northern and eastern Syria, the autonomous areas will not be affected by the implications of the Caesar Act, which exempts them from the sanctions in the first place. As a result of the decline in Assad’s capability to regain those areas, this stage will constitute an opportunity for the Kurds to establish their independence from Syria.
  • The Syrian opposition: while a controversy has been raised within the opposition community with regard to the impact of the Caesar Act on the political regime and the Act’s negative implications for the Syrian people that will be indirectly affected by the sanctions, the opposition is aware that the Act would not lead to toppling the Assad regime, although it would at least lead to undermining the regime’s economic capabilities and weakening its security and military structure. Consequently, the Act will have a long-term impact since it would contribute to weakening the regime’s negotiating position in the process of reaching a political solution to the conflict.

2- Losers

  • Russia: the Caesar Act constitutes a severe blow to the Russian companies that have prepared to collect the fruits of the military victory in Syria. The sanctions eliminate Russia’s hope to launch a global campaign for reconstruction before a political transition phase that would satisfy the West. The Act weakens the power of Russia’s cards in Syria by showing it as helpless in front of US power. The Act could also deplete Russia financially if it wishes to prevent the structure of the Syrian regime from collapse. More seriously, however, the Act converts Russia in the eyes of Syrians into an enemy who has contributed to their ending up in this position. The demonstrators who took to the streets in As-Suwayda in recent days have demanded the departure of Russian troops from Syria in a clear indication of the existence of new trends within the regime’s close circles against Russia.
  • Iran and Hezbollah: both Iran and Hezbollah have strived to prevent the economic downfall of the Assad regime, albeit at the expense of the collapse of the economic situation in Lebanon. This is attributable to the fact that the resilience and survival of the Syrian regime would constitute an Iranian success story that would not be allowed to fall. Besides, both Iran and Hezbollah have significant investments and interests in Syria that would be devastatingly damaged by the sanctions. Furthermore, both actors are directly targeted by the sanctions which would reflect on their performance in Syria and exacerbate their economic and military troubles in Syria.
  • China: the new US sanctions will affect China’s efforts within the framework of the Road and Belt Initiative, considering that Syria assumes an important position in this Initiative. Chinese companies have also been betting on acquiring a significant share of the Syrian reconstruction projects. The Chinese companies will most likely refrain from taking the risk of challenging the US sanctions, given that Chinese companies had withdrawn from Venezuela to avoid US sanctions.

Potential implications for the situation on the ground

It is unlikely that the military situation on the ground will witness significant changes in the short run. The relevant parties, particularly Russia, Iran and the Assad regime, will be focusing their attention on searching for economic and political means to ease the sanctions on the Syrian regime and prevent it from collapse, especially that the US interpretations of the Act underline preventing the regime and its allies from using their military power to change conditions in Syria, particularly in Idlib. This means that the Act draws red lines with respect to any moves in this direction.

Despite the heightened tension in Idlib, particularly in the Jabal Zawiya area that overlooks the M4 highway and the tension between Russia and Turkey on the Libyan front, which was reflected by the postponement of the visit by the Russian ministers of foreign affairs and defence to Turkey to hold talks on the conditions in Syria and Libya, Russia will be cautious at this stage about taking escalatory steps in Syria before discovering the nature of US inclinations in the period following the entry into force of the Caesar Act.

However, this would not prevent the Russian policy, which is based on a combination of the use of diplomacy and military strikes, from thinking of activating the situation, particularly in Idlib which is considered easier than areas east of the Euphrates, in order to achieve a twofold goal: testing the US reaction at this stage and reminding Turkey of the size of its power after it has sought to cross the Russian red lines in Libya.

Accordingly, in the stage ahead, it is likely that one or more of the below scenarios will materialise:

First scenario: resort by Russia to understandings and bargaining with internal and external powers to preserve it geopolitical interests in Syria. Russia will seek to activate the diplomatic channels with the US, considering that the Russian Deputy Foreign Minister Sergei Ryabkov has recently stated that Russia is ready to engage immediately in a broad dialogue with the US on all issues pertaining to the situation in Syria. On the other hand, Russia seeks to revive the Astana process, reconcile the Turkish and Iranian viewpoints, put pressure on the Assad regime in order to resume the negotiations of the Constitutional Committee (in this context, the UN Special Envoy for Syria Geir Pedersen has, in a recent statement, expressed his hope that the Syrian Constitutional Committee would hold its third session in August 2020), seriously engage in the path of settlement and freezing of hostilities in Idlib, and preserve resources to support the economy in the stage ahead, with the aim of reversing the deterioration of the Syrian economy and preserving the political regime moving forward.

This scenario is the most likely since it coincides with Russia’s desires to achieve positive results from its military intervention in Syria and avoid sinking in a quagmire that would deplete its economic and military capabilities.

Second scenario: the direct use of force in Idlib or through proxies in the areas east of the Euphrates. The materialization of this scenario is contingent on the failure of the Russian diplomatic moves and the ultimate closure by the US of the door in the face of Russian endeavours unless the conditions determined by the US to ease the sanctions are met. In that case, Russia would be forced to resort to the strategy of the “war of activation” so that it would not be dragged into a dilemma that would deplete it both economically and militarily. This scenario would not be resorted to before all the diplomatic means have been exhausted.

Third scenario: maintaining the status quo in case the diplomacy road was bumpy and futile and the war road costly and irrational. In that case, Russia would bet on the US elections in November 2020 and the likelihood of the advent of a Democratic administration that does not care much about the Syrian issue (such as Obama’s Democratic administration) or on a change in the priorities of the Trump administration during its second term in office.

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