VZCZCXYZ0013
PP RUEHWEB

DE RUEHDM #6384/01 3420923
ZNY CCCCC ZZH
P 080923Z DEC 05
FM AMEMBASSY DAMASCUS
TO SECSTATE WASHDC PRIORITY 5998

C O N F I D E N T I A L DAMASCUS 006384 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 12/06/2015 
TAGS: ECON ETRD ETTC SY
SUBJECT: FOR SOME SYRIANS, CIRCUMVENTING TRADE SANCTIONS IS 
ILLEGAL, BUT NOT IMMORAL 
 
REF: A) DAMASCUS 4822 B) DAMASCUS 5142 C) DAMASCUS 
     5323 D) DAMASCUS 6280 E) ANKARA 7073 
 
Classified By: CDA: Stephen Seche for Reasons 1.5 b/d 
 
¶1. (C) Summary:  Trade sanctions under the Syria 
Accountability Act (SAA), which place a general ban on U.S. 
exports to Syria, have negatively impacted certain segments 
of the Syrian population and specific economic and commercial 
sectors (reftels A,B,C,D), but they have not significantly 
reduced the flow of U.S. goods into the Syrian market.  The 
ease with which U.S. commodities can be purchased and shipped 
from Dubai, Lebanon, Turkey and other countries in the region 
has provided a market opening for Syrian vendors to illegally 
import U.S. goods and undercut the Syrian businessmen who 
have been willing up until now to cooperate with U.S. export 
licensing requirements.  As a result of this competition, 
many Syrian businessmen who were once abiding by U.S. 
sanctions feel increasingly pressured to buy U.S. goods 
without a license in order to maintain their businesses' 
competitiveness in the Syrian market.  End summary. 
 
¶2. (C) After SAA sanctions were initially imposed in May 
2004, many Syrian businessmen with long-standing ties to U.S. 
companies adopted a strategy that in the short-term would 
require them to abide by U.S. sanctions restrictions, but in 
the long-term would allow them to maintain their U.S. 
business ties during and after sanctions.  Though this group 
is generally predisposed to building stronger ties between 
the U.S. and Syria and has been optimistic about the future 
of U.S.-Syrian relations, it is becoming progressively more 
disenchanted with the U.S. export license process and feels 
increasingly threatened by Syrian companies that are 
illegally importing U.S. commodities without export licenses. 
 
 
¶3.  (C) Syrian companies have exploited the limitations 
emplaced by the SAA to gain market share for American 
products by illegally importing U.S. goods from the Gulf and 
neighboring countries and selling them in the Syrian market 
at premium prices.  The Syrian end-users who ultimately buy 
the U.S. commodities are either ignorant of or indifferent to 
the SAA.  Syrian consumers we've queried have expressed their 
belief that if a product is obtained through a legitimate 
financial transaction, then the acquisition of the commodity 
is legal and the origin or components of the item are 
unimportant.  Most Syrians are unaware that U.S. trade 
sanctions even exist.  And of those conscious of them, most 
would agree with the comments of one Post contact who 
insisted that it is unrealistic to expect buyers of U.S. 
goods in the Syrian market to be responsible for determining 
how the products arrived in Syria.  According to another 
Syrian, though purchasing U.S. goods in Syria might 
technically be illegal, it is certainly not &haram8 
(morally wrong). 
 
¶4. (C) Post has heard a lot of anecdotal evidence about how 
U.S. goods enter the Syrian market and offers the following 
examples.  An agent for Siemens Telecommunications says that 
it is well-known in the Syrian IT community that American 
products such as Sun Microsystems and Oracle computer 
equipment are being shipped from countries in Asia or from 
Dubai.  This, he claims, is providing an &escape door8 for 
local suppliers who want to sell U.S. products in Syria 
without obtaining an export license.  In another instance, 
the sole distributor in Syria for Boston Scientific medical 
supplies recently expressed frustration that Boston 
Scientific products have been shipped without an export 
license to Syria from Europe by another vendor to fulfill a 
contract with a public hospital.  The Boston Scientific 
distributor, who had competed for the same contract, said 
that because his business proposal built in the financial 
costs of the export license application process, it was less 
competitive.  Lastly, in the past few weeks the Consular 
Section has interviewed several applicants who have wanted to 
buy used automobile parts for shipment to Syria via Dubai or 
Lebanon and another applicant who wanted to continue to ship 
synthetic yarn to Syria from his companies in Lebanon and 
Turkey (established after U.S. sanctions were imposed).  In 
many cases these visa applicants, who have continually 
imported U.S. commodities into Syria since the imposition of 
sanctions, have been surprised to learn that the re-export of 
goods is not legal under the SAA. 
 
¶5. (C) The SARG has consistently downplayed the effectiveness 
of U.S. sanctions and has historically helped facilitate 
sanctions-busting activities.  After U.S. sanctions were 
imposed in 2004, the SARG changed its law to permit the 
import of goods from non-country of origin if the commodities 
enter the country through one of the seaports.  Additionally, 
last year the SARG also lifted a ban on second-hand machinery 
imports (reftel E).  In a statement to the Financial Times, 
Deputy Prime Minister for Economic Affairs Abdullah Dardari 
 
said that there is "no shortage of sanctions busters willing 
to evade current U.S. measures against the country."  A post 
contact in Lattakia elaborated on Dardari,s statement and 
claimed that because U.S. companies often cannot or do not 
closely monitor the end-users of their products, it has been 
easy for Syrians to create front companies in, or ship goods 
directly from, third countries. 
 
¶6. (C) Though other posts in the region may see other causes, 
recent trade statistics from the U.S. Bureau of Census World 
Trade Atlas may help explain how U.S. goods are still flowing 
into Syria.  Though direct export of U.S. goods to Syria has 
decreased due to sanctions (so far 20 percent in 2005), the 
export of U.S. commodities to countries that most often 
re-export to Syria has increased.  Comparing the first nine 
months in 2004 (January to September) with the same period in 
2005, total U.S. exports to Jordan increased by roughly 22 
percent.  Exports to Saudi Arabia increased by 26 percent. 
UAE, a regional trade hub that serves as a major transit 
point for prohibited U.S. goods into Syria, witnessed a 102 
percent in U.S. exports in the same period.  Although U.S. 
exports to Lebanon have decreased (which may partially be 
explained by the SARG,s decision in recent months to 
decrease the amount of Lebanese goods officially allowed into 
Syria), an importer-exporter in Lattakia claims that overall 
the imposition of U.S. sanctions has increased the number of 
Lebanese businessmen shipping U.S. goods to Syria by at least 
50 percent. 
 
¶7. (C) Syrian businessmen who are trying to abide by the 
mandates of U.S. sanctions law have expressed frustration 
about the perceived inconsistency and inefficiency of the 
export license process as well as the threat posed by 
competing vendors who are importing U.S. goods illegally. 
The comment of one Syrian businessman, that he believes that 
the USG has deliberately stopped (approving) export licenses 
to Syria until the end of the year (when the Mehlis 
investigation is concluded), highlights the sense of 
victimization prevalent in the community of Syrian 
businessmen with historical ties to the U.S.  The initial 
willingness of Syrian businessmen to import U.S. commodities 
within the framework of the SAA has diminished as they have 
watched their market shares (and in some cases the financial 
viability of their companies) erode.  Post contacts have 
confided that for the sake of their "bottom line," they are 
willing to incur the costs of applying for U.S. export 
licenses only for "complex" commodities (e.g. often technical 
equipment that cannot be obtained from third countries) and 
prefer to purchase other U.S. goods in the Syrian market. 
Others have stated that while they have waited for export 
license decisions they have had contracts cancelled, have 
been charged penalty fees for not fulfilling contractual 
obligations, and have been blacklisted from applying for SARG 
tenders.  In many instances these businessmen have ultimately 
decided to purchase U.S. goods from neighboring countries. 
One contact, an agent solely for a U.S. medical supplies 
company, has said that his business cannot endure the 6 to 8 
month decision-making period for export licenses and that he 
has contemplated turning to Asian and European companies. 
Econoff recently witnessed this shift to alternate markets at 
a healthcare exhibition in Damascus sponsored by the 
Syrian-American Medical Society at which no U.S. medical 
supplies or equipment were displayed. 
 
¶8.  (C)  Comment:  Post has heard a consistent refrain from 
the Syrian business community that it, not the SARG, is 
bearing the brunt of the effects of the SAA.  Contacts have 
also repeatedly expressed that though they value their 
business ties to the U.S. and have made considerable effort 
to comply with the SAA, the wide availability of competing, 
illegally obtained U.S. goods in the Syrian market is forcing 
them to chose between legality or continued financial 
viability.  When obliged to make this decision we have and 
will continue to see a number of Syrian businessmen choose 
the latter.  End comment. 
SECHE