What is particularly attractive about preemptive contract sanctioning in the case of Syria is that, unlike the existing trade sanctions, they work even if many countries refuse to enforce them. Take Russia's recent insistence that it will continue selling weapons to Syria, for example. If the Assad regime wants to buy arms and Russia is the only country willing to sell, that merely strengthens Russian firms' ability to charge a high price for guns and ammo. But an odious regime designation -- even if Russia didn't take part -- would at the least make the arms companies demand payment up front (assuming they aren't already). And what if the Assad regime wants international investment to help build a power plant? If the world's major financial centers will only accept a new construction contract as valid if a legitimate successor regime subsequently chooses to endorse it, that adds immense risk to the deal -- wherever the investing firm is based.
Again, the new sanctions would stop allowing Western court systems to be used to uphold a competitive advantage to firms from countries that refuse to join the sanctions effort. Under the existing rules, U.S. and British courts would declare new contracts between U.S. and British firms and Syria unenforceable, but could be used to defend the contract rights of Russian or Chinese firms still dealing with the regime. Preemptive contract sanctioning would level the playing field by declaring all new contracts, whoever signed them, unenforceable.
While governments and firms in countries opposing sanctions on Syria may be happy with making bad moral decisions, even they don't like to make bad economic decisions. And for those worried about sullying the purity of contractual obligations, a note: While trade sanctions do force companies to renege on existing contracts, preemptive contract sanctioning just takes away enforcement rights from those signing new deals.
And one reason to believe the Syrian government might be particularly vulnerable to the declaration of odious regime status is that it had already come to the conclusion that ramping up foreign investment in areas like infrastructure was key to the country's economic future. Before the uprising, Syria was actively courting foreign investors to strengthen the economy outside of the oil sector, which is facing long-term decline. In 2009, the country set up a stock exchange and changed rules to allow foreigners to take majority stakes in Syria's banks. In 2010, the regime set the target of attracting $55 billion in foreign investment over five years -- about a fivefold increase over previous levels. It formed a sovereign wealth fund to oversee the creation of joint ventures between foreign and domestic companies. The country had started bidding on an independent power project south of Damascus -- firms from Germany, Britain, Finland, and Greece had been shortlisted. And five companies, including France Telecom, were in the running for a third mobile telecommunications license.
Preemptive contract sanctions have one additional attraction: They are technically straightforward to implement. In the United States, they could be enacted under existing law. That suggests there is no good reason to delay. Of course, any new Syrian regime might feel they needed to honor contracts with Chinese or Russian firms signed under the previous government because of diplomatic concerns. And the current regime may well be so desperate that no amount of international economic isolation will change its course. But President Obama has called on the international community to consider "every tool available" to stop the slaughter in Syria. So the Arab League, the United States, and Europe should call new deals with Assad's murderous regime what they are: odious.
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