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When an illegitimate regime contracts with foreign actors and, in essence, mortgages its country’s future, successor regimes and innocent citizens are expected to pay back that mortgage. This all-too-common occurrence saddles citizens with unjust contracts from which they did not benefit and burdens legitimate successor governments with repayment. A declaration of contract non-transferability would put creditors and investors on notice that any future contracts to a regime would not be considered binding on successor governments. In 2012, CGD explored how this approach could be applied in Syria and other fragile states. Successive US administrations have considered the idea.
The controversy surrounding the recent purchase of Venezuelan government bonds by Goldman Sachs is a great reminder of the role that “preemptive contract sanctions” could play in the struggle against odious regimes like that of Nicolas Maduro. In 2010, CGD released a working group report explaining in detail how this new sanctions tool could work. While the political forces have not yet aligned to try this tool against other odious regimes, such as those in Syria or South Sudan, the Maduro regime in Venezuela is more isolated regionally and globally and could be the perfect candidate. To smooth the way, the US Congress should amend the Foreign Sovereign Immunities Act to remove any legal obstacles to applying this sanctions tool in the event that the “planets become aligned.”
What are preemptive contract sanctions?
Preemptive sanctions would work as follows: The United Nations, a regional organization, or individual countries would declare that a legitimate successor to a (named) illegitimate regime would not be bound by contracts, notably including loans, that the illegitimate regime signs after the date of the declaration. The declaration signatories would not allow such contracts, nor any arbitral awards or foreign judgments associated with those contracts, to be enforced in their courts if the successor government repudiates them. Any party owning such a contract would face the significant risk that it may be worthless at some point in the future. Given the role of New York and London in financial markets and contract enforcement, the United States and the United Kingdom would need to be part of any sanctioning coalition. But it would have more legitimacy if the United Nations or an appropriate regional organization sponsored the declaration.
The benefits of applying such a tool are clear. First, it aligns the lender/investor’s profit motives with the declaring countries’ goals. Knowing that a successor regime would have a financial incentive, and legal justification, to repudiate previously contracted debt would deter creditors from signing such contracts in the first place. The illegitimate regime would be starved of external resources because contracts signed by parties in third countries will be at risk because they are unenforceable in declaring countries. Second, this approach avoids the cost of the typical financial sanctions approach involving enforcement of penalties on entities that transact business with the sanctioned regime. And third, it would protect a legitimate successor regime from having to repay the odious debt, without facing higher costs of borrowing, as would likely occur with an ex poste repudiation of the debt. Indeed, Seema Jayachandran and Michael Kremer, who co-chaired the CGD working group with John Williamson, have argued that preemptive contract sanctions might reduce the cost of borrowing by legitimate governments.
Can the politics align?
In 2012-13, CGD scholars argued that the international community should deploy preemptive contract sanctions against the Assad regime in Syria. But Russian support for the regime, plus concerns about the role of terrorist groups in the opposition, undercut support for trying this tool. Since its independence from Sudan six years ago, South Sudan has spiraled downward into what is arguably the worst economic, political, and humanitarian situation in the world. In February, the United Nations declared famine in South Sudan, calling it a man-made disaster that threatens 100,000 with starvation, with another million on the brink of famine. Yet here again, regime change could be messy, and China and others argue that more time is needed to give the current regime a chance to implement an inclusive national dialogue.
Venezuela is more isolated and represents the most viable case for applying preemptive contract sanctions. While President Maduro won the 2013 election, there is increasing doubt within Venezuela about the legitimacy of his presidency, particularly in the wake of his announcement that he will convene an assembly to rewrite the constitution. Moreover, international support for the Venezuelan government appears to be crumbling, even among countries within the region that normally do not take an active role in this type of matter. Given its historically strong political and financial support for Maduro, China will play a pivotal role. As the situation within Venezuela deteriorates, it may be in China’s best interest to add its support for preemptive contract sanctions. By doing so, it may stand a better chance of protecting the value of its current investments in Venezuela, including the value of the loans that will inevitably need to be restructured. Such a move may also enhance China’s status in other Latin American countries that object to Maduro’s actions. And, it could be a demonstration of a willingness to work with the Trump administration on the world stage.
The IMF could be an obstacle
While the 2010 CGD report argues that a small group of developed countries, particularly those that are major legal and financial centers, could effectively employ preemptive contract sanctions, the International Monetary Fund’s (IMF) Lending into Arrears (LIA) policy could stand in the way. The LIA policy prohibits lending to a country that is in arrears to private creditors unless, among other things, the country is “making a good faith effort to reach a collaborative agreement with its creditors.” Certainly a repudiation of debt owed by a successor regime could not be deemed to be “a good faith effort.” Therefore, the set of countries making the declaration, or at least recognizing the declaration, would need to include those that could reject any attempt at the IMF Board of Directors to invoke the LIA policy. This would likely reflect the membership of the UN Security Council, at a minimum.
Getting the USG house in order
The executive branch’s current authority to make a legally enforceable preemptive contract sanctions declaration is uncertain. The CGD report argues that a US declaration could be enacted and enforced under current law, most importantly the Trading with the Enemy Act of 1960 and the International Emergency Economic Powers Act of 1977. However, there are questions about whether the declaration could be made effective or maintained under these laws. A much neater approach would be to amend the Foreign Sovereign Immunities Act to clearly describe the circumstances under which a suit to enforce a contract of a regime declared illegitimate would not be enforced in US courts. The US Congress should begin working with the US State Department on legislation that would support a declaration of preemptive contract sanctions if the international community unites around the goal of getting rid of the illegitimate Maduro regime.
La controversia en torno a la reciente compra de bonos del gobierno venezolano por Goldman Sachs es un gran recordatorio del papel que las "sanciones preventivas de contrato" podrían jugar en la lucha contra regímenes repulsivos como el de Nicolás Maduro. En 2010, CGD publicó un informe del grupo de trabajo explicando en detalle cómo podría funcionar esta nueva herramienta de sanciones. Si bien las fuerzas políticas aún no se han alineado para probar esta herramienta contra otros regímenes repulsivos, como los de Siria o Sudán del Sur, el régimen de Maduro en Venezuela está más aislado regional y globalmente y podría ser el candidato perfecto. Para guiar el camino, el Congreso de Estados Unidos debe enmendar la Ley de Inmunidades Soberanas Extranjeras para eliminar cualquier obstáculo legal a la aplicación de esta herramienta de sanciones en caso de que los "planetas se alineen".
¿Qué son sanciones contractuales preventivas?
Las sanciones preventivas funcionarían de la siguiente manera: las Naciones Unidas, una organización regional o países individuales declararían que un sucesor legítimo a un régimen ilegítimo no estaría obligado por los contratos, especialmente los préstamos, que el régimen ilegítimo firma después de la fecha de la declaración. Los signatarios de la declaración no permitirían que dichos contratos, ni ningún laudo arbitral o sentencias extranjeras asociadas con esos contratos, sean aplicados en sus tribunales si el gobierno sucesor los repudia. Cualquiera de las partes implicadas que posee dichos contratos se enfrentaría al riesgo significativo de que puedan ser inútiles en algún momento en el futuro. Considerando el gran papel de Nueva York y Londres en los mercados financieros y la aplicación de los contratos, los Estados Unidos y el Reino Unido tendrían que formar parte de cualquier coalición sancionadora. Pero tendría más legitimidad si las Naciones Unidas o una organización regional apropiada patrocinaría la declaración.
Los beneficios de aplicar dichas sanciones preventivas son claros. En primer lugar, alinea los motivos de ganancia del prestamista/inversionista con los objetivos de los países declarantes. El saber que un régimen sucesor tendría un incentivo financiero, y una justificación legal, para repudiar la deuda contraída previamente, disuadiría a los acreedores de firmar dichos contratos en el primer lugar. El régimen ilegítimo se vería privado de recursos externos debido a que los contratos firmados por las partes en terceros países estarán en riesgo porque no son exigibles en los países que los declaran. En segundo lugar, este enfoque evita el costo de típicas sanciones financieras que implican la aplicación de sanciones a las entidades que realizan negocios con el régimen sancionado. Y también protegería a un régimen sucesor legítimo de tener que pagar la deuda, sin enfrentar mayores costos de endeudamiento, como probablemente ocurriría con un repudio ex post de la deuda. De hecho, Seema Jayachandran y Michael Kremer, que copresidieron el grupo de trabajo CGD con John Williamson, han argumentado que las sanciones preventivas a los contratos podrían reducir el costo de los préstamos por parte de los gobiernos legítimos.
Venezuela está más aislada y representa el caso más viable para aplicar sanciones contractuales preventivas. Aunque el presidente Maduro ganó las elecciones de 2013, hay cada vez más dudas dentro de Venezuela sobre la legitimidad de su presidencia, particularmente a raíz de su anuncio de que convocará una asamblea para reescribir la constitución. Además, el apoyo internacional para el gobierno venezolano parece desmoronarse, incluso entre países de la región que normalmente no desempeñan un papel activo en este tipo de asuntos. China jugara un papel fundamental dado su apoyo político y financiero históricamente fuerte para Maduro. A medida que la situación en Venezuela se deteriora, puede ser lo mejor para China sumar su apoyo a sanciones contractuales preventivas. Al hacerlo, puede tener una mejor oportunidad de proteger el valor de sus inversiones actuales en Venezuela, incluso el valor de los préstamos que inevitablemente tendrán que ser restructurados. Al mismo tiempo, podría mejorar el estatus de China en otros países latinoamericanos que se oponen a las acciones de Maduro
El FMI podría ser un obstáculo
Mientras que el informe del CGD 2010 argumenta que un pequeño grupo de países desarrollados, particularmente aquellos que son importantes centros legales y financieros, podrían efectivamente emplear sanciones contractuales preventivas, la política de préstamos atrasados (Lending into Arrears (LIA)) del Fondo Monetario Internacional (FMI) podría obstaculizar el camino. La política de la LIA prohíbe prestar a un país que está en mora con los acreedores privados a menos que, entre otras cosas, el país "haga un esfuerzo de buena fe para llegar a un acuerdo de colaboración con sus acreedores". Ciertamente un repudio a la deuda de un régimen sucesor no puede ser considerado como "un esfuerzo de buena fe". Por lo tanto, el conjunto de países que hacen la declaración, o al menos el reconocimiento de la declaración, debería incluir aquellos que podrían rechazar cualquier intento de la Junta Directiva del FMI de invocar la política de la LIA. Esto, como mínimo, probablemente manifieste la membresía del Consejo de Seguridad de la ONU.
Consiguiendo que el Congreso de Estados Unidos se ponga en orden
La autoridad actual de la rama ejecutiva para hacer una declaración de sanciones contractuales preventivas exigible legalmente es incierta. El informe de CGD argumenta que una declaración de los EE. UU. podría promulgarse y ejecutarse de conformidad con la legislación actual, sobre todo con la ley de comercio con el enemigo de 1960 y la ley de poderes económicos de emergencia internacionales de 1977. Sin embargo, existen dudas sobre la declaración si podría hacerse efectiva o mantenerse bajo estas leyes. Una propuesta superior sería enmendar la Ley de inmunidades soberanas extranjeras para describir claramente las circunstancias bajo las cuales una demanda para cumplir un contrato de un régimen declarado ilegítimo no se cumpliría en los tribunales estadounidenses. El Congreso de los EE. UU. debería comenzar a trabajar con el Departamento de Estado en una legislación que favorezca una declaración de sanciones contractuales preventivas si la comunidad internacional se une en torno al objetivo de deshacerse del régimen ilegítimo de Maduro.
International norms matter. Citizens of the more than 80 nations where polls have been conducted do think and act taking into account global realities and norms. Most could be called “global citizens”, not in opposition to but along with their self-identity as citizens of their own country. That was a key point of this paper, prepared as part of a larger project on the global economy sponsored by this new foundation. It was the logic behind Secretary of State John Kerry’s stirring speech last week, making the case for a US military intervention to punish Bashar al-Assad for his apparent use of chemical weapons. Doing nothing, he argued, would be appeasement (recalling the Munich compromise) and send a signal that the United States is no longer able or willing to punish behavior that clearly violates an internationally acknowledged norm: that use of chemical weapons is a heinous act.
However, international law matters too. A virtually unilateral US military intervention would set the norm on which people everywhere agree (that use of chemical weapons is a step too far) against the awkward and inadequate but still better-than-nothing framework of international law against the use of military force except for self-defense without Security Council approval.
For the last three years at the Center for Global Development – beginning before the troubles in Syria –several of my colleagues and I have argued that the United States should use its market might—not just its military power—to drive illegitimate leaders from power and to support legitimate successor governments by enacting what we call preemptive contract sanctions.
The United States should declare, ideally with agreement among many other nations, that some regimes are “odious”, and that, from the moment of such a declaration, the debt they incur and the contracts they make would not be recognized and enforced in US courts. In the case of Syria, Russian and other lending to the Assad regime would not be enforced in any US courts or honored in any subsequent post-conflict “settlement”. (This approach could have pushed Gbagbo out of Cote-d’Ivoire at lower cost in 2011, and if invoked in the case of the string of corrupt military leaders of Nigeria (culminating in the terrible General Abacha, now before the International Criminal Court in The Hague for human rights abuses) might have discouraged commercial creditors who shored up that government for two decades, saddling the first post-military democratic government in the late 1990s with almost $30 billion in debt.) Declaring preemptive contract sanctions means that a legitimate successor government in Syria would not be saddled with Assad’s debts, forced into paying back the very contracts used to finance the killing of innocent Syrian civilians.
Asking other nations to declare the current Syrian regime to be, literally, “odious” – the shame part of this Tom Friedman New York Times column – would deprive Assad of the benefits he enjoys now of membership in a global system of sovereign states. Shame could be reinforced with other Friedman proposals (the “mark of Cain” on Assad, his wife and all those involved in the use of chemical weapons: have an ally bring them before the International Criminal Court (since the United States is not a member), prohibit their travel, make them famous criminals). That would translate a global norm – horror at use of chemical weapons – into agreed international action, with leadership from the United States.
Some will argue it is “too late” for what might seem a mild rebuke. But in today’s world of non-state terrorism and internal sectarian conflict, in which US military power is no longer the guarantor of global peace and stability, it might be “too late” for military action as well. Whether to complement or substitute for a military intervention, US leadership on a different kind of collective action makes sense to me.
The news from Syria just continues to get worse and there is no glimmer of light at the end of the tunnel. UN Secretary-General Ban Ki Moon said this week that the death toll now exceeds 100,000, making it this century’s third deadliest conflict for civilians. White House Spokesman Jay Carney said that Syrian President Bashir Assad will go down as one of the “worst tyrants” in recent history and that there is no solution that doesn’t include a transition to a “post-Assad” Syria.
Preemptive contract sanctions would put something tangible behind the rhetoric. Under this new sanctions tool, President Obama and leaders from other governments in the Friends of Syria group would declare that any new contracts with the Assad regime (or perhaps designated individuals or entities associated with it) would be unenforceable in the courts of countries signing onto the declaration. Such a declaration might do little to deter Assad’s supporters in Russia and Iran, but it would be a signal to Assad’s supporters in Syria that they have no hope of resuming normal economic activity at any time in the future if Assad stays in power. And, while the administration continues to struggle with how to materially support (the right) opposition groups in their struggle against Assad, preemptive contract sanctions would be a signal of tangible support that does not require favoring one group over another.
Preemptive contract sanctions alone would not resolve the situation in Syria. But they are one of the few tools left in the toolbox that does not involve direct military intervention.
The latest reported deal (in part financed through the Russian foreign-development bank, the VEB) sells ground-to-air missile systems to the Assad government. The Wall Street Journal reports that these batteries “would significantly boost the regime’s ability to stave off intervention in its civil war.”
Several of my colleagues here at CGD have been supporting preemptive contract sanctions (PCS) as one of the policy prescriptions needed to prevent these types of arms deals from moving forward. If PCS were to be implemented by say, the US and the EU, any new contracts with the Assad regime would not be recognized in those countries’ courts.
To be clear, this particular deal is alleged to have been inked in 2010. So, even were preemptive contract sanctions issued against the Assad government today, it wouldn’t have a chilling effect on this particular contract.
However, implementing PCS is still hugely relevant and could chill these types of deals in the future—preemptive contract sanctions should be added to the agenda at the next Friends of Syria meeting expected in South Korea June 5-6.
Here’s why the US and EU should implement PCS against the Assad regime:
PCS would have a chilling effect on future contracts with the Assad regime. If I can’t get my contract enforced in a US or EU court, I might think twice about entering it. That’s not to say that PCS would prevent all new contracts—or ongoing ones such as this Russian deal—but it should at least put a dent in the arms and finance deals helping Assad hang on.
PCS would demonstrate much-needed US and EU support for the opposition—but without needing to pick favorites.
In addition to this sign of immediate support for the Syrian opposition, PCS would also prevent the next Syrian government from being saddled with Assad’s debts still being incurred. The successor government would not be forced into paying for the contracts signed after PCS are enacted that helped Assad kill his people (or face losing international financial markets access).
PCS would close a ridiculous loophole—currently, US and EU courts can be called upon to enforce contracts between the Assad government and other countries’ citizens. But those same transactions (and benefits of those transactions) are prohibited for US and EU countries and citizens because of our existing sanctions regime.
It was a relief to see the Friends of Syria February communique out of Bulgaria that refers to FOS readiness to “work with a future government of Syria to the extent possible to address Syria’s debt in accordance with internationally established processes.” And let’s hope the Paris Club is thinking about this. But why are we waiting for Assad to fall to get started?
The conflict in Syria has dragged on for 26 months, and the international community has seemingly exhausted its options for non-lethal aid and support to the Syrian opposition. Now, with new allegations that chemical weapons were likely used by the Assad regime, the United States and others may be inching closer to putting boots on the ground.
These developments sound alarmingly familiar to past reactions to weapons of mass destruction. Even the White House has admitted that they are heeding the past and proceeding with caution. So before we proceed down this well-worn path in the middle east, the international community should try something new.
My colleague Owen Barder points to one such untapped option called preemptive contract sanctions in a recent oped in the Financial Times. This approach, first proposed by CGD, would allow international courts to cut off President Assad’s supply of new resources that finance his repressive rule. Barder explains:
“The plan is simple. In short, any new contracts with the Assad regime would not be recognised in the courts of any other nations. And anyone doing business with the Assads would find that their contracts would be deemed to be unenforceable against any successor regime in Damascus.
In the immediate future, it would help to turn up the pressure on the government in Damascus. It would probably be sufficient for the US and the EU to make such a declaration, but it would gain greater legitimacy if it were endorsed by the Arab League and the Friends of Syria.”
Preemptive contract sanctions may be the only non-lethal option left that can strengthen the international response. They would signal support for the opposition and protect the Syrian people from having to repay some debt run up by the Assad regime. And they would deter support from countries that remain supportive of the Assad regime.
The only reason not to try this new approach is fear of something new and untested. Surely, not trying a smart and nonlethal option is much more frightening.
During his first overseas trip as the United States’ top diplomat, and in advance of this week’s Friends of Syria meeting in Rome, Secretary of State John Kerry spoke forcefully in response to concerns from the Syrian Opposition Coalition that the United States is not providing sufficient support to the opposition:
“We are determined that the Syrian opposition is not going to be dangling in the wind wondering where the support is or if it’s coming, and we are determined to change the calculation on the ground for President Assad.”
Short of military intervention and its attendant risks, there is no better way to “change the calculation on the ground” and signal support to the opposition than to move forward now with a new and potentially powerful economic tool: Preemptive Contract Sanctions.
As things stand now, the Assad regime continues to sign arms and loans contracts with Russia and other rogue actors and use these resources to violently repress the opposition and Syrian civilians. In the absence of international arms sanctions, these contracts remain legal. Indeed, earlier this month, Russia’s state arms trader said that they would continue to honor contracts with the Assad regime, and presumably sign more, in the absence of UN sanctions. Of course, Russia is also the one blocking sanctions against Syria at the UN Security Council.
Under preemptive contract sanctions any new contracts with the Assad regime would be declared illegitimate and could be repudiated by a legitimate successor government. This could deter new loans and investments from Russia and others. And even if not, it would tangibly signal to Assad that he has no future in Syria, thereby helping “change the calculation” on the ground. Preemptive contract sanctions would also help protect the eventual post-Assad successor from having to repay these obligations.
The Syrian Opposition Coalition has been clear about its hope for military and humanitarian support from Western and Arab countries, and the United States and others seem to be moving closer to providing some kind of direct support to the opposition. Still, preemptive contract sanctions offer one of the only diplomatic options left for the United State and other nations to show concrete support and protection for a future successor government in Syria. If done in concert with other forms of humanitarian and military aid, it would confirm that we won’t leave the opposition “dangling in the wind” – both now and as a legitimate successor government starts to rebuild the country after Assad’s departure.
As Secretary Kerry meets with members of the Syrian Opposition Coalition in Italy this week, we hope that the draft Declaration Regarding Illegitimate Contracts with the Syrian Government will be among the ideas that is seriously considered.
It seems obvious that illicit financial flows are draining funds from developing countries that could otherwise be used to invest in productive enterprises, provide public services, or boost aggregate domestic demand. Yet, a few examples show the unexpected twists this story can take. Illicit financial inflows may be a bigger problem than outflows for countries that supply the world’s drug trade – through mechanisms like exchange rate appreciation. Also, the countries with the largest illicit outflows – such as China, Saudi Arabia, Mexico and Russia – are hardly the ones that come to mind when thinking about developing nations starved for domestic capital.
Focusing on countries where kleptocrats have plundered national treasuries and built personal fortunes from oil and mineral contracts seems to provide a clearer indictment. However, here too, Reuter points out a policy conundrum: are illicit financial flows a lever for policy or simply a symptom of corruption? Put differently, if the world were able to close off the channels for illicit financial flows, would these kleptocrats behave differently? Would they steal less? Would they use ill-gotten funds domestically in ways that promote development? Would they invent new ways to send money overseas?
Illicit financial flows are a problem for world governance. Hiding financial transactions facilitates tax evasion in developed and developing countries alike. It creates problems for macroeconomic policies and financial regulation, and assists terrorists and criminal organizations who can only function by hiding their activities. And, yes, it makes life much easier for politicians, bureaucrats and business people in developing countries who want to extract bribes and shelter them overseas. There is only so much the developed world can do to promote better governance in developing countries; after all, developed countries don’t have such a great track record of addressing corruption at home – whether it comes to Super PACs in the US or Berlusconi’s comeback after conviction on tax fraud. But we can make a big difference if rich and powerful countries were to stop protecting and enforcing repayment of odious debt; hindering recovery of stolen assets; allowing multinationals to make facilitation payments; and hiding oil and mineral royalty payments from public view. Reuter’s work serves to reinforce the call to action coming from many quarters by giving a more nuanced view of the phenomenon and outlining a more useful research agenda – a challenge that CGD is beginning to tackle as explained by Owen Barder. Reuter’s presentation and book also draw attention to this responsibility of the rich when he notes (p. 487):
These funds do not mysteriously disappear from developing countries. In large part, they flow into legitimate and, often, even highly respected financial institutions in the developed world. Thus, governments of the rich countries that serve as the domicile for many of the recipient banks can … more forcefully push the institutions to ensure they are not taking in illicit flows.
With relentlessly bad news out of Syria, the search continues for what the world can do to put pressure on Assad’s regime and to lay the groundwork for a future, legitimate Syrian government. The case for preemptive contract sanctions is becoming ever more compelling. Under this approach, the United States, United Kingdom, and other members of the Friends of Syria, would declare that new contracts with the Assad regime are illegitimate and that our courts should not enforce them if a legitimate successor government in Syria repudiates them. This could deter new loans and investments in Syria’s oil or other sectors and send a signal to the Assad regime that the economic pressure will not loosen.
We have written before about how this tool could strengthen existing measures against the Assad regime. We’ve talked about how it is one of the few diplomatic tools left in the global search for ways to intervene. And we’ve highlighted how they could help get around Russia’s veto of global sanctions at the UN Security Council, and deter support from countries that remain supportive of the Assad regime. But fifteen months after President Obama first called for the end of the Bashar al-Assad regime, the violence continues and is spilling over the border into neighboring countries.
So as government officials from the Friends of Syria sanctions working group prepare to meet in Tokyo on November 30, we thought we’d highlight two new developments that reinforce the case for using preemptive contract sanctions in Syria:
First, the civil war in Syria is far from over – some estimates project that the relentless conflict will drag on for another year or more – and the Assad regime will have to find ways to continue to finance the military’s brutal crackdown on the Syrian people. Just this week, reports show that Iran has started construction of a $10 billion natural gas pipeline to Syria, a sign that some countries are still all too willing to do business with Syria and a move that has been called a ‘public show of confidence in Assad’s ability to ride out the uprising’. New contracts, such as this, and other loans to the Assad regime will leave the next government burdened with obligations incurred for odious reasons—to support Assad’s repression—and not necessarily in the public interest. Preemptive contract sanctions would relieve a legitimate successor government from having to honor these contracts. Even if Iranian firms would be unlikely to use American or British courts to enforce these contracts, a future Syrian government could nullify them knowing that it could turn to European and American investors to help it rebuild. These sanctions would send a signal to business supporters of Assad that there simply is no future with him in power, and that encouraging him to leave - sooner rather than later - is the way to go.
Second, the Syrian opposition groups have united and the newly formed National Coalition of Syrian Revolutionary and Opposition Forces is rapidly receiving backing from the international community, including formal recognition from France, the UK, and a number of countries in the region. The United States and European Union also recognize the new coalition as a legitimate representative of the opposition. With its increased international legitimacy, the Coalition hasn’t been shy about its hopes to secure heavier weapons from Western and Arab countries, but many countries – particularly the United States and United Kingdom - are reluctant to go down that path. Preemptive contract sanctions provide one of the few nonlethal diplomatic options left for the United State, the United Kingdom and other nations to back up their rhetoric and show concrete support and protection for a future successor government.
For all these reasons, we ask: why wait? We hope that the draft Declaration Regarding Illegitimate Contracts with the Syrian Government will be among the ideas that is seriously considered at the Friends of Syria meet in Tokyo. As the saying goes: the best time to plant a tree is twenty years ago; the second best time is today.