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Deciphering the web of US sanctions on Syria

When Bashar al-Assad's government brutally cracked down on protesters in 2011, former President Barack Obama wanted to ramp up sanctions but faced a dilemma. Syria was already so heavily sanctioned that few cords connecting it to the global financial system were left to cut.

"We're talking about a country whose economy is about the size of Pittsburgh's," a US official told the New York Times in 2011.

Those deliberations are worth remembering as 2024 comes to a close and Western and regional governments look to engage Syria's new government, which is led by Hay'at Tahrir al-Sham (HTS). 

Human rights groups and aid organisations will look to expand aid into Syria, where an estimated 90 percent of the country lives in poverty.

Turkey, which enjoys close ties to HTS, is eyeing Syrian reconstruction opportunities.

Oil-rich Gulf states including the United Arab Emirates, Qatar and Saudi Arabia could expand their influence in Syria, sandwiched in the heart of the Levant, at a time when Iran is in retreat. If reconstruction does get underway in Syria it could also be a boon to European and American engineering firms, an Arab official told MEE.

Recently, talk about sanctions relief has focused on HTS, a former Al Qaeda affiliate that is sanctioned by the US and EU.

In December, the US lifted a $10m bounty on HTS leader Ahmed al-Sharaa, also known by his nom de guerre Abu Mohammed al-Jolani, after he met senior US officials in Damascus.

MEE previously reported that the US weighed removing the bounty as a "first step" to engage Syria's new rulers. HTS is still sanctioned and designated a US terror group.

But the reality is that the sanctions on HTS are a drop in the bucket, compared to an overlapping sanctions regime on Syria that was five decades in the making, predating even the 2011 Arab Spring and Syrian civil war.

A history of sanctions

When Hafez al-Assad took power in Syria in a 1970 coup, Syria was receiving financial and military aid from the Soviet Union. The elder Assad was renowned for keeping channels open to the US and its Cold War foes, but in 1979, he fell out with the US over Lebanon, and Syria was designated a state sponsor of terrorism.

Those sanctions came after Assad's Baath party imposed sweeping nationalisation that chased out Syria's old bourgeois business class and deterred western investment.

The designation put Syria in the same bracket as Cuba and Iran as a terror sponsor and imposed sweeping new restrictions on US foreign aid, a ban on defence sales, export controls for dual-use items and other financial restrictions.

Despite the designation, Syria was still courted by the West and sanctions mainly applied to transactions involving the Syrian government. Ties between the US and Syria improved briefly after the elder Assad joined a US-led coalition to fight Saddam Hussein in the first Gulf War, but soured over Syria's ties to Hamas, Islamic Jihad and the flow of foreign fighters from Syria into Iraq after the 2003 US invasion.

These tensions sparked the first massive wave of sanctions on Syria.

Congress passed the Congressional Syria Accountability and Lebanese Sovereignty Restoration Act in 2003 and the following year former President George W. Bush imposed sweeping sanctions. American exports to Syria were all but prohibited, except for food and basic medicines. Then in 2006, the US banned transactions with the Commercial Bank of Syria.

Syria's financial ties to the US were severely restricted, but not totally severed from the US. For example, the US federal government also continued to fund Arabic language students with five-figure grants to study at Damascus University almost right up until 2011.

Power of the US dollar

US sanctions on Syria ramped up massively after Assad's brutal crackdown on protesters and as the civil war raged. The US slapped sanctions on Syrian businessmen, banks and the government. Bilateral US-Syria trade which still stood at roughly $900m in 2010 dropped below $60m in 2012.

US economic ties have since revolved around northeast Syria, which is controlled by the Kurdish-led Syrian Democratic Forces.

In 2020, a US company was awarded a sanctions waiver to develop oil fields in the region, but that project withered.

After 2011, the European Union also imposed sanctions on Syria similar to the US. The web of sanctions fell broadly into two categories. The first targeted individuals with travel bans and asset freezes.

The second sought to prevent the Syrian government from accessing global financial channels, curb Syrian imports from Western countries and embargo Syrian oil exports.

US sanctions in particular carry weight because the dollar is the world's reserve currency, and most international trade is conducted via the greenback.

After the outbreak of the Syrian civil war, the US then began implementing secondary sanctions which means that anyone who did business with a sanctioned Syrian entity could see their access to the US-dollar-based economy curbed.

The sanctions meant that even after the Assad government wrested control of two-thirds of Syria from rebels it could not emerge out of isolation. Assad visited the UAE in 2022 and the next year rejoined the Arab League, but the Gulf states who invest widely in the US and trade their oil in dollars refused to contribute to reconstruction.

Similarly, in 2021, the US's top geopolitical foe, China, welcomed Syria into the Belt and Road Initiative. The multi-trillion-dollar programme for development and infrastructure was almost tailor-made for Syria's pummeled cities and highways, but Syria saw hardly a penny of Chinese investment, analysts say because of US sanctions.

One of the most restrictive measures on Syria is US sanctions on the Central Bank which go back to 2011, making it virtually impossible for the Syrian government to tap international financial markets or receive aid.

The sanctions on the bank were reaffirmed under the 2019 Caesar Syria Civilian Protection Act which was named after a Syrian military photographer who smuggled tens of thousands of gruesome photos out of the country that documented evidence of war crimes.

On Thursday, the Gulf Cooperation Council called for sanctions to be lifted to "provide all means of support to the brotherly Syrian people".

Some in the US have gone even further, underscoring their vision for a post-Assad Syria.

"A Trump tower in Damascus one day would be a welcome development!" Republican US Congressman Joe Wilson, a prominent architect of recent Syria sanctions, said in December, advocating for Syria to be swiftly reconnected to the global economy.

Wilson said he wanted "private and commercial investment" to fuel Syria's reconstruction, which the UN estimates will cost $400bn. Many groups are united in wanting to see Syria emerge out of isolation, for humanitarian, political and business reasons.

But before the signature gold-lettered "Trump" sign can emblazon Damascus's skyline, a thicket of sanctions must be undone that prevent Syria from tapping the global financial system or western goods.