How much will sanctions lifting help Syria?

'What would I return home to?'

Six months after Bashar al-Assad’s fall, many are wondering whether the new government is moving Syria towards a happier future, yet more managed chaos, or — God forbid — something darker.

While headlines hailed the end of the Assad era, many laughed at the oxymoronic air of “moderate jihadist”, a frequently deployed descriptor for Syria’s new President Ahmed al-Sharaa. Since then a weak transitional government, competing international actors, and sectarian violence have pointed to an elusive postwar recovery.

Yet the recent lifting of US and EU sanctions suggests brighter prospects for Syrians’ pre-eminent worry — the country’s shattered economy.

Washington and Brussels both made broad sanction revocations covering most of the Syrian economy in late May. The US move is the most important, given the role of the dollar in financial transactions and America’s ability to enforce laws extraterritorially. Observers expected Donald Trump to renew General Licence 24, a sanctions reprieve issued in Joe Biden’s last days in the White House, set to expire in July. But few expected General Licence 25 to be so wide-ranging — comparable to the EU’s lifting of all sectoral sanctions — nor for it to lack an expiry date.

In another big move, Trump has also suspended the Caesar Act, which imposed secondary sanctions on any third party or third country dealing with Syria.

‘Economic destruction’

Removing the sanctions vice is foundational for Syria’s battered economy. Nearly three-quarters of the population, 16.5 million people, require humanitarian assistance. Ninety percent of Syrians are living below the poverty line, meaning they cannot afford basic needs. The benighted nation has lost so much of its population amid the chaos, with around 6 million people — about a quarter of the population — fleeing mainly to neighbouring countries since the civil war started in 2011.

“I’ve had many different conversations with Syrians in different countries since the fall of the Assad regime, and many people are asking, ‘If I were to return, to what would I be returning? Are the conditions there for me to survive and thrive, for my children to grow and succeed?’” Wendy Pearlman, a professor of political science at Northwestern University and the author of The Home I Worked to Make: Voices from the New Syrian Diaspora, told World Politics.

“The level of economic destruction and questions about material conditions are foremost in people’s minds when they’re making the decision about whether to return,” she continued. “So many people’s homes — maybe their entire neighbourhood or their entire village — have been destroyed. There’s a lack of electricity, of water, of schools, of healthcare. That’s why the lifting of sanctions and allowing economic recovery is so essential.”

But the lifting of sanctions is a necessary, not sufficient, requirement for Syria’s economic reconstruction, cautioned Vittorio Serracapriola, Rome-based lead sanctions analyst for Middle East consultancy firm Karam Shaar Advisory.

The Caesar Act’s suspension is only for 180 days — and that means “we’re facing a similar issue to the one we had with General Licence 24”, Serracapriola told World Politics. “The question is will that be enough to really boost confidence in the private sector? And I don’t think general licences work the way they’re supposed to do, because they’re temporary policy tools; they can be revoked with the stroke of a pen.”

Given these issues and Syria’s unstable politics, Western governments will probably need to create “incentives like tax breaks in the way they did for Ukraine to get their companies to re-engage with the Syrian private sector”, Serracapriola continued. He said there are grounds for optimism on this, since “many are pushing it at the EU level”.

There are also grounds for optimism about the Trump administration’s latest moves — with the US Ambassador to Syria Thomas Barrack saying last week he expects the president to remove Syria’s designation as a state sponsor of terrorism. “Things are moving quickly,” Serracapriola commented.

Gulf states have been especially fast movers. Saudi Arabia and Qatar paid off Syria’s $15.5 million debt to the World Bank in mid-May. Gulf companies sprang into action upon the sanctions relief news — most notably Emirati firm DP World, which announced an $800 million deal to run the port of Tartus. Emirati supermarket chain Spinneys is looking at locations for new sites — while Kuwaiti telecoms company Zain has already moved into Syria.

Assistance from wealthy Gulf countries will come with strings attached, Pearlman said: “It’s really assumed that anyone offering to help this new government will want payback.”

But since the sanctions lifting is a process, not an event, Western companies are still going to be wary of investing in Syria until remaining legal and repetitional risks are taken away. It’s easier for countries like the UAE because some of the rules are “more loose”, Serracapriola noted. So, for now at least, Gulf investment looks like Syria’s best hope for getting its battered economy off the ground.

Photo credit: Vyacheslav Argenberg, Wikimedia Creative Commons