Enab Baladi – Omar Alaa Eldin

Following the fall of the previous Syrian regime on December 8, 2024, and the subsequent steps that included the announcement of Ahmed al-Sharaa assuming the presidency during the transitional phase and a Western and Arab opening towards the new administration, the economic crisis in the country is intensifying as the reconstruction and stabilization plan clashes with the Western sanctions imposed on Syria.

Economic experts believe that lifting the US and European sanctions has become an urgent necessity, given the scarcity of liquidity, the weakened purchasing power of Syrians, and the devastation that the country’s economy has suffered over years of war.

Despite the partial lifting, the sanctions paralyze the ability of Arab and friendly countries to provide financial aid. On February 26, four sources informed Reuters that “Qatar is refraining from providing funds to the new Syrian rulers to increase public sector salaries, due to ambiguity over whether the transfers would constitute a violation of US sanctions, which poses a hurdle to efforts aimed at revitalizing the economy affected by war.”

The transitional government in Syria has repeatedly called for the necessity of lifting the sanctions, whether through statements made by the transitional president, Ahmed al-Sharaa, or by the Foreign Minister, Asaad al-Shibani.

British relief

On March 6 of the current month, the British government announced the removal of 24 Syrian entities from the sanctions it had imposed on the previous regime.

The British removal from the sanctions lists included the Central Bank of Syria (CBS), other banks, and oil companies, according to the decision obtained by Enab Baladi.

The removal from sanctions included the Agricultural Cooperative Bank, the Syrian Commercial Bank, the Syrian Central Bank, the Savings Bank, in addition to the International Pangates Limited Company, the Syrian Oil Trading Company, and two oil companies.

Europe and the US Treasury

The path to lifting sanctions began with the partial exemption provided by the US Treasury Department on January 6, aimed at “meeting basic humanitarian needs, including providing public services or humanitarian assistance,” and the suspension lasts for six months from the date of the decision.

This was followed by a European suspension of sanctions imposed on the previous regime, which, according to French Foreign Minister Jean-Noël Barrot, included the energy, transportation, and financial institutions sectors that were essential for financial stability in the country.

On January 27, EU foreign ministers agreed on a roadmap to alleviate European sanctions on Syria.

European Union foreign policy chief, Kaja Kallas, stated following a meeting of the EU Foreign Affairs Council in Brussels, “While we aim to move quickly, lifting the sanctions can be rolled back if wrong steps are taken.”

At the Paris Conference for the Support of Syria on February 13, the participating countries and parties emphasized the need to “reassess economic sanctions to target those responsible for violations without harming civilians, and to allocate frozen funds to support transitional justice and reconstruction based on principles of transparency and fairness.”

No solution but complete lifting

The license granted by the United States on January 6 “has no significant effect on the banking sector,” according to Samir al-Aita, head of the Arab Economists Forum.

Al-Aita noted in an interview with Enab Baladi that the license only allowed expatriates to transfer individual remittances, without lifting the Caesar Act sanctions, which were extended until 2029.

The American license does not permit large capital transfers to Syrian banks, which must go through the central bank.

Dr. Samir al-Aita, Head of the Arab Economists Forum

Al-Aita stated that the lifting of European sanctions on the central bank for a year “can be reversed at any time” and has political conditions, adding that the lifting came without an official text so far indicating what it includes, as some statements suggest that the lifting pertains only to the banking infrastructure.

The expert believes that it is unlikely that the European lifting will exceed the US sanctions.

Al-Aita added that partial suspension in both cases (US and European) will not have a significant impact on Syrian banks and their correspondent banks, which need a longer suspension of sanctions or their cancellation to operate normally.

External fund

To obtain funds from supportive countries, al-Aita proposes the establishment of an external fund that would “pay the price for imports or settle the dues of companies that will repair infrastructure or undertake reconstruction.”

While al-Aita sees it as impossible for any country to deposit a certain amount in the central bank to finance the Syrian state to pay salaries and invest at this stage, despite the US license and the partial European lifting, banking expert Amer Shahda believes that the partial lifting of sanctions does not impede large capital transfers into the country if Syrians abroad wish to invest in Syria.

According to Shahda, the central bank allowed the transfer of amounts in foreign currency, “cash without ceilings.”

Shahda pointed out in his interview with Enab Baladi the necessity of empowering the Syrian Central Bank financially, especially in light of the scarcity of resources and balances.

The central bank faces difficulties in entering financing operations unless it receives support from Arab countries like Qatar, Saudi Arabia, or Kuwait through cash deposits. In this case, the bank would be able to control the movement of the cash mass in foreign currency and the Syrian pound, according to Shahda.

Required procedures

Restructuring the monetary system is essential to maximize the benefits from lifting the sanctions, according to banking expert Amer Shahda, to enable banks to meet the requirements for industrial and commercial revival in Syria.

The central bank should strive to give Syrian banks their real role in receiving remittances, and not limit that to a small group of licensed financial companies.

Amer Shahda, Banking expert

Shahda urged the central bank to strive to give Syrian banks their true role in receiving remittances, and not restrict this to a small group of licensed financial companies.

Meanwhile, al-Aita confirmed that improving the current situation in the country requires the complete lifting of sanctions on the central bank, stressing the need to “find mechanisms that mitigate excessive commitment and fear of other commercial and financial sanctions.”

Al-Aita believes this is possible if there is a genuine desire from abroad for Syria’s revival and recovery, but it requires, on the internal level, a control of the cash reality concerning banks and money exchange and stopping the cash loosening.

How transfers to Syria were conducted

Financial transfers to Syria were complex and difficult during the previous regime’s control over the economic life sectors, on one hand, and the US and European sanctions imposed on the country.

Most remittance companies worldwide refrained from carrying out any financial transfers to Syria, while the Syrian regime and its economic arms relied on neighboring countries like Lebanon as intermediaries for the entry and exit of funds to and from the country.

An investigation by Enab Baladi on February 25, 2024, revealed that Lebanon formed one of the channels for dispensing and storing funds, playing this role unlike any other neighboring countries due to the open crossings between the two and the transport lines that moved through them almost daily.

Some Syrians resorted to sending remittances to licensed exchange offices in Syria, including the al-Haram and al-Fuad offices, as well as Western Union.

Meanwhile, most Syrians relied on unofficial exchange offices, which previously adopted the advertised exchange rate of the black market, in contrast to licensed offices that adhered to the rates issued by the central bank.