Lifting Sanctions on Syria Reshapes Economic Landscape

In a move that seemed like throwing a stone into decades-old waters, US President Donald Trump announced from Riyadh the end of the rift with Damascus and the lifting of sanctions imposed on Syria, a major development that will support the country in its journey to rebuild its war-ravaged economy. However, the sanctions lifting journey may be full of details, especially since it is not a recent development; it actually dates back to 1979.

Trump announced yesterday his intention to "lift all sanctions on Syria" after talks with Saudi Crown Prince Mohammed bin Salman during his visit to the Kingdom, the first stop on his Gulf tour this week.

Trump did not disclose the timing and method of lifting these sanctions, nor whether they would be lifted all at once or in parts. He simply indicated that he would work "to lift the sanctions on Syria to give them a chance... because the sanctions were bad and they were holding the country back... and now is the time for Syria to prosper."

The long-awaited lifting of sanctions will undoubtedly have a positive impact on many aspects of the Syrian economy, particularly in terms of returning to the global financial and banking system, engaging with international institutions, and encouraging investors. However, maximizing the benefits of this increase requires internal steps, including structural, financial, and legal ones. This raises several scenarios, particularly regarding determining priorities that affect citizens' lives.

Finance Minister Mohammad Yaser Barniyeh believed that the US decision would help his country attract foreign investment and financial flows, and return to the global financial and monetary system, according to the Syria TV channel on Telegram.

Barniyeh also pledged to continue "rebuilding infrastructure and providing an institutional and legislative environment that attracts investment."

The announcement had a "more political than economic" nature, according to Adnan Mazari, a non-resident senior fellow at the Peterson Institute for International Economics. In an interview with Asharq Al-Awsat, he explained that transferring it to the economy requires the government to take several key steps, including "developing strategic plans that identify the sectors that need financing, building trust internally and externally, and working diligently to build official institutions."

Mazrai, who previously served as Deputy Director for the Middle East and Africa at the International Monetary Fund, believes the announcement could push Washington toward issuing some exemptions allowing trade with Syria. But more importantly, he believes, the decision will allow other countries, such as Saudi Arabia, to contribute directly to reconstruction funding.

The Syrian economy is suffering from a severe collapse. A United Nations report released in February indicated that three out of four people in Syria rely on humanitarian aid, while the poverty rate has tripled to 90% of the population, while the extreme poverty rate has increased sixfold to 66%.

The economy has also been severely impacted by the war that began in 2011. The UN report estimated the total losses in GDP over 14 years at approximately $800 billion. UN sanctions continue to pressure the economy despite the fall of Bashar al-Assad's regime, amid calls from the government and regional countries, led by Saudi Arabia, to lift the sanctions because the reasons for their imposition no longer apply.

Trump's announcement faces legal dilemmas, according to Marco Massad, an international relations researcher at the Middle East Policy Institute in Washington.

He pointed out in an interview with Asharq Al-Awsat that US presidents often impose sanctions on countries through executive orders, which they can then revoke. Sanctions enacted through legislation, such as the Caesar Act, are more complex and may require a reassessment by the State and Justice Departments of the situation in Syria and congressional approval.

Irina Tsukerman, a lawyer and president of Scarab Rising, a strategic consulting firm, also pointed to this point. She believes that "the Caesar Act will not disappear overnight," as it was designed to target "Assad's behavior, not his person."

She believes that the law's complete repeal requires congressional approval, which is far from certain given the partisan divide. She also noted that "Israeli concern about the new regime in Syria" is an important factor in this equation. She noted that Trump may resort to issuing limited exemptions for specific sectors, in an attempt to mitigate the effectiveness of this law.

Implementing the decision represents a "major boost" for the Syrian government, which is struggling to secure funding for reconstruction and economic revival. It will also help the country obtain support from international banks and lenders such as the International Monetary Fund and the World Bank, according to Mazrai.

He added that the mere announcement does not mean "funding will flow to Syria," considering the high levels of debt to be one of the main problems.

There is no official figure for the size of Syria's debt, but Mohammad Abazid, the former Minister of Finance in the caretaker government, indicated in media statements that the foreign debt ranges between $20 and $23 billion, in addition to "billions in domestic debt."

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