Business and FinanCe

Despite the failure of sanctions to either dampen trade or change Syria’s foreign policy, an easing of the embargo is not expected anytime soon
It’s a similar story in the country’s natural gas sector, with sanctions delaying the much needed development of Syria’s natural gas resources at a time of declining oil production. The country’s aircraft industry has also been hard hit. Syrian Arab Airways, the national carrier, has an ageing fleet of Boeing jets badly in need of replacement. As the US dominates the aircraft industry, upgrading the fleet has encountered major hurdles. The establishment of the Damascus Stock Exchange, the diamond in the crown of the country’s economic reform programme, has also been delayed indefinitely in part due to difficulties in sourcing an IT platform to run the activities of the exchange. While the government recently signed a $10m contract with the Swiss firm OMX, a strong euro has forced it to pay much more than it originally budgeted. And then there is the toll on the country’s overall business reputation. Despite much protest to the contrary by Syrian authorities, sanctions have scared away many of the word’s leading firms from doing business in Syria. The country’s rapidly expanding private bank sector is a case in point. Regardless of private banks falling outside US Treasury Department measures against Syria, many large western financial institutions like Deutsche Bank are unwilling to deal with the country at all. Syria’s economic expansion continues, nonetheless – just like the range of economic measures against it. Despite the failure of sanctions to either dampen trade or change Syria’s foreign policy, an easing of the embargo is not expected anytime soon. Indeed, the latest blow against Syria is seen by many as an attempt by the Bush administration to ensure its hardline remains long after No.43 leaves the White House. “The latest targeted sanctions are not going to change the course of the economy or the country as a whole,” Joshua Landis, a former Fulbright scholar in Syria who teaches at the University of Oklahoma, said. “What it will do is complicate the relationship any future government can have with Syria. It limits their options for changing course.” n

medicine (agricultural items presently account for around 90% of American exports to Syria), a ban on US investments in Syria, a ban on Syrian airplanes entering American airspace, restrictions on the travel of Syrian diplomats beyond a 25-mile radius of Washington DC and New York, downgrading US relations with Syria and prohibiting US citizens from engaging in property transactions with the Syrian government. When the sanctions were implemented in May 2004, Bush supported a ban on exports and flights; the later redundant given Syria’s only airline has never flown to the US. Washington also allowed for a range of exemptions, specifically for commercial aircraft parts and computer components that would assist in connecting Syria to the outside world via the Internet. Under the act, goods are classified American if more than 10% of their components are manufactured in the US; hence the presence of a Ford dealership in Damascus. Ford automobiles sold in Syria are not manufactured in the US and, as such, are American in reputation only. The executive order implementing SALSA also unexpectedly contained two additional penalties. Under Section 311 of the 2001 Patriot Act, the president empowered the Treasury Department to sever correspondent accounts with the state-owned Commercial Bank of Syria (CBS) because of money-laundering concerns. Under the International Emergency Economic Powers Act (IEEPA) the Treasury was further instructed to freeze the assets and prop48 The Middle easT May 2008

Damascus, where syria’s economic expansion continues, alongside us moves to contain it

erty of individuals held to be “directing or otherwise significantly contributing to” Syria’s sponsorship of terrorist organisations, development of WMD, occupation of Lebanon, or efforts to undermine stability in Iraq. The latest blow came in February when Bush issued an executive order blocking the assets of Syrian officials and individuals on charges of public corruption and misuse of public assets. Number one on the list was Makhlouf, owner of the country’s largest mobile phone company Syriatel and a backer of the country’s largest holding company, Cham Holding, which is spearheading a diverse array of tourism, commercial and residential developments. Despite the growing trade volume between Syria and the US, along with an ever expanding array of American goods hitting Syrian shelves, US sanctions have not been without effect. The government admitted as much in August last year when – following a summer of constant power outages – the prime minister, Muhammad Naji Al Otari, said US and French-led pressure had stopped companies like the Americanbased General Electric and French-owned Alstom from bidding on the construction contracts for two new power plants. Bids have been called for five times in the past two years, with no takers.