'Vote of confidence': Trump’s lifting of Syria sanctions raises hopes for investment

US President signed order fulfilling his pledge to permanently lift most sanctions on country

Syria's economy is opening up to foreign investors after 14 years as a no-go zone in wartime. Getty Images

US President Donald Trump’s executive order to permanently lift most sanctions on Syria is a “vote of confidence” in the country’s new leaders, removing some of the final barriers for foreign investors, Syrian officials and experts told The National.

The move implements a promise Mr Trump made in May to lift crippling sanctions on Syria’s new government, in a major policy shift aimed at giving the country a chance at “greatness”. The signing of the executive order “will definitely encourage more investors to take the step and enter the Syrian market,” Ayman Hamawiye, head of Syria’s Investment Authority, told The National.

In late May, Mr Hamawiye told The National that the authority had received hundreds of letters expressing interest, including letters from dozens of Western companies, following Mr Trump’s pledge to end sanctions. Now, Mr Trump's order terminating those sanctions will “definitely” help turn those expressions of interest into concrete investments, though expectations around the time frame should be managed, Mr Hamawiye said.

Trump signs executive order lifting Syria sanctions

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The regime of Bashar Al Assad was under a dense web of sanctions, which intensified after 2011 following a brutal crackdown on peaceful protests, which led to a 14-year civil war. Since the regime was toppled in December by Sunni rebel groups, Syria has had a surge of investment pledges, particularly from Gulf countries. The latest, announced this week, was a $1.5 billion deal backed by a Qatari company to develop an artistic and media production hub in Damascus.

“Of course, we’ll keep in mind that even executive orders need some time before they’re implemented on the ground, but in any case, this is a positive and encouraging development,” Mr Hamawiye added.

“There’s strong interest in investment, and it’s constantly growing. The more the security and international concerns diminish, the more investment interest increases, especially from major international investors,” a source at Syria's Ministry of Economy told The National.

The sanctions relief does not apply to Mr Al Assad or his associates. It also excludes people accused of human rights abuses, drug trafficking, chemical weapons activities, or linked to ISIS or Iranian proxies, White House press secretary Karoline Leavitt said on Monday.

US President Donald Trump announced in May he would lift sanctions on Syria, a day before meeting its President, Ahmad Al Shara. AP

A 'vote of confidence'

Benjamin Feve, a senior researcher at Karam Shaar Advisory, told The National the move was significant for investor confidence and Syria’s international reputation, and demonstrated Washington’s seriousness in supporting the country.

“This is really a vote of confidence from the US government towards the Syrian government. It also shows that the American administration – even its most senior figures, including those most opposed to [Syrian President Ahmad] Al Shara – were unable to convince Trump to reverse his decision on lifting the sanctions,” Mr Feve said. “This reflects a real, radical shift within the US administration itself,” he added.

During a brief, historic meeting with Mr Al Shara – a formerly Al Qaeda-linked fighter described by Mr Trump as a “handsome man” with a “tough past” – the US President urged him to meet specific conditions, including establishing ties with Israel.

Back-channel talks have taken place between Syria and Israel are continuing but have yet to yield tangible results, with the issues highly sensitive. Syria has a long history of war with Israel, which has occupied the Golan Heights, a rocky plateau bordering the two countries, since 1967.

“It's also kind of a test for the Syrian authorities, will they manage this post-Assad transitional phase well?” Mr Feve added.

Syria's new regime is seeking international investment to repair the economy from the civil war. AFP

Outbreaks of sectarian violence have also raised questions about the interim government’s ability to stabilise Syria, despite its pledges of inclusivity.

Some sanctions will remain on Syria, including those mandated by the US Congress, as well as the US designation of Syria as a state sponsor of terrorism. Sanctions on Hayat Tahrir al-Sham (HTS), the now-disbanded group that led the December offensive and whose former members lead the government, also remain in place.

“Obviously, none of these sanctions explicitly prevent investments, but they do damage Syria’s reputation,” Mr Feve said.

Challenges ahead

Experts and officials told The National that while the lifting of sanctions is a milestone, the path to recovery remains long. For Mr Feve, the reintegration of Syrian banks into the global financial system, a necessary step to manage the expected flow of billions in reconstruction funds, is a top priority.

“What still blocks things today are the interbank links between Syrian banks and international banks,” Mr Feve said. He said the end of sanctions does not mean foreign banks will automatically resume long-cut ties.

“International banks still don’t know whether Syrian banks are really compliant with all the measures meant to prevent money laundering and terrorism financing. So it's taking time, but those connections will gradually be re-established.”

Syria's central bank governor told The National last week that Syria's banks are expected to resume ties with international lenders within weeks. According to the source at the Ministry of Economy, challenges also lie in the urgent need for administrative reforms and the state's capacity to manage massive investments.

“The legal complications and the old chaos within government institutions will take time to dismantle. We are in the process of building a new government system – not from zero, but from a point below that, due to the presence of the old system,” the source said.