Syria believes the US is inching towards delisting the country as a state sponsor of terrorism, in what would be a major step in the country's gradual reconnection to the global financial system.
Finance Minister Yisr Barnieh, who led a Syrian delegation to Washington during the International Monetary Fund and World Bank spring meetings, said the country's delisting as a state sponsor of terror is the “last milestone” to unlock US investment.
“I'm optimistic that things will move in the right direction. How long? When? I'm not sure, but I hope to be very soon,” he said during a panel discussion on the sidelines of the spring meetings, when asked by The National.
Talks were held with the State Department last week on the state sponsor of terrorism designation last week.
A source told The National that the US thinks Syria has taken steps in the right direction to be delisted, although Washington wants more to be done. The source would not provide specifics. They also said Syria sees potential to attract US investment across sectors including telecoms and technology, banking and financial services, transport, aviation and health care.
The State Department said US law establishes specific statutory criteria for rescinding a designation.
“Several steps would need to be taken by both the department and the President, should the decision be made to remove the SST designation,” a representative told The National. “Any action related to Syria’s status on the SST list would be based on the law and the criteria established by Congress.”
The Syrian delegation held talks with Treasury on strengthening anti-money laundering and counter-terrorism financing, state-run news agency Sana reported. The Treasury did not respond to The National's request for comment.
US legal risks
The new Syrian government has been slowly reconnecting with the global financial system since the toppling of Bashar Al Assad's regime in December 2024. Damascus has since reconnected with the IMF and World Bank, is attracting investment from the Gulf and Turkey, has begun reconnecting with the Swift network, and in March reactivated its account at the Federal Reserve Bank of New York for the first time since 2011.
And while the repeal of the Caesar Act last year removed the harshest US sanctions on Syria, the state sponsor of terrorism designation, which was imposed in 1979, still depicts it as a pariah state, leaving US companies unable to do business there. The designation also places restrictions on foreign aid, defence exports and places controls on dual-use technology.
“Without that last milestone, everything we have done has no value,” Mr Barnieh said.
Alex Zerden, a former Treasury official, said the designation is the largest remaining US legal barrier for Syria's reintegration into the global financial system.
“That’s not just because of the designation itself but because the secondary consequences are a major concern to US and international investors and financial institutions,” he said.
Mr Zerden said the Syrian government's legal liability, particularly for existing and possible future claims by US terrorism victims, continues to cast a long shadow over business activities.
“Organisations do not want to get pulled into protracted litigation or claims disputes,” he said.
Even Syria's account at the New York Fed has its limits because of the designation. Speaking at the Middle East Institute, Syria central bank governor Abdulkader Husrieh said Damascus cannot use its account for commercial activity.
“Otherwise, once our funds are used for commercial activity, the money will be confiscated immediately,” Mr Husrieh said.
Syria still remains on the Financial Action Task Force grey list, which continues to make it difficult for international companies to conduct business.
“There are massive reputational costs to engage with Syria,” said Vittorio di Serracapriola, lead analyst of sanctions at Karam Shaar, a consulting company focused on Syrian business.
Article IV consultations
The IMF has sent four missions to Syria – the latest in February – since restoring relations to provide technical assistance and discuss reform priorities. Last week, the Syrian delegation also held talks with the fund on technical assistance, building capacity, strengthening central bank policies, supervisory capabilities and improving oversight, state-run news agency Sana reported.
The fund has not had an Article IV consultation – its annual economic check-in with member countries – with Syria since 2009.
When asked by The National during a panel discussion at the IMF if discussions on an Article IV are taking place, its mission chief, Ron van Rooden, said a lack of adequate data remains a roadblock. The fund has access to “relatively good numbers” on data, including inflation, the exchange rate and national accounts, but he said the biggest challenge remains finding credible data on Syria's balance of payments.
“Finding good numbers is difficult there, but we are making progress,” Mr van Rooden said. He added that he hopes to complete Article IV consultations “hopefully in the course of this year”.
