The impact of sanctions
The sanctions against Syria have had various impacts on Iranian and Russian investments and involvement in the country’s economy. The pressure on Russia and Iran has intensified since the US Senate passed the Caesar Syria Civilian Protection Act of 2018, which allows the US administration to impose sanctions on foreign entities trading and financing the Syrian regime.
The US has been imposing sanctions of various kinds on Syria since 1979. In 2004, Washington imposed additional sanctions on a number of Syrian individuals and entities in the banking and technology sectors in response to the Syrian regime’s support of terrorism in Iraq, its illegal occupation of parts of Lebanon, and its role in the assassination of Lebanon’s Prime Minister Rafik Hariri.82
In 2011, the objectives of US sanctions on Syria changed. Before that time, the US had used sanctions to influence regime behaviour and respond to uses of excessive force and pre-planned attacks by the Syrian regime. However, since 2011, US sanctions against Syria have continued to increase annually. Current sanctions focus on individuals, technocrats and business networks working with Syrian authorities. In 2018, after James Jeffrey was appointed as the US special representative for Syria engagement, the use of sanctions took on a new dimension. Though the nature of the sanctions has not greatly evolved, Jeffrey has used them as a tool to pressure the regime and its allies to participate in the UN-led political process in accordance with the Geneva resolutions and Security Council Resolution 2254. These sanctions exert pressure on foreign companies wishing to enter the Syrian market and target commercial networks and financial assets, as well as crude oil and processed goods.
The evolution of international sanctions on key Syrian economic sectors and persons will greatly shape both Russian and Iranian interventions in the country. If Washington imposes penalties on foreign companies working in Syria, there is the possibility that US policy towards the regime could actually further empower Iran and Russia in the country.
The sanctions imposed by the OFAC have the most potential to damage the Syrian regime and economy. Nonetheless, to date, the sanctions imposed by the US and the EU have yet to affect the regime’s behaviour. Moreover, allies to the US, such the UAE, Bahrain, Egypt and Jordan, are restoring relations with Damascus. The regime’s widening network will enable it to neutralize or bypass sanctions by using commercial brokers and businessmen not yet affected by US measures.
The evolution of international sanctions on key Syrian economic sectors and persons will greatly shape both Russian and Iranian interventions in the country. If Washington imposes penalties on foreign companies working in Syria, there is the possibility that US policy towards the regime could actually further empower Iran and Russia in the country. As Iranian companies are already under US sanctions, additional punishments are unlikely to affect their approach to the Syrian market. Furthermore, although larger Russian and Chinese companies may be discouraged from investing in the key sectors of the Syrian economy – for fear of endangering their projects elsewhere – smaller Russian and Chinese companies may be drawn to Syria to contend with Iranian companies with similar capacities and expertise.
However, US sanctions on Iran will most likely negatively impact Tehran’s financial ventures in Syria. The devaluation of the Iranian rial on the international currency market, which began in February 2018, led to a huge decrease in Iranian public and private sector investments in Syria. By April, the impact of ongoing US pressure on the Iranian economy was being strongly felt in Syria. The US has indirectly encouraged the devaluation of the rial by its threats to scrap the Iran nuclear deal, promoting uncertainty and thus making it increasingly difficult for foreign companies to conduct business in Iran. The sharp decline of the rial as a result of this uncertainty and the US withdrawal from the Iran nuclear deal are indications that Iran’s economy and security remain vulnerable, regardless of its interests in Syria. A weaker Iranian economy will certainly continue to have an impact on potential Iranian investment in reconstruction efforts in Syria.
82 Department of Treasury (2004), ‘Blocking Property of Certain Persons and Prohibiting the Export of Certain Goods to Syria’, 12 May 2004, https://www.treasury.gov/resource-center/sanctions/Documents/13338.pdf (accessed 21 Jan. 2019).