Rebuilding Syria: Why sanctions relief will take time

The United States and European Union have taken major steps to revoke their Syria sanctions regimes, with Washington declaring sweeping waivers on 23 May and Europe largely following suit on 28 May.

While these efforts are rapidly advancing, the complexity of the pre-existing sanction regimes, conditionality, and remaining ambiguities all highlight that this process will take time, as Syria remains one of the most sanctioned countries nearly six months after the shock collapse of the former Assad regime last December.

Nevertheless, the recent decisions on sanctions mark a turning point for a country requiring major support, laying the groundwork for a new era after Syria’s brutal conflict of nearly 14 years.

Regional unity on the interim government

Syria’s interim authorities have strongly advocated for sanctions relief in recent months, engaging regional partners and the West on the issue in nearly every encounter.

“There are a lot of layers to why the Arab and Gulf position has been largely unified on Syria, including countries who had very strong relations with the previous administration, like the UAE,” Samy Akil, a Nonresident Fellow at the Tahrir Institute for Middle East Policy, told The New Arab.

Saudi Arabia has played a particularly central role in convincing Trump, alongside Turkey and Qatar.

“They realised there is no added value in opposing or hampering any support or legitimisation to the new government,” Akil argued. “They think instability in Syria is detrimental to the region and have decided to enhance relations.”

Dr Nanar Hawach, the Senior Syria Analyst at the International Crisis Group, told TNA that regional support is crucial for US President Donald Trump and Europe to follow through on sanctions relief.

“Trump’s strong announcement suggests he’s serious, and regional backing from Saudi, Qatar, and Turkey will likely help push it forward,” he said.

With sanctions relief, regional states hope Syria’s transition and reconstruction will ease the regional temperature. This decision follows a trend towards pragmatism and cooperation prevailing over the competition of the Arab Spring period, at least relatively.

“If things go south, the UAE, Egypt, and maybe others will think of alternative avenues or potential ways to support another actor in Syria. But for the time being, they are happy to play along,” Akil noted.

The complexity of Syria's sanctions makeup

Yet while interim government officials have praised the decisions to lift sanctions, early announcements and waivers do not mean Syria is out of the woods.

Indeed, the complexity of Syria’s sanctions presents major challenges. Technical efforts to lift and revise sanctions mechanisms require specificity and care, especially as individual sanctions on former regime figures should remain in place - something Europe particularly focused on in its revocation announcement.

Even under less constricting conditions, any relief from such decisions would take time to precipitate.

“In practice, sanctions relief is a slow, multi-stage process shaped by legal, political, and institutional constraints,” Vittorio Maresca di Serracapriola, Sanctions Lead Analyst for Karam Shaar Advisory Limited, told TNA.

“Even after public announcements - like the US and EU pledges to lift economic sanctions - actual revocation requires updating legal instruments, issuing new licenses, and revising sanctions lists,” he explained.

Washington’s Syria sanctions present a unique challenge as they fall under multiple legal mechanisms. These include executive orders, Congressional acts like the Caesar Act, terrorism-related sanctions under Foreign Terrorist Organisations (FTO), Specially Designated Global Terrorist (SDGT) designations, and the 1979 State Sponsor of Terrorism (SST) designation.

“Temporary waivers like the US General License 24 haven’t restored confidence because they’re short-term,” added Serracapriola.

General License 25 - the latest US sanctions waiver released on 23 May - aims to address the time-bound issue. In an apparent first, it provides indefinite sanctions waivers for major Syrian institutions and actors, including government leaders like Interim President Ahmed Al-Sharaa, the Central Bank of Syria, and the Commercial Bank of Syria.

In parallel, the Trump administration announced a six-month waiver of the Caesar Act sanctions. This 2020 US law applied secondary sanctions on most business activity with the former regime. However, any permanent revocation will require US Congressional action - no small feat.

The time-bound nature of the Caesar waiver will stymy economic activity and investment in Syria, making full revocation via the US Congress essential moving forward.

Still, these decisions are crucial to allowing financial flows, as the sanctions stymied economic and humanitarian activity, given the risk-averse nature of financial institutions and businesses. Now, the focus will be on re-establishing financial and banking relationships.

“Despite recent EU and US announcements, most formal banking channels remain frozen. This has led to widespread over-compliance by international banks, blocking even permitted transactions like remittances and humanitarian aid,” explained Serracopriola.

The decision to include terrorism-related sanctions waivers in GL 25 is also significant. In his interview ahead of the license announcement, Serracopriola stressed the importance of delisting al-Sharaa and the now-defunct HTS from counterterrorism sanctions.

“As long as Syria’s leadership remains designated, banks will likely avoid engagement regardless of sanctions relief,” he added.

Whether the open-ended GL 25 and Caesar waivers address that core concern remains to be seen, especially given Syria’s ongoing instability and fears over the intentions of the interim authorities in Damascus.

Syria's economy remains in shambles

The effort to improve Syria’s economy faces major constraints due to the impact of the 14-year war and its widespread corruption and cronyism, Lebanon’s economic collapse, and brain drain.

The latter constitutes a particular issue as the country aims to rebuild - a monumental effort for any country facing such a daunting liberalisation and reconstruction effort.

Dr Karam Shaar, Director of Karam Shaar Advisory Limited, highlighted this issue in an interview with TNA. “The key issue and main bottleneck to economic recovery is capacity. So, capacity building,” Shaar said.

“Many would think the absence of foreign aid or lack of interest in investment are the core issues. I do not view this as the primary issue at all. It is the limited bandwidth of the government and the lack of expertise, namely the ability to capitalise on pre-existing offers of aid and support from multinational institutions and foreign governments.”

Samy Akil, Non-resident Fellow at the Tahrir Institute for Middle East Policy, agrees.

“The Syrian authorities will have to work with international organisations and foreign actors to restructure the civil service, how ministries operate, the banking sector regulations, and the machinery of how government efficiency operates,” he said. “It needs to be reformed to distribute and manage any project or initiative to improve the economic situation in Syria.”

Attracting high-level talent, namely via refugee returns, will not be easy. Today, roughly 90 percent of Syrians live under the poverty line of $2.15 per day. Opportunities are severely lacking as the economy largely ground to a halt after Assad’s collapse in December, exacerbating widespread unemployment.

According to the United Nations Refugee Agency (UNHCR), an estimated 7.42 million internally displaced people (IDPs) reside in Syria today, with some estimates citing a decrease to 6.6 million. Of the roughly one million IDPs who have returned to their homes, an estimated 28 percent now live in damaged or unfinished structures.

That context is not conducive to the refugee returns needed to bolster government capacity and further economic recovery.

Other experts, including Hawach, argue that parallel efforts are needed to address Syria’s intertwined issues.

“The government should prioritise improving security to attract external investment. It also needs to restore the basic functionality of state institutions and reform them to reduce bureaucracy and improve service delivery.”

Such moves, in theory, can simultaneously attract highly skilled labour while gradually restoring the country’s economic activity.

Sanctions, especially those on the banking sector, have hampered Syria’s transition, Serracapriola highlighted, with over-compliance by international banks blocking even remittances and humanitarian aid.

“As a result, Syrians rely on informal networks like hawala, which lack oversight and carry higher risks of money laundering and terrorist financing. Meanwhile, the formal sector remains isolated, undercapitalised, and distrusted,” he added.

“The risk isn’t just economic paralysis - it’s the entrenchment of informal finance, deepening financial opacity, and pushing the country further into the orbit of Iran and Russia.”

Perhaps understanding that latter point, GL 25 explicitly does not authorise transactions with Russia, Iran, or North Korea - major US rivals.

Can progress be sustained?

While dire, Syria’s conditions are ripe for improvement, and Damascus’s goal should be to buy time, which it is already doing in practice. Much of its public messaging highlights government and security sector reform efforts, including infrastructure maintenance and development, security operations against the former regime and drug and gang networks, and international engagements that it believes increase its legitimacy.

But this approach is time-limited, as world leaders understand. Yet, that understanding is not preventing caution in the West - an understandable approach that could introduce additional risks into Syria’s transition.

The West attaches conditions to sanctions relief and broader support for the interim authorities, including on issues like counterterrorism cooperation, minority protection, and inclusive governance, and friendly relations with neighbouring states, particularly Israel.

Some reports suggest Damascus will have to normalise diplomatic relations with Tel Aviv to achieve full sanctions revocation, which could upend the country’s tense relative calm.

Potential spoilers of Syria’s transition compound the risks of over-conditioning relief. Key figures in Trump’s administration remain staunchly against normalisation or remedies for the interim government, including notable figures like counterterrorism czar Sebastian Gorka and US Department of State Assistant Secretary of State for Near Eastern Affairs Joel Rayburn.

Even supposed proponents of US sanctions relief, like Secretary of State Marco Rubio, advocate for “incremental” relief, highlighting Western concerns about Syria’s new leaders and their jihadist roots.

Ultimately, Western leaders should consider the benefits of maximum relief for Syria today, as the country is essential to regional stability. Its people deserve and need relief. While the West can play a positive role, it should not attach numerous arbitrary demands reminiscent of previously failed nation-building campaigns.

Rather, allowing Syrians the tools and access necessary to drive their country’s transition should sit at the core of Western policy thinking. Empowering regional states interested in investing in Syria’s reconstruction should take precedence in that effort.

That means prioritising smart but rapid and sweeping sanctions relief and guidance to international organisations and business leaders that opens the doors to regional reconstruction in the country.

Alexander Langlois is a foreign policy analyst focused on the Middle East and North Africa. 

Follow him on Twitter: @langloisajl