Barely a week passes without Washington condemning Syria for allegedly engaging in some nefarious activity. The latest two hits came in the form of an American travel ban on a number of pro-Syrian Lebanese politicians, along with the release of the US Securities and Exchange Commission’s annual name and shame list of companies doing business in state sponsors of terrorism, of which Syria is an inaugural member.
Yet despite much political posturing from Washington, the raft of economic sanctions unleashed by US President George Bush have had little impact on US-Syrian trade. Trade between two countries tripled from 2005 to 2006 and is showing healthy gains in the first quarter of this year. Furthermore, America imports more than 10 times the value of goods from Syria as does Damascus’ high profile ally Iran, with total exports to the Islamic republic weighing in at a mere $17.8 million, compared to $209 million with the US, according to figures from the Syrian Central Bureau of Statistics.
Total trade between Syria and the US in the first quarter of this year hit $144 million, up from $72 million in the first quarter of 2006, figures from the US Department of Commerce show. As a total, in the six month period from the last quarter of 2006 to the first quarter of 2007, total trade reached $361 million, more than three times the amount during the same period a year earlier when the figure was only $116 million.
Analysts are chalking up the rise in trade value to unusual agricultural activity. Syrian farmers last year relied on expensive corn imports to feed their livestock after barley crops — the staple feed — were destroyed by bad weather. Nevertheless, the healthy figures indicate that for all the political manoeuvring, sanctions are having little affect on Syria which has traditionally traded with Europe over America.
“In terms of volume, bilateral trade has not been greatly affected,” Jihad Yazigi, economist for the Syria Report, said. “Syrian trade with the United States is centered on oil and food, commodities which fall out of the scope of the sanctions. The sanctions are not about bilateral trade. It’s a specific items ban affecting technology and aircraft parts.”
Sanctions have little effect
Furthermore, Syrian-US trade is sure to be higher than official figures show given that Syrian traders can easily source American goods through countries in the region such as Lebanon and Dubai. Jordan’s Free Trade Agreement with the US, the first signed with an Arab country, also has an unknown effect due to the practice of importing raw materials from Syria, repackaging them as Jordanian goods, and exporting the finished products to the US.
Syria has operated under some form of American sanctions system since 1979 when the country was listed as a leading sponsor of international terrorism by the State Department. Exports of dual use items — such as electrical components and software — were banned and American aid to the country was cut.
Relations thawed in 1991 when Damascus supported the US-led coalition to expel Saddam Hussein’s forces from Kuwait. Trade and investment flowed, with US oil giant ConocoPhillips investing $500 million in a joint oil and gas project.
America’s second war against Saddam brought relations to a halt when Syria refused to give her support to the venture. The awarding of a $700 million gas project near Palmyra to an international consortium which included the US based Occidental Petroleum in early 2004 was seen by some as an attempt by Damascus to win favor with the US. Bush, however, didn’t take the bait and Syria’s defiance over Iraq resulted in the Syrian Accountability and Lebanese Sovereignty Restoration Act (SALSA) which banned all exports except food and medicine, along with direct flights from between the two countries.
The assassination of former Lebanese Prime Minister Rafik Hariri brought renewed economic pressure on Syria. Two additional penalties were issued by the Bush administration late last year under Section 311 of the US Patriot Act, resulting in the Treasury Department severing correspondent accounts with the state-owned Commercial Bank of Syria (CBS). Bush also issued executive orders under the International Emergency Economic Powers Act (IEEPA) which saw the Treasury seize the US assets of certain members of the Syrian government accused of supporting terrorism and aiding the pursuit of weapons of mass destruction.
The latest move came earlier this month when the SEC added well-known companies including German electronics and engineering group Siemens, chemical and pharmaceutical group BASF, as well as banking group Deutsche Bank to its annual list of companies active in countries it deems as sponsors of terrorism.
While the 2004 sanctions resulted in an immediate drop in trade — US exports to Syria fell by $13 million a month after they took effect — Syria recovered its traditional trading position with the US throughout last year.
Syria’s business community has a proven record in operating under and around sanctions. Yet there is always hope that access to America’s markets and knowledge base may become easier.
“The Syrian people are always looking to establish positive relationships with all the countries of the world,” a spokesperson for the Damascus Chamber of Commerce said.
“Problems exist regarding exports and imports and there are issues surrounding transport, but there are proposals to develop trade relations between Syria and America and we in Syria want to deepen our economic relations with all our trading partners.”
US Trade with Syria — Figures from the Census Bureau
Trade relations could influence politics
There is a considerable upside to deepening trade relations with the world’s largest economy. Since finalizing an FTA in 2001, Jordanian exports to the US have skyrocketed from $229 million in 2001 to $1.42 billion in 2006. Jordan now boasts a trade surplus of $771 million, compared with a deficit of $110 million in 2001. Over the same period the US has sought to deepen her economic ties throughout MENA, signing trade agreements with Morocco, Bahrain and Oman.
Likewise, if Libya is any example, business relations can quickly deepen following an extended period of political tension. Before the reformed ‘rouge state’ was brought in from the cold, the US had negligible trade with the country. Last year, the US racked up $2.4 billion in imports and $434 million in exports, providing Libya with a $2 billion trade surplus.
Speaking at a Banking and Financial Services conference in Damascus, David Hale, chairman of Hale Advisers LLC, said Syria’s trade “could probably triple or quadruple if Syria were able to end sanctions and pursue an FTA with America.”
“If Syria could pursue a foreign policy which turned America from a foe into a friend, it could significantly boost its prospects for boosting trade and investment,” the global economist said. “The Assad government should therefore regard its foreign policy as a potential instrument of economic reform. It should attempt to capitalize on America’s problems in Iraq to improve relations with the Bush administration.”
A number of developments have hinted at better relations between Damascus and Washington. The issuing of the Baker-Hamilton report last December called on President Bush to engage Syria in finding a solution to the violence engulfing Iraq. The visit of US House Speaker Nancy Pelosi to Damascus in May renewed discussions of a possible easing of sanctions, while Secretary of State Condoleezza Rice’s meeting with Syrian Foreign Minister Walid Muallem was seen by many as an indication that America would adopt a more pragmatic approach to solving the region’s ills.
For the moment, however, most Syria watchers believe any improvement in relations between the two countries will have to wait until after the 2008 US presidential elections. Major obstacles still lie on the road between Washington and Damascus, primarily the international tribunal to investigate the killing of Hariri. Should Syria feel to be forced into non-compliance, more serious sanctions might follow regardless of who sits in the White House.
The end game for Syria is the Golan Heights
“The real threat of the tribunal is that it is a way for the Republicans to lock in an inimical relationship with Syria should the Democrats come to power,” Joshua Landis, author of the upcoming book Democracy in Syria, said. “Furthermore, any issues of non-compliance would result in a resolution which would likely force the Europeans to join the economic embargo. Their unwillingness to do so has greatly weakened the efforts of American officials to isolate Syria.”
For Syria, the end game remains the recovery of the Golan Heights. Its support for Hamas and Hizbullah — groups which the US considers terrorist but which Syria considers national liberation movements sanctioned under international law — will not end while this rocky outcrop captured from her in 1967 remains under Israeli occupation. “The white elephant in the room is always the Golan Heights,” Landis said. “So long as Israel and the United States believe that they can deny it to Syria and get Syria to cooperate in Israel, Palestine and Lebanon, then they have rocks in their heads.”
