Washington Tweaks Syria Sanctions as Early Recovery Push Continues
06 December 2021

Washington Tweaks Syria Sanctions as Early Recovery Push Continues

06 December 2021

Table of Contents

Weekly Syria Update Digest

On 24 November, the U.S. Treasury Department amended Syria sanctions regulations, offering new guidance on permitted activities. The updates to the general licenses are part and parcel of an evolving effort by Washington to cement space for early recovery programming in Syria. They do not, however, create significant new space for aid actors, and they do not signal a major change of policy direction toward Damascus. Nonetheless, the development follows others that collectively mark a departure from the hard-line sanctions messaging that was seen under the previous U.S. administration. Although aid actors have welcomed the softening tone, Washington has yet to carry out the type of structural change to American sanctions policies that will be needed to alleviate broader chilling effects. 


  • Multiple Jordanian ministers have called on Syria to heed Amman’s requests for cooperation on cross-border water, trade, and drugs issues. The time may be ripe to test Damascus’s willingness to reciprocate over Jordan’s efforts to end Bashar al-Assad’s isolation, but major change is unlikely.
  • Turkey’s currency crisis has spilled over into opposition-held northwest Syria, which adopted the Turkish lira as a hedge against instability in the Syrian pound. The sharp depreciation of the Turkish lira has increased the prices of key commodities, worsening living conditions in Idleb and driving resentment against Hay’at Tahrir al-Sham. 
  • On 22 November, the Damascus Chamber of Industry announced a new plan to register local industrial facilities for investment by Iran. The overall impact of Iranian investments on ordinary Syrian people is limited, as Iran’s reconstruction efforts are targeted more towards its own economic interests, including repayment for its wartime support to Damascus.
  • The Autonomous Administration has announced plans for an independent monetary authority. Though a step short of a regional central bank, the entity is provocative, and if it comes to fruition, it will sharpen the region’s break from Damascus.
  • Government forces targeted Nawa city in Dar’a Governorate with artillery bombardments. Meanwhile, there were clashes between local armed groups and Government forces in As-Sweida city. This is a change in the Syrian Government’s policy of dealing with southern Syria, and growing violence remains possible at any time.


Washington Tweaks Syria Sanctions as Early Recovery Push Continues


In-Depth Analysis

On 24 November, the U.S. Treasury Department amended America’s sanctions regulations for aid operators in Syria. Though modest, the changes reaffirm Washington’s emphasis on early recovery activities and signal a growing recognition of the chilling effect of past U.S. sanctions messaging over Syria. The amended general licenses specify that NGOs are allowed to carry out (generically defined) “new investment” in Syria, purchase refined petroleum “of Syrian origin” for use in the country, and engage in limited transactions with Government of Syria actors, provided they are carried out in support of aid activities.

What does it mean in practice? 

In large measure, the amendments have been welcomed, even by the staunchest critics of the Assad regime. Over-broad readings of U.S. sanctions have inhibited aid action, and they undermine narrower sanctions by other actors, including the EU. That said, the new rules do not significantly alter the sanctions landscape in Syria, and concern over chilling effects, proactive de-risking, and other unintended harms due to sanctions overcompliance still exist. These factors should not detract from a recognition that the measures do hint at important small steps and a change in tone. For one, aid actors may benefit from an unambiguous authorisation to deal in Syrian petroleum products, which may ease compliance risk for fuel-related activities and winterisation, a perennial focus that is now a major concern as Syrians face winter with diminishing state support and rising energy prices (see: Syria Update 19 October 2021). More broadly, the measures can be read as a signal of the U.S.’s changing approach to Syria sanctions under the Biden administration. Although widely seen as disengaging from the Middle East, the current White House has taken some clear steps with respect to Syria. Among them, it has abandoned the most hard-line aspects of Trump-era messaging on sanctions, which have deterred even legally permitted activities. 

Although the Treasury has specified that its latest moves are not intended as an about-face on Syrian sanctions policy, they follow a number of similar manoeuvres. The announcement comes a little over a month after the completion of the U.S. Treasury’s review of its global sanctions policy, which highlighted adaptations that are needed to ensure that U.S. sanctions are effective while minimising knock-on effects (see: Syria Update 25 October 2021). On 8 November, the Treasury published clarifications that specifically carved out space for early recovery activities for the first time (see: Syria Update 15 November). That announcement brought renewed attention to Washington’s abiding interest in facilitating early recovery activities, widely seen as an inherent humanitarian good and a necessity for acquiring Russia’s buy-in for a renewal of the cross-border resolution. It can also be argued that the emphasis on early recovery activity as part of an American-Russian quid pro quo involving cross-border aid delivery is one of the few areas of meaningful international progress on Syria since the collapse of the de-escalation zone system. 

In the long term, aid actors will likely push for more decisive signalling. Neither the amendments nor previous steps entirely offset the wide-reaching chilling effects of American sanctions, which continue to push banks away from transactions referencing Syria. Addressing these effects will require a broader, more concerted effort, clearer messaging, and a willingness on the part of aid actors to experiment. One small step may be greater direct engagement between Washington and financial institutions, particularly in areas where smaller NGOs are based. To that end, in September, a U.S. official visiting Turkey encouraged banks there “to ensure that NGOs continue to have appropriate financial access to carry out their work” in Syria. However, other issues, such as those faced by intermediary banks, are more nettlesome. Durable change and the assurances needed to gamble on multi-year programming decisions will require a more consistent and vocal approach. Recent memories of U.S. diplomacy conducted via Twitter caution aid organisations against moving too far, too fast.


Whole of Syria Review

‘Normalisation’: Jordan Demands Syria Export Water and Commercial Goods, not Drugs

On 30 November, Jordanian Agricultural Minister Khaled Musa Al Henefat called on the Syrian Government to activate a Syrian-Jordanian water-sharing agreement concerning Yarmouk River resources. The agreement, which was signed in 1987, stipulates, among other things, that Syria provide Jordan with 200 million cubic metres of water from the Yarmouk River annually. However, Syria has constructed a number of dams, thus decreasing downstream flow to Jordan, which Amman views as a violation of the agreement. Jordan’s concerns regarding Syria go beyond the issue of water, however. On 20 November, Jordanian Foreign Minister Ayman Safadi stated that his country is not only facing a refugee crisis on its northern frontier, but also daily operations by drug traffickers from Syria. 

Testing the Water

Water rights and the narcotics trade exemplify the barriers that will impede regional normalisation with Syria. For Amman, which has arguably spearheaded amped-up talks with the Syrian Government, the time is ripe to test Damascus’s willingness to reciprocate. Jordan’s King Abdullah has advocated taking a pragmatic path toward “behavioural change” in Damascus, yet the extent to which the Syrian Government will heed Amman’s concerns and deliver the tangible benefits it seeks is unclear. (see: Syria Update 20 September 2021). Some argue that mitigating the impact of water scarcity by activating the Yarmouk agreement has been among Jordan’s vital interests in Syria, but Syria faces its own multi-regional water scarcity issues, and its readiness to advance on water issues is dubious. The view on drugs is also in doubt. Coordination on the regional drug trade centred in Government-held areas of Syria is an issue over which Jordan must rely on greater cooperation with authorities in Syria. Since President Bashar al-Assad’s phone call with Abdullah — the first such call since the Syrian uprising began — Damascus has trumpeted multiple operations foiling attempts to smuggle tonnes of captagon pills out of the country. However, the drug trade continues to boom due to a combination of complicity and impotence on the part of Damascus. The two states are in greater alignment on cross-border trade. The reopening of the duty-free zone between the countries has boosted much-needed cross-border commerce, but both states are seeking more substantive outcomes. All told, the Government of Syria is unlikely to move quickly to meet the expectations of regional states seeking closer ties, especially when such steps require Damascus to check its own interests. 

Turkish Lira Crisis Hits Idleb, Triggering Protests and Undermining HTS 

On 27 November, media sources reported that Turkey’s currency crisis has spilled over into opposition-held northwest Syria, sparking mass protests and prompting the leader of Hay’at Tahrir al-Sham (HTS), Abu Mohammad al-Jolani, to meet with the Syrian Salvation Government’s Shura Council to review the financial and bread crises. Similar to Idleb, the Euphrates Shield and Olive Branch areas have also witnessed an unprecedented spike in the prices of goods and key commodities. The events come as the Turkish lira plummeted to a record low against the U.S. dollar, following sharp interest rate cuts in Ankara. Over the past year, the Turkish currency has lost about 40 percent of its value, fuelling a rise in inflation that is approaching 20 percent (or much higher by some measures). The Turkish lira is in wide use in northwest Syria, which relies heavily on imports of fuel, flour, and other key commodities from Turkey.

An Imported Crisis 

The depreciation of the Turkish lira against the U.S. dollar has resulted in worsening living conditions in Idleb, fuelling resentment against HTS and the Salvation Government, and undercutting the value of Turkish lira wage earners, including aid response implementers. Northern Syria has seen piecemeal adoption of the Turkish lira in some capacity since 2018 (see: Cash Crash: Syria’s Economic Collapse and the Fragmentation of the State). Its adoption was driven by commercial and administrative realities borne of Turkey’s deep control over these areas, but it was also meant to stabilise the region monetarily. The lira’s widespread use, including in humanitarian operations, has brought on precisely the problem it was meant to avert, namely high prices, weak purchasing power for consumers, and price manipulation by merchants. For instance, HTS-affiliated Watad Petroleum has once again raised fuel prices and linked the increase to the lira’s deterioration. Many workers in the region are paid in Turkish lira, including aid sector workers, local council employees, teachers, nurses, construction workers, and other professionals. Northwest Syria is expected to struggle to cope with price increases, especially as its weak economy relies heavily on international aid for subsistence. When the value of the Turkish lira decreases, prices adjust quickly, but wages take longer to catch up, leaving civilians unable to afford key commodities. 

Syria Offers Damaged Industrial Facilities to Iranian Investors

On 22 November, the Damascus Chamber of Industry announced that Syrian business owners would be allowed to register their industrial facilities as candidates for Iranian investment. The initiative came ahead of the opening of the “Made in Iran” exhibition in Damascus on 29 November. The exhibition, which was attended by the Syrian and Iranian trade ministers, was the second in recent years to showcase Iranian industrial products for Syrian markets. It coincided with the opening of a new Iranian trade centre on 30 November that aims to monitor economic activities in Syria and provide information about Iranian companies to Syrian industrialists. Iranian sources report that the two countries also signed four cooperation documents to boost industrial and economic ties. 

An Investor of Last Resort?

Iranian goods are heavily politicised in Syria; while they are popular in Shiite areas, others generally avoid them, and merchants sometimes resort to concealing their products’ country of origin, either because of a reputation for poor quality or a rejection of Iranian influence. The overall impact of Iranian investments on the lives and livelihoods of ordinary Syrian people is likely to be slim, as Iran’s reconstruction efforts are targeted more towards its own economic interests and a return on its decade-long financial and military investment in the Assad regime’s survival, which has been estimated at anywhere from 30 to 105 billion USD for the first seven years of the conflict alone. An attempt earlier this year by the Government of Syria to secure investment from “friendly countries” to restore 38 destroyed or damaged factories appears to have had no takers, as few foreign investors are willing to risk dealing with a regime under international sanctions and unable to guarantee the supply of electricity for manufacturing (see Syria Update 4 October). Iran, itself under international sanctions related to its nuclear programme, is one of the few countries to which Damascus has been able to turn for investment, though many announced deals have been little more than photo ops with no real steps towards implementation. 

Nevertheless, rapprochement between Damascus and other Arab states may mark a change in this dynamic, particularly if tangible economic deals with the oil-rich Gulf states are signed (see Syria Update 15 November). After 10 years of conflict and economic destruction, the Government of Syria is keen to reach into the deep pockets of the Gulf states to finance reconstruction efforts and generate much-needed income, though potential partners such as the UAE are wary of Western sanctions and political pressure (see: In-Depth Analysis section above). Investment from foreign governments and private firms has the potential to shape the contours of the Syrian economy and, thus, the needs and livelihoods of the Syrian people. Aid donors should therefore closely follow such developments, which despite limited momentum to date, still have potential to reshape the Syrian economy.

Autonomous Administration Reaches for Independent Monetary Authority

On 17 November, the Legal Committee of the Autonomous Administration in northeast Syria convened to discuss the establishment of a new monetary institution in its territories. Officials stated that efforts to create new regulations for monetary operations in the area are being undertaken because the Central Bank of Syria (CBS) “is not taking effective measures as a monetary authority,” and is “no longer operating” in Syrian Democratic Forces (SDF)-controlled areas. Despite these charged claims, at the time of writing, the possible role of any new monetary authority remains vaguely defined. Co-president of the Economy and Agriculture Committee Salman Barudo stated that this step should not be considered a monetary divorce with the Syrian Government. At present, the Autonomous Administration remains effectively under the financial authority of Damascus, and salaries within the Administration are paid in Syrian pounds. Not surprisingly, the population in northeast Syria has suffered the consequences of inflation and currency depreciation. In reaction, the U.S. dollar has increasingly supplemented the Syrian pound in day-to-day use in the area, as authorities tacitly permit dollar transactions as they walk a middle path between outright acceptance and Damascus’s ban on such transactions. 

A Stance Against Damascus: Dollarization Underway?

If established, a new monetary authority would promote independent monetary policy and banking regulations in Autonomous Administration areas, possibly skirting issues related to the CBS and granting a margin of independent decision-making authority to regional officials. As understood, a new monetary authority would not print money, the most fundamental function of a national central bank. However, it could take over many of the central bank’s responsibilities in policy, banking and financial regulation, and processing payments for the Autonomous Administration. In theory, it could open the way to bolder dollarization in northeast Syria, including the possible use of dollars in salary payments to Autonomous Administration staff. 

What’s behind the Measure?

The drafting of a new monetary law comes as Moscow and Damascus continue attempts to bring northeast Syria under Government control. Dollarization would stabilise price inflation, encourage investments, and allow for longer-term economic planning in the northeast. The move coincides with an announcement by the Autonomous Administration’s Financial Committee that its 2022 budget forecast weighs in at 981 million USD, a 60 percent increase from 612 million USD for 2021. The increase reportedly reflects improvements in the collection of taxes, customs, and other fees, as well as a rise in oil revenues. Although budget announcements in Syria are notoriously difficult to validate, authorities implemented a new, expansive tax law in July and have likely benefited from a boost in trade after COVID-induced restrictions (see: Syria Update 12 April 2021). Despite the significant increase in the Autonomous Administration’s budget, however, it is unclear whether it is actually able to reduce its trade dependence on the Syrian Government. Damascus remains the primary supplier of medicine, flour, processed fuels, and other consumer goods into the Administration territories. Damascus may view the planned monetary authority as a breach, and it may seek to cut off and destabilise the Autonomous Administration territories as a result.

Shelling Kills Several in Nawa, Shattering Post-Reconciliation Calm in Dar’a

On 29 November, local and media sources reported that Government forces targeted Nawa city in western Dar’a Governorate with heavy mortar bombardment, leading to two deaths and around ten injuries. According to local sources, the bombardment was in response to the targeting of a Military Security vehicle around Nawa with an improvised explosive device (IED), which killed two soldiers and injured others. The shelling marks the first major military action by Government forces in southern Syria since it forced through a host of reconciliation agreements in Dar’a Governorate, including in Nawa, over a violent summer (see: Syria Update 6 September 2021 and Syria Update 2 August 2021). Meanwhile, in neighbouring As-Sweida Governorate, sources reported violent clashes in As-Sweida city between local armed groups and Government forces. Locals believe that Government forces are positioning themselves to end As-Sweida’s semi-independent trajectory, building on momentum gained in Dar’a in recent months. 

More of the Same in Southern Syria

The use of heavy weapons and the shelling of civilian neighbourhoods by Government forces are indications of Damascus’s evolving approach in Dar’a Governorate, as it turns to violence in response to serial challenges to its authority. This likely augurs a rise in instability in southern Syria, amid ongoing security chaos (armed attacks and assassinations that have increased uncertainty around the region’s future). 

Against this backdrop, local media reported that Ahmad Oudeh, a former rebel commander and the leader of the Russian-affiliated Eighth Brigade in Busra al-Sham, travelled to Russia and Jordan after his latest trip to Amman a month ago (see: Syria Update 8 November 2021). The reasons for Oudeh’s visit to Moscow are not clear; some local sources indicated that he was receiving medical treatment, while others stated that Oudeh aimed to make the case for his relevance in southern Syria after his standing fell vis-à-vis Damascus. Looking ahead, aid actors should be concerned about the potential for further violence. Despite major changes to military command structures in the region, fundamental drivers of unrest remain unaddressed. Now, the Syrian Government appears set to abandon the accommodating policies of recent months in favour of hard power and violence to root out disturbances.

Open-Source Annex

Key Readings

The Open Source Annex highlights key media reports, research, and primary documents that are not examined in the Syria Update. For a continuously updated collection of such records, searchable by geography, theme, and conflict actor, and curated to meet the needs of decision-makers, please see COAR’s comprehensive online search platform, Alexandrina, at the link below..

Note: These records are solely the responsibility of their creators. COAR does not necessarily endorse — or confirm — the viewpoints expressed by these sources.

Under the Guise of Aid: The Far-Right French NGO Allegedly Supporting War Crimes in Syria

What Does It Say? The report documents how a French charity, SOS Chrétiens d’Orient, benefited from close ties with the Government of Syria and reportedly provided aid to militias that have been complicit in war crimes.

Reading Between The Lines: The case against the organisation is that it has violated French laws and could end up in court. This incident is a worst-case scenario for aid donors, and it makes clear the need for conflict-sensitive due diligence and safeguarding procedures.

Source: Newlines Institute
Language: English
Date: 29 November 2021

SDF, Damascus Conduct Settlement Operations

What Does It Say? SDF’s Military Council and dignitaries from Al-Hasakeh met to discuss detainee releases, as well as living conditions in the region. 

Reading Between The Lines: Tribal leaders have been important intermediaries in the release of IDPs and others held in camps and prisons across northeast Syria. Detainees and living conditions are a point of contention between many Arab tribes and the Autonomous Administration.

Source: Asharq Al-Awsat
Language: English
Date: 28 November 2021

The United Nations and Russia Discuss Ways for Humanitarian Aid to Reach Beneficiaries in Syria

What Does It Say? The Russian Deputy Foreign Minister Sergei Vershinin met with Muhannad Hadi, the regional coordinator of the United Nations Office for the Coordination of Humanitarian Affairs, to discuss access to aid in Syria. 

Reading Between The Lines: Alongside investment in early recovery activities, Russia views cross-line operations as a necessary condition for its consent to re-authorise cross-border access for UN agencies.

Source: Al Watan
Language: Arabic
Date: 19 November 2021

The Syrian Regime Arrests Families that Returned from Turkey to the Eastern Neighbourhoods of Aleppo

What Does It Say? Over the past two months, the Syrian Government has reportedly arrested 23 families that returned to Syria from Turkey, or other areas of Syria not under its control. Local sources note that returnees continue to face questions at the borders regarding the reasons for their absence from Syria.

Reading Between The Lines: While the international community is advocating for returns, the recent string of arrests speaks to some of the many reasons that returns have stalled. Such incidents will further dissuade people from returning for fear of arbitrary arrest.

Source: Enab Baladi   
Language: Arabic
Date: 24 November 2021

Arrest Campaign Targets Syrian Kurds in and around Damascus

What Does It Say? The Government of Syria has been pursuing an aggressive arrest campaign in central Damascus, targeting wanted people, people who have not served their military service, and arbitrarily arresting people who have come from Afrin and the northern Aleppo countryside. 

Reading Between The Lines: Despite ongoing calls by the international community for the Syrian Government to cease such activities and to release detainees, the Government shows no signs of altering its behaviour.

Source: The Syrian Observer    
Language: English
Date: 24 November 2021

Russian-Iranian’ Understanding’ Leads to T-4 Airbase Evacuation in Syria

What Does It Say? Russia has apparently succeeded in persuading Iran to evacuate the T-4 airbase in Homs.

Reading Between The Lines: The relationship between Russia and Iran in Syria is often perceived in binary terms: either as a zero-sum competition or as cooperation in support of a common partner. Such readings are simplistic, and Iranian forces likely have multiple reasons for any such action.

Source: Asharq Al-Awsat
Language: English
Date: 23 November 2021

The Syrian Ministry of Interior: 100,000 Pounds to Obtain an Immediate Passport

What Does It Say? The Syrian Ministry of the Interior announced its readiness to issue passports within one day for 100,000 Syrian pounds (30 USD).

Reading Between The Lines: Passports continue to be a source of revenue for Damascus, which is capitalising on the desire of many Syrians to leave the country.

Source: Enab Baladi
Language: Arabic
Date: 24 November 2021

Houses in the Damascus Suburbs Cost One Billion SYP while Monthly Rents Reach 700 Thousand SYP 

What Does It Say? Housing costs in some Damascus suburbs have reached one billion Syrian pounds, while rents in the capital can reach 700,000 SYP per month. 

Reading Between The Lines: The skyrocketing housing costs (a 100 percent increase in one year) are yet another symptom of inflation in the Syrian market, especially as construction materials are imported, and thus paid for, in U.S. dollars.

Source: Daily News of Damascus
Language: Arabic
Date: 24 November 2021

Al-Bukamal: Violent Explosions Target the Iranian Deployment Areas

What Does It Say? A violent explosion rocked the city of Al-Bukamal, which is under the influence of Iranian-affiliated militias, in the eastern countryside of Deir-ez-Zor.

Reading Between The Lines: Iranian-affiliated militias have been carrying out redeployments in towns stretching from Al-Mayadin to Al-Bukamal on the Syrian-Iraqi border in the eastern countryside of Deir-ez-Zor due to their repeated targeting by Israel and the international coalition.

Source: Almodon
Language: Arabic
Date: 27 November 2021

Former IS Fighters Say They Paid Way out of Kurdish Jail in ‘Reconciliation’ Scheme

What Does It Say? Kurdish-led forces in charge of jails in northeast Syria, housing about 10,000 men with alleged links to the Islamic State, are releasing prisoners in exchange for money under a “reconciliation” scheme, according to documents accessed by The Guardian and interviews with two freed men. 

Reading Between The Lines: The SDF lacks the capacity to rapidly process trials and releases of those held in its prisons and IDP camps, including women and children. The fact that the system is overwhelmed increases the likelihood of corruption and bribery.

Source: The Guardian
Language: English
Date: 22 November 2021

Demonstrators in Deir-ez-Zor Block a Russian Convoy Moving Towards SDF-Controlled Areas, and the Coalition Interferes

What Does It Say? A demonstration took place north of Deir-ez-Zor, protesting the passing of Russian military convoys and patrols through the region, prompting U.S. forces affiliated with the international coalition to intervene and diffuse the situation.

Reading Between The Lines: This is not the first time that the countryside of Deir-ez-Zor and other SDF-controlled areas have witnessed protests aiming to obstruct the passage of Russian military convoys. U.S. forces also regularly intercept Russian patrols travelling on the highway from the Russian bases in Quamishli and Abu Rasin.

Source: Enab Baladi
Language: Arabic
Date: 19 November 2021

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