November 24, 2003	Monday	Ramazan 28, 1424

DAMASCUS: US sanctions threatened against Syria may pack a painful political bite as Damascus faces growing accusations that it backs “terrorism”, but they will likely lack economic teeth.

The US Congress sent a bill to President George W. Bush on Friday to impose economic and diplomatic sanctions on Damascus, which Washington accuses of turning a blind eye to militants crossing its borders to wage attacks inside Iraq.

Syria has dismissed the legislation, which is expected to be signed by Bush but gives him authority to waive some penalties for reasons of national security, saying it would do more harm to US companies than Syria’s inward-looking economy.

Diplomats and analysts agree that the direct impact on Syria’s economy would be light, even if Bush goes for the full application of sanctions, since the two countries already do so little business.

“Overall it is a highly symbolic act,” one Western diplomat said. “The impact is somewhat diminished by the fact that the climate for investment in Syria is bad and US companies have not been interested in investing here.”

US-Syrian trade totalled some $500 million in 2002, a tiny fraction of both country’s trade and easily replaceable, said Rateb Shallah, head of the Federation of Syrian Chambers of Commerce.

“I really don’t see any significant negative economic impact on Syria,” said Syrian economist Nabil Sukkar. “But they will tarnish Syria’s image in the world and that is negative.”

US sanctions would also further isolate Syria politically and diplomats say that could dampen the overall business climate hampering piecemeal efforts to liberalise the state-run economy.

EU COUNTER-BALANCE: Syria is hoping to counter-balance US sanctions by rushing to sign an Association Agreement with the European Union after more than six years of negotiations, Western diplomats said.

The EU said last week the economic and political pact would be inked “very soon”. Analysts expect a deal before year-end.

“Politically, you need a big power behind you, to try to balance. It will not balance but at least you are in the company of...a partnership that includes a big power,” Sukkar said.

A fixture on the US list of “state sponsors of terror” for supporting anti-Israeli groups, Syria already gets no US aid. US firms who want to export dual-use items, mainly hi-tech goods, to Syria already need special license, discouraging many.

The legislation requires Bush to choose at least two out of six new options ranging from a ban on non-existent Syrian flights to the United States, to bans on US firms investing in Syria and exports of US goods, bar food and drugs, there.

Western diplomats say that at their most stringent, economic sanctions would mainly affect Syria’s oil and telecommunications sectors, which rely on American-made specialist equipment.

Damascus can obtain that equipment elsewhere if it must and can find new markets for its largely oil-based exports to the United States, they say. But US firms may not be allowed to bid for oil contracts in Syria, which is moving to broaden its search for oil and gas in the north of the country.

US oil giant Exxon Mobil Corp. has joint ventures with Syrian firms for lubricant production and ConcoPhilips has gas operations in Syria.

Syria signed oil exploration and production deals with US companies Devon Energy and Gulfsands Petroleum in May, shortly after the US-led war on Iraq that it bitterly opposed.

“Firms get around rules by creating foreign subsidiaries, registered elsewhere,” said the diplomat. “But given the climate in the US these companies would not stay. The optic that they are not complying with sanctions would be unacceptable to them.”

KNOCK-ON EFFECTS: Days after the US Senate passed the bill last week, Syria signed an oil exploration deal with Petro-Canada — a hint that plenty of other firms are willing and able to invest there.

But analysts and Western diplomats say European firms and multi-national corporations may shy away from Syria to avoid antagonising bigger partners in the United States.

“This sends a message not just to Syria but to companies dealing with it,” one Western diplomat said. “It does not prohibit foreign companies from dealing with Syria but adds to the mix of bad environment that might discourage other companies from engaging here.”

If the sanctions law, which also seeks to punish Syria’s military presence in neighbouring Lebanon, does ban US exports to Syria, implementation could prove a headache all round.

“The world economy is so intertwined that European companies manufacture products with US components. Under sanctions those components should not be going to Syria,” the diplomat said.

“The act also places no ban on Syrian goods entering the United States. So would the purchase of Syrian oil on the international spot market by a US firm even count?”—Reuters