What new U.S. sanctions could do to Russian-Syrian contracts

As the United States prepares to impose new sanctions against the Syrian government, the Assad regime’s $400-billion reconstruction plans are in jeopardy. On Monday, the newsletter The Bell published a report summarizing the potential Russian-Syrian deals that could be threatened by new American sanctions. Moscow has invested significant blood and especially treasure into its military intervention in Syria, and state officials have expressed confidence that Russia will be “rewarded” financially for this loyalty with lucrative reconstruction contracts. (Dmitry Rogozin even said Moscow has a “moral right” to these deals.)

What are the highlights of this report?

• Investment risks. In February, at a Russian-Syrian conference held at Russia’s Chamber of Commerce and Industry, the chamber’s president, Sergey Katyrin, announced that Russian investors would get preferential treatment in Syria’s rebuilding procurement deals. Sources later told The Bell, however, that many Russian enterprises would stay away from Syrian contracts, fearing future sanctions.
• Hard times for an important bank. When the U.S. Treasury sanctioned the Russian Financial Corporation Bank (RFC Bank) in early April, Washington apparently targeted the main financial institution used for settlements between the Russian and Syrian governments. RFC Bank was “designated” for being owned by Rosoboroneksport, which supplies weapons to Syria. Russian and Syrian enterprises and agencies can still circumvent RFC Bank by turning to institutions in Lebanon, Egypt and the United Arab Emirates, says The Bell, but cross-rate currency fees would cost an additional 10 to 15 percent.
• It’s a good time to have nothing more to lose. Many Russian companies cooperating with the Syrian government (like Technopromexport) had little to lose from additional Western sanctions, as they’ve already been sanctioned for activities in Crimea. The Syrian government is also working with the companies Evro Polis and Wagner (both tied to Evgeny Prigozhin) to reclaim and protect Syrian oil and gas fields. According to the magazine RBC, the Wagner private military company is spending anywhere between 5.1 and 10.3 billion rubles ($81.9 and 165.3 million) in annual operating costs in Syria. State Duma deputy Dmitry Sablin, who is one of the leaders of the hyper-patriotic social movements “Brothers in Arms” and “Antimaidan,” has strongly advocated closer ties between Russian and Syrian entrepreneurs, organizing a whole delegation of the latter to Khanty-Mansiysk.
• The official bilateral trade is tiny. The official volume of Russian-Syrian commercial trade was a piddling $282.7 million in 2017, with $279.8 million in exports and $2.9 million in imports. (Arms sales are likely classified and hidden from these statistics.)