Without a coordinated international effort to lift sanctions, Syria will struggle to secure foreign investment
Aaref WATAD / AFP
Stacks of Syrian pound banknotes are piled on a currency trader's stall at a market in the city of Manbij, currently controlled by the Turkish-backed Syrian National Army, in the Aleppo province on January 4, 2025.
The suspension of certain sanctions on Syria is a step toward economic stabilisation, but it is far from sufficient to drive the country’s recovery. Coordinated international support for the reconstruction process is essential. The Gulf countries have an interest in taking the lead in shaping Syria’s economic future to ensure stability and security in the Levant.
The EU announced on 27 January that it would suspend certain sanctions on Syria, particularly in the energy, transport, export, and banking sectors. The decision aims to stabilise the country's economy and facilitate the provision of humanitarian aid. However, relief is conditional on Syrian authorities committing to a democratic transition process and dismantling the Assad regime’s chemical weapons programme.
More than a decade of civil war and international sanctions have crippled the Syrian economy. According to the UN’s Economic and Social Commission for West Asia, GDP has contracted by 64% since 2011, and foreign direct investment (FDI) has collapsed.
During the conflict, the Assad regime increasingly turned to illicit activities, such as drug trafficking – notably Captagon – to generate much-needed foreign currency. Now, the new Syrian government must find legal routes to secure funds. Yet, with legal exports generating only a fraction of wartime illicit revenue, one question remains: where will the money come from?
While the European initiative gives some breathing space to stabilise Syria's crisis, stopgap measures are not enough to jumpstart the recovery process
Sanctions relief is not enough
While the European initiative provides some breathing space for the Syrian government to stabilise the economic and humanitarian crisis, stopgap measures are not sufficient to jumpstart the recovery process.
First, US sanctions, which are more extensive and more severe than the EU's, remain a major obstacle. While Washington has temporarily eased some restrictions to facilitate humanitarian aid, the Caesar Act continues to target third parties doing business with Syria, as well as Syrian government officials and entities. Without a coordinated international effort to lift sanctions, Syria will struggle to secure foreign investment and financial flows.
Second, rebuilding infrastructure, restoring public services, and revitalising industries requires far more financial resources than sanctions relief alone can provide. Estimates place the cost of rebuilding Syria between $250bn and $400bn.
Although it is difficult to estimate the value of the relief a full lifting of sanctions would bring, the resulting economic benefits would not be enough to close the substantial financing gap. Significant contributions from international organisations and bilateral donors are needed, and private-sector engagement will be essential.
A man looks out to the devastation while clearing rubble and debris from a house at the Yarmouk camp for Palestinian refugees south of Damascus on December 22, 2024.
Private sector investments will be slow to materialise
Syria's economy will be open, and there will be opportunities for international investment – at least, that was the message from Syria's Foreign Minister Asaad al-Shaibani at the 2025 World Economic Forum. However, the minister gave few details or a roadmap on how this would be achieved.
There are several significant obstacles impeding private sector engagement in reconstruction. The country's institutions have collapsed, and its infrastructure has been destroyed. Strategic sectors, such as oil, are monopolised, and the legislative environment remains unfavourable to new market entrants – a legacy of an economy tightly controlled by the regime.
Moreover, Syria lacks reliable economic data. No International Monetary Fund or World Bank mission has visited Syria in the past 15 years, which means investors cannot access key metrics for assessing risk, such as GDP growth, interest rates, and exchange rates.
For private sector investment to materialise, governments must signal a firm commitment to Syria's reconstruction and provide durable sanctions relief to facilitate international trade and investment. They must also offer financial aid to rebuild essential public services and infrastructure.
Other important steps include supporting public-private partnerships to rebuild key economic sectors such as energy and transport and supporting political and governance reforms. Without meaningful political engagement and guarantees from state actors, businesses will view the country as too high risk.
The extent of the Gulf's involvement in Syria's economic recovery will depend on the trajectory of its political transition
The Gulf's strategic investment in stability
The GCC countries are well positioned to lead the international effort to rebuild Syria. They also have a strategic interest in doing so. Taking charge in the rebuilding of Syria would advance the security interests of GCC states. It would also present an opportunity to reassert the Gulf's influence in the Levant.
Maintaining and enhancing stability in Syria is critical not only for the country but for the broader security and economy of the region, including the Gulf. A secure and economically viable Syria would help contain refugee flows from Lebanon and Jordan, helping to stabilise these countries. It would curb cross-border terrorism by reducing the appeal and preventing the resurgence of extremist groups such as the Islamic State (IS), and it would disrupt drug trafficking networks, which have largely targeted Gulf markets.
Furthermore, Tehran, long a dominant force in Syria, has seen its influence decline over the past year as a result of Israel's blows to its axis of resistance and the ousting of Iranian-backed Bashar al-Assad. This shift has created an opening for the Gulf states to integrate Syria into its sphere of influence. Likewise, there is an opportunity to counterbalance Turkish influence in Syria, which has grown due to Ankara's support of Hay'at Tahrir al-Sham (HTS), Syria's new leader.
GCC leaders began diplomatic outreach to Damascus soon after the regime fell – an early indication of their readiness to take an active role. Delegations from Saudi Arabia, Bahrain, and Qatar landed in Syria shortly after the fall of the Assad regime for discussions on cooperation, economic development, reconstruction, and security. GCC Secretary General Jasem Mohamed Albudaiwi later declared that the GCC countries would provide relief and developmental support to facilitate economic recovery.
Saudi Crown Prince Mohammed bin Salman welcomes Syrian President Ahmed al-Sharaa in Riyadh on February 2, 2025.
Syria's interim President, Ahmed al-Sharaa, has also expressed hopes for Gulf support, notably from Saudi Arabia. In an interview with Al Arabiya, al-Sharaa stated that Saudi Arabia "will certainly have a large role in Syria's future."
His first official visit abroad was to Saudi Arabia, underscoring his enthusiasm for closer ties with Riyadh. Saudi Arabia is reciprocating interest. On 12 January, the Kingdom hosted the first international aid meeting, and discussions are underway for a high-level donor conference to mobilise further financial support convened by Saudi Arabia.
Next steps
Syria is shifting towards reconstruction, but the road to economic stability remains uncertain. The EU's partial suspension of sanctions is important but far from sufficient to address the country's deep structural challenges. Private sector investment is critical for long-term prosperity but will only materialise if governments spearhead reconstruction efforts.
In this regard, the Gulf states have an opportunity to extend their influence in the Levant but also enhance regional security by curbing terrorism, managing refugee flows, and dismantling illicit trade networks. However, irrespective of positive statements by officials, the extent of the Gulf's involvement in Syria's economic recovery will depend on the trajectory of the political transition and the establishment of strong institutions to support economic growth.
