Just ten days ago, the European Union renewed its sanctions against the Syrian regime and its worst agents. Now, there is going to be a chorus blaming the current collapse on an economic "siege" by the West, demanding measures be lifted. They will be disappointed either way. /1
First, sanctions are unlikely to be lifted in near future. While some policy entrepreneurs keep searching for openings for normalization ("more for more"), the broad policy consensus holds. Nobody's chomping at the bits to send their tax euros to Assad. /2
Why? There are simply few incentives esp few "push" factors. Assad and Putin won the war, so let them chart a path forward then. They thought they had a trump card in the migration and returnees issue. But the "refugee crisis" was half a decade ago. Europe has mostly moved on. /3
But we're still not indifferent. Europe has provided *billions* in aid - thousandfold Russia's share. But years of experience trying to render aid in gov-held areas shows how little leverage we can muster on behalf of the Syrian people in whats effectively a hostage situation. /4
Second, sanctions simply aren't the heart of it. Syria was never under an especially tight sanctions regime and has, in fact, been importing and exporting all sorts of goods from a range of 3rd countries throughout the war. "Caesar" will change this, but we're not there yet. /5
European sanctions are twofold: The first set targets a range of individuals and institutions involved directly in state repression. The second target economic sectors that finance that repression. Most importantly, these affect the oil and gas sector, as well as banking. /5
Prior to the outbreak of conflict, Europe was by far Syria's largest trading partner - the destination for 54% of its exports. The by far biggest item here was oil. Syria exported 95% of its crude to the EU, accounting for 38% of all export value. You can do the math. /6 
But it's not sanctions that killed the petroleum sector. Oil is fungible and Assad couldve sold it anywhere. Output declined precipitously as central Syria fell out of regime hands from 2012. Surviving fields are mostly in SDF hands. Large-scale exports are not on the horizon. /7
The oil fields and quarries that it did recapture, the Syrian gov then ransomed to Russia and Iran as prizes. The rest of the EU trade balance is a mix of minerals, manufactured and agricultural products. Trade in these sectors *never ceased* but declined as country imploded. /8
The 2nd major sector under sanctions is banking. Now, there's a good argument to be made that sanctions have cut off the Syrian financial sector from int debt markets and payment systems (affecting remittances), exacerbating forex shortages and putting pressure on currency. /9
There is technically a distinction here between the Syrian central bank and other state-owned banks, and private banks, only one of which is currently sanctioned (these can even maintain SWIFT access). In practice, risk and liability considerations make them all untouchable. /10
This is where much of the debate is focused: The facilitation of legitimate trade (and humanitarian) financing. And this is where there is most legitimate work to be done. It's a broader problem affecting a number of countries. Indeed, EU diplomats have been forward on this: /11
Looking to dispel the idea that they're sitting atop medicine for Syria, they repeatedly ask Damascus for lists of goods and transactions being held up so they could be facilitated. No reply. Because that's talking import financing, which is not the principal constraint. /12
Syria is simply broke. This is why the collapse of Lebanon, which for years served as an economic buffer and financing proxy for Syria (estimates that Lebanese banks held of upwards of $30bn in Syrian deposits) precipitated collapse of Syria's currency - almost in lockstep. /13
Short of a direct or indirect capital injection (e.g. unfreezing SCB assets in the European Union - fat chance), there's little Europe can do to meaningfully affect this. In fact, the Syrian gov continues to exacerbate the issue through strangling legislation and measures. /14
It has clamped down on imports by restricting permits (held by cronies) and raising tariff barriers. It has worked to squeeze exporters via SCB exchange rates and forcing them to surrender forex holdings. When they rebelled, the gov dissolved and replaced the exporters union. /14
This year, multiple Syrian wheat tenders failed to find bidders at a price it could afford. The gov even struggles to procure wheat from its patron Russia - a relationship largely unaffected by sanctions (SCB hold ruble accounts in Moscow). Domestic production insufficient. /13
It always comes back to this: Syria's economy is in total tatters. Not just from unimaginable capital loss and looting, but from the destruction of the country's social fabric ("economic disorganization"). Even areas spared fighting are dilapidated as the government ... /14
... poured all its available resources into the war machinery and current expenses (i.e. wages) rather than capital investments. At every turn, it not only prioritized regime survival over socio-economic welfare of Syrians, but moved to deliberately raze it when expedient. /15
Which brings us full circle Lifting of sanctions, whatever good it would do, would require political compromises (i.e. stop the massive war crimes, engage meaningfully in the political process) the Syrian government is simply not willing to make for the benefit of its people. /16
Throughout this war, the Syrian gov bet that Westerners care more about (1) "state stability" and (2) the welfare of Syrians than they do, and they ruthlessly exploited this to win, leveraging their central role. Now comes the tab - and they may bet we'll pick that up too. /18
Finally, even if Europe were to facilitate financing in a manner that would allow the SCB to shift and alleviate the burden of financing the balance of payments deficit, the whole thing certainly wouldn't survive the upcoming Caesar Act - nobody will set up INSTEX for Bashar. /14
Indeed, where Europeans might find wiggle room, America is not at all interested in trying to pull Russia's and Iran's cart out of the ditch. Caesar would effectively cut off surviving regional dollar channels, especially via the UAE laundromat (which is under FATF pressure). /15
In sum, the collapse is structural and it puts us before the same dilemma we have faced throughout this war: Treating the symptoms fuels the disease. Sanctions relief only makes sense if those responsible, the government and its backers, are made to carry the solution.
(Ugh, all the tweet numbers are messed up. You can figure it out)
