Syria switching to euros to combat U.S. sanctions

Al Jazeera
Nov. 02, 2006

The U.S.’s sanctions against Syria prompted Damascus to start switching its foreign currency surplus from U.S. dollars to euros, the United Press International reported.

A Syrian source told the London-based Al-Hayat newspaper that Syria has already started to take a series of steps to deal with the U.S. sanctions barring trade between the two countries.

Syria's Central Bank Governor Dr. Adib Mayala said on Tuesday that the country "would rid itself of the relationship between the Syrian lira (pound) and the U.S. dollar at the beginning of the upcoming year."

Specifically, Syria decided to exchange its foreign currency surplus - some USD 20 million - to Euros, and use the sum to pay off foreign debts, the Syrian source said, adding that the move is aimed at paying Damascus’ external debts and combating the U.S.’s economic sanctions.

Moreover, Syria used Euros with a number of countries in recent agreements related to its foreign debt of some USD 3 billion.

Meanwhile, a financial source in Syria said that "there was no traditional connection between the lira and the dollar, merely most of the foreign currency in Syria's national reserve is in U.S. dollars and many business transactions were transacted in dollars."

Earlier this year, the Director General of the Commercial Bank of Syria said that Damascus decided to switch all of its foreign currency transactions from U.S. dollars to euros as a precautionary measure because Washington’s threats against Syria would complicate the banking procedures and disrupts cash flow into the country from corresponding banks in Europe.

"This is a precaution. We are talking about billions of dollars," Duraid Durgham said.

Syrian sources said the latest move is aimed at protecting national economy, especially that U.S. laws stipulate that any financial transactions in dollars must pass through the U.S. banking system.

"It looks like a kind of pre-emptive action aimed at making their foreign assets safer, preventing them from getting frozen in case of any conflict," said a Middle East economist who demanded anonymity.

The Bush administration imposed economic sanctions against Syria in 2004.

The American Department of Treasury also cut its ties with the Syrian Central Bank, which is responsible for all of the government’s financial transactions abroad.

The United States has intensified pressure on Syria in recent months, accusing it of meddling in Lebanon's internal affairs, and aiding the Iraqi resistance.

The Syrian government denies all the allegations.