With sanctions off, what’s keeping Syria on US terror blacklist?

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WASHINGTON — A year after President Donald Trump vowed to lift all sanctions on Syria to support its economic recovery, its continued designation as a state sponsor of terrorism is deterring much-needed investment and risks creating a vacuum that Chinese companies could fill. 

Since Trump’s May 2025 meeting with Syrian President Ahmed al-Sharaa in Riyadh, his administration has rescinded layers of US sanctions through executive orders, relaxed export controls, revoked the terror designation of Sharaa’s former militant group and worked with Congress to lift the Caesar Act, which authorized sweeping sanctions on foreigners supporting the Syrian government and sectors including infrastructure and energy. 

Syria envoy Tom Barrack is among those in the administration who have advocated for Syria’s removal from the State Department's list of countries that have "repeatedly provided support for acts of international terrorism,” a designation it shares only with Cuba, Iran and North Korea. Imposed in 1979, Syria's SST label carries restrictions on US foreign assistance, defense sales and the export of certain dual-use goods. 

As a condition for delisting, the State Department conducted the required six-month review, completed last year, to ensure Syria has not supported international terrorism. The decision to remove the designation is awaiting final approval from Secretary of State Marco Rubio, multiple US officials told Al-Monitor.

“There's no other obstacle. He’s the last signature,” one administration official said. 

Reached for comment, a spokesperson for the State Department said the department is “reviewing Syria's SST designation” and “any action related to Syria’s status on the SST list would be based on the law and the criteria established by Congress.”

Leverage with Damascus

Charles Lister, a senior fellow and the director of the Syria Initiative at the Middle East Institute, said that Rubio is "supportive of the idea that the US government needs some form of significant leverage over the government in Damascus in order to encourage it to move in the right directions” on issues like inclusive governance and providing justice and accountability.

There is also pressure to maintain the designation from Israel and some pro-Israel groups in Washington that are concerned by Sharaa's past as the leader of an al-Qaeda offshoot. Since Sharaa took power, waves of sectarian violence against Alawites, Kurds and Druze carried out by Islamist fighters aligned with his government have fueled concerns for the rights and safety of minorities living in Syria. In particular, the deadly clashes that erupted between Syrian troops and the Kurdish-led, US-backed Syrian Democratic Forces in January "gave those lobby groups the kind of ammunition they needed to convince the administration to slow down,” Lister said. 

Another factor is structural, Lister noted: Early Syria policy was driven by a small group of Trump advisers, allowing for faster decisions on sanctions relief. As more of the US government became involved over the past year, a more cautious approach took hold. 

Sanctions hangover 

Syrian and US officials say Syria’s inclusion on the terror blacklist is stifling commercial investment just as the country urgently needs economic growth after more than a decade of war that ended with the sudden toppling of former President Bashar al‑Assad in December 2024. 

Abdulkader Husrieh, who until recently served as governor of Syria’s Central Bank, told Al-Monitor the SST designation is the “single largest remaining obstacle to large-scale commercial investment in Syria.”

The label remains a key legal reason many tech products, equipment and software require licenses to export to Syria, even after Washington has relaxed broader sanctions on the country. Experts say navigating the US Commerce Department's complex regulatory process could prove enough of a headache to dissuade companies that were already skeptical about Syria’s long-term commercial prospects. 

"If you have to apply for every single technology or every single software, then it can become burdensome," said Sameer Saboungi, co-founder and deputy director at the US-Syria Business Council, a Washington-based nonprofit dedicated to fostering bilateral trade.

“The practical step of applying for a license still deters many potential exporters,” Saboungi added. "To an extent they probably view it as a low-value opportunity, with the volume not high enough to merit spending the time."

Earlier this year, Damascus was in talks with Microsoft to buy 50,000 software subscriptions for use by government employees. Speaking on condition of anonymity, a former Syrian official involved in the deal said it collapsed after Microsoft declined to seek an export license, citing the cost of lawyers’ fees and the cumbersome approval process.

The former official said he was aware of more than a dozen major US companies that voiced reluctance to do business in Syria because of the SST label.

Vittorio Maresca di Serracapriola, an analyst at Karam Shaar Advisory, a consulting firm focused on Syria, said the chilling effect is especially pronounced among “large tech firms and financial intermediaries whose compliance culture is generally risk averse.” 

For many companies, their "compliance systems are not updated and platforms continue excluding Syrian users by default," affecting services like cloud hosting, AI tools and app stores, di Serracapriola said. The online payment company Stripe, for example, still classifies Syria as high risk. "Because Stripe sits behind hundreds of platforms, this creates cascading restrictions across the digital economy." 

Legally, the SST designation does not restrict financial institutions from engaging with the Syrian government, but its stigma has discouraged some from processing transactions, providing financing or underwriting major projects.

“Large correspondent banks, export credit agencies and multinational insurers continue to treat Syria as a high-risk jurisdiction,” Husrieh said. “Gulf investors, Turkish firms and some European companies have expressed interest in reconstruction, infrastructure, energy and telecommunications projects, but many deals remain stalled because financing channels and international banking access are still constrained,” he added. 

China’s opening 

The compliance concerns and reputational risks for US companies are “leaving Syria with no option but to go to China,” the former Syrian official said. 

He recalled that Huawei, a Chinese telecom giant subject to extensive US restrictions over national security concerns, “was on the ground in Syria every single day — going to the Communications Ministry, going to [mobile operator] Syriatel and the major providers with a lot of incentives” to do business. 

After more than 13 years of civil war, nearly every part of Syria’s infrastructure will require foreign investment to rebuild — from public transportation to telecommunications to its electricity grid. The World Bank conservatively estimated Syria’s reconstruction would cost $216 billion, while Syrian Minister of Economy and Industry Mohammed Nidal al-Shaar said in May 2025 that “at least $1 trillion” would be required to “reconstruct and rebuild a new Syria.” 

“Companies are coming every day to meet with stakeholders and explore opportunities,” Saboungi said. “When American companies are not there, you have others filling the void.”