Benjamin Fève, Vittorio Maresca di Serracapriola, and Karam Shaar
Summary
The EU’s February 2025 sanctions exemptions ease restrictions on energy and transport, remove four banks from the asset freeze list, allow making funds and economic resources available to the Central Bank of Syria while keeping it listed, and authorize limited banking transactions for energy, transport, humanitarian, and reconstruction purposes. They also make the humanitarian exemption in place permanent and allow luxury goods exports for personal use. While these measures may provide short-term economic relief and support infrastructure rehabilitation, they lack mechanisms to reintegrate Syria into global financial markets. Financial institutions will likely remain wary due to compliance risks, US sanctions, and Syria’s Financial Action Task Force (FATF) being gray-listed. Their impact will largely hinge on whether the US follows suit, or if structured incentives encourage businesses and financial institutions to re-engage with Syria’s economy.
Introduction
On 24 February 2025, the European Union (EU) enacted its most significant adjustment to its Syria sanctions policy since its initial introduction in 2011, when sanctions were imposed in response to the Assad regime’s violent repression of the civilian uprising. Through three key legal instruments—Council Decision (CFSP) 2025/406, Council Regulation (EU) 2025/407, and Council Implementing Regulation (EU) 2025/408 1—the EU introduced exemptions and suspensions to its restrictive measures.
These exemptions and suspensions are effectively permanent. While CFSP 2025/406 requires a review of the suspensions in 12 months, reinstating them would require a unanimous vote by all 27 EU member states. Therefore, the decision does not include a snapback clause as speculated before its announcement, meaning the restrictive measures will not automatically return if specific conditions are violated or certain events occur.
The EU’s rationale for amending its restrictive measures stems from a changing political landscape, particularly the fall of the Assad regime in December 2024. In its “conclusions” of 19 December 2024—a written statement that identifies specific issues of concern for the EU and outlines actions to take or goals to reach—the European Council emphasized that the fall of the Assad regime presents a “historic opportunity” to support Syria’s inclusive political transition, in alignment with UNSC Resolution 2254. The revised sanctions framework is intended to facilitate economic recovery, reconstruction, stabilization, humanitarian aid and refugee return.
Among the notable changes:
The EU insists that these suspensions and exemptions do not equate to a complete lifting of sanctions. It emphasized that its sanctions policy will remain under constant evaluation, particularly in relation to compliance with European Council priorities and concerns raised in its December 2024 conclusions. The first assessment and re-evaluation deadline is set for June 2025, when the sanctions are due for renewal.
Background
Since the outbreak of the Syrian conflict in 2011, the EU has imposed a comprehensive sanctions program whose main objective was pressuring the Assad regime to end its violent repression on civilians and engage in a negotiated political transition, as later outlined by UNSC Resolution 2254. These sanctions targeted key sectors of the Syrian economy while also imposing asset freezes and travel bans on individuals and entities affiliated with the former Assad regime. The measures sought to curtail the Syrian government’s ability to fund its war efforts and human rights abuses, while allowing exemptions for humanitarian aid to mitigate civilian suffering.
Over the years, however, the effectiveness of these sanctions have been widely debated. While they have curtailed regime revenues and restricted access to the formal banking sector, they have also fueled economic fragmentation, expanded illicit trade and financial networks, and imposed financial hardships that extend beyond regime elites to the general population, further hindering the return of displaced persons.
The political landscape shifted dramatically in December 2024 with the fall of the Assad regime. With the justification for broad-based sectoral sanctions eroding, the EU faced mounting pressure from within and abroad to ease or lift sanctions. Ever since the issuance of General License 24 (GL 24) by the US administration, the impetus has been on EU policymakers to suspend, at least partially, sanctions imposed on the former Assad regime.
Syria’s interim government has consistently called for the lifting of international sanctions to facilitate the country’s reconstruction and economic recovery. Interim Foreign Minister Asaad al-Shibani emphasized the necessity of removing these sanctions to aid in reconstruction efforts and alleviate the severe poverty affecting over 90% of the population. Experts and observers concur that lifting sanctions is essential for Syria’s stabilization and recovery efforts.
Changes, Impacts, and Limitations
One of the most significant aspects in the new amendments to the EU sanctions program is the de-listing of four public banks—the Industrial Bank, Popular Credit Bank, Savings Bank, and Agricultural Cooperative Bank. Of similar significance is permission to make funds and economic resources available to the Central Bank of Syria while keeping it listed. Previously, the EU had imposed strict sanctions on these institutions, freezing their assets and economic resources and blocking their access to international transactions. As a result, all funds and assets held within EU jurisdictions were frozen, and these banks were barred from engaging with EU-based financial institutions.
The restrictions extended to third-party intermediaries, preventing them from facilitating financial operations involving sanctioned banks. For instance, in 2012 the EU sanctioned the Syrian International Islamic Bank (SIIB) for conducting transactions linked to these institutions. But in 2014 the SIIB was de-listed, as the EU Council could not provide sufficient evidence to uphold the listing. Lebanon’s Syrian–Lebanese Commercial Bank faced similar restrictions, preventing it from facilitating financial operations involving sanctioned entities. Now that the four public banks have been delisted, and the Central Bank of Syria is permitted to receive funds and economic resources while remaining listed, they might regain limited access to financial transactions with European institutions.
Although this delisting does not fully reintegrate Syrian public banks into global financial markets, it marks a significant step toward restoring commercial banking operations and easing financial flows that had previously been obstructed. However, some restrictions remain—particularly for the Central Bank of Syria, which is still subject to a targeted asset freeze, though the total value of its frozen assets in the EU remains unclear. The UK was the first country to entirely unfreeze the assets of the Central Bank of Syria.
The EU’s latest amendments also introduce key exemptions to the blanket prohibitions that previously severed all correspondent banking relationships between Syrian and EU financial institutions. Under the original restrictions, Syrian banks—including the Central Bank of Syria—were completely cut off from the European banking system. They were banned from opening new branches, subsidiaries, or joint ventures within the EU and restricted from engaging in financial transactions with European banks. Likewise, EU-based financial institutions could not establish new direct operations or accounts in Syria.
The new exemptions carve out specific scenarios where these prohibitions no longer apply. By default, financial activities are now permitted when aimed at humanitarian aid, economic stabilization, or civilian welfare. They do not require a specific license. Banks are expected to take their own risk-based approach, assessing the permissibility of individual transactions independently.
According to an interview conducted with Stephen Fallon, former Chief Compliance Officer of INSTEX, banks cannot simply rely on assurances or the compliance of third parties. They must conduct their own due diligence to mitigate exposure to penalties under strict liability laws. Despite the exemptions, many financial institutions are expected to remain cautious, as due diligence requires significant time, resources, and investment. This reluctance means de-risking practices are likely to persist, as banks may still consider engagement too risky.
The EU also lifted its ban on exporting new Syrian-denominated banknotes and coinage to the Central Bank of Syria. Until 2012, EU member states had supplied Syria with its currency, but after sanctions took effect, Syria shifted to sourcing its banknotes from Russia.
Exemptions also apply to financial transactions that support essential services such as water and sanitation, institution-building, and broader civilian needs. These exemptions extend to financial transactions involving the import of Syrian crude oil and petroleum, the sale of jet fuel, the transfer of key oil and gas equipment or technology, financial transactions, loans, joint ventures with Syrian enterprises, participation in power plant construction, the delivery of Syrian currency to the Central Bank of Syria, and EU airport access for Syrian airlines.
Despite removing four public banks from the sanctions list, the EU has maintained restrictions on the Commercial Bank of Syria and the Real Estate Bank. This distinction is significant, as the Commercial Bank of Syria controlled half of the banking sector’s market share before 2012 and served as the primary financial institution for state-owned enterprises (SOEs) and public sector institutions.
Even for the banks that have been delisted, major challenges remain in reconnecting with international financial markets due to ongoing US sanctions. These institutions had minimal international exposure before the sanctions were imposed and lacked robust correspondent banking relationships with European and global financial institutions. Unlike the Commercial Bank of Syria, which had authorization to deal in foreign currencies, three of the four de-listed banks (Industrial Bank, Popular Credit Bank, and Savings Bank) were barred from engaging in foreign exchange transactions until early 2011. As a result, their removal from the EU sanctions list may have a limited impact.
Regardless of the easing of restrictions, major obstacles persist. The global financial system remains highly risk-averse, and many European financial institutions are unlikely to resume transactions with Syrian banks due to concerns over compliance with remaining sanctions, anti-money laundering (AML) regulations, and counterterrorism financing (CTF) measures.
The EU’s decision to ease sanctions on Syria should not assume that Syria’s financial sector will automatically recover. When financial institutions experience prolonged decoupling and de-risking, they do not simply revert to pre-sanctions or pre-war conditions. Instead, they opt for a recalcitrant “wait and see” approach.
Syria remains on the Financial Action Task Force (FATF) gray list, further increasing compliance costs, deterring foreign investment, and pressuring banks and businesses to sever ties. Without sustained AML/CFT reforms, Syrian banks will struggle to reintegrate into global markets. Gradual sanctions relief alone will likely do little to reverse Syria’s financial isolation without incentives for the market to return to risk-taking and for financial institutions to re-engage.
While discussions on financial restrictions have largely focused on formal banking prohibitions, it is worth noting that European financial institutions were never explicitly required to cut ties with Syria’s private banks. Instead, they were only barred from establishing new correspondent banking relationships. In theory, pre-existing correspondent banking ties between European and Syrian private banks could have remained intact, and in fact did until 2014–2015, according to bankers in Damascus interviewed by Karam Shaar Advisory.
The EU’s decision to ease restrictions carries significant political weight. This policy shift, combined with backing from sovereign financial institutions like the European Central Bank (ECB) and the European Investment Bank (EIB), may reassure European financial institutions that they can cautiously re-engage with Syria without immediate compliance risks. Direct outreach from EU public bodies to private and public banks could further reinforce this message. Since much of Syria’s financial isolation resulted from a “chilling effect” and overcompliance, particularly relating to US sanctions, these changes could help ease de-risking attitudes.
Although these exemptions significantly alter the European legal framework, their impact on the global financial system remains limited. Major European banks—particularly global institutions—are unlikely to shift their stance, as many internally apply US AML and sanctions rules as their default standard. Nonetheless, these changes send a strong political signal, setting the stage for gradually rebuilding confidence in financial transactions related to energy, transportation, humanitarian aid, and reconstruction. However, to address private-sector hesitancy to re-engage with Syria’s financial sector, the EU must provide clearer regulatory assurances. Establishing well-defined compliance guidelines would enhance credibility and reduce uncertainty for financial institutions considering re-engagement with Syria’s financial sector.
The EU’s latest amendments to its sanctions program on Syria significantly relax sectoral restrictions2 on energy and trade. The new measures suspend specific prohibitions that previously restricted economic engagement with Syria.
One of the most impactful changes is the partial lifting of restrictions on Syria’s energy sector. The EU now permits the import, purchase, and transportation of Syrian crude oil and petroleum products. Additionally, it has eased restrictions on energy infrastructure development, enabling European companies to participate in power plant construction for electricity production, form joint ventures, provide loans, and offer financial support for Syrian entities involved in oil exploration, production, and refining.
This shift marks a major policy change that could significantly impact Syria’s economic recovery. The EU’s decision to lift prohibitions on importing and transporting Syrian crude oil and petroleum products allows European companies to engage in energy trade with Syria. As a result, EU firms can now import Syrian crude oil for refining and transport, invest in and partner with Syrian entities within the country, and sell oil and other energy products to Syria. These changes address a major challenge in the country’s fuel supply.
Another key development is the EU’s decision to allow European companies to participate in power plant construction, maintenance, and rehabilitation—an essential step, given Syria’s deteriorating electricity infrastructure.
Since Syria’s civil war began, repeated attacks, fuel shortages, and years of neglected maintenance have severely damaged the country’s power grid. European companies such as Germany’s Siemens, Italy’s Ansaldo Energia, and Greece’s Metka ATE, which had previously supplied equipment for some of Syria’s largest power plants—including Deir Ali I and Deir Ali II—now stand to benefit. With financial restrictions lifted, these companies can return, repair, and supply essential components for Syria’s energy infrastructure.
Beyond repair work, the easing of sanctions paves the way for new energy projects, including the construction of much-needed power plants. This is particularly relevant for renewable energy initiatives, where European firms possess both the technical expertise and financial resources to support solar, wind, and hydroelectric initiatives. Expanding these energy sources could help reduce Syria’s reliance on imported fuel for power generation.
The EU’s sanctions relief also extends to the supply of key oil and gas equipment—an essential step for a sector that has been exhausted and physically decimated by years of conflict. Heavy bombardment and unregulated extraction techniques may have permanently reduced the productive capacity of many fields, while aging infrastructure has operated for years without proper maintenance.
For years, Syrian oil refineries, gas fields, and related industries struggled to operate efficiently due to shortages of spare parts and technical assistance, as European suppliers were barred from providing these essential materials. European companies have historically played a significant role in Syria’s oil sector. As of 2011, firms such as France’s Total Group and Croatia’s INA d.d. held production-sharing agreements (PSAs) with Syrian oil subsidiaries. With these restrictions lifted, European engineering and energy firms can now legally export industrial equipment, allowing Syria to restore parts of its domestic production and refining capacity.
Despite these changes, key public entities in Syria’s oil sector remain under sanctions, including the General Petroleum Corporation (GPC), the Syrian Petroleum Company (SPC), and Mahrukat. The GPC oversees upstream oil operations, managing exploration, production, and foreign partnerships while controlling the national pipeline network. The SPC is responsible for oil exploration and production, historically operating major fields like Karatchok, Suweidiyeh, and Rmeilan. Mahrukat manages the marketing and distribution of refined petroleum products within Syria.
Keeping these entities on the sanctions list complicates the implementation of exemptions, as Syria’s oil and gas sector has historically relied on PSAs. These agreements typically required the now-sanctioned entities to act as partners of European companies operating in Syria.
Realistically, investment in Syria’s oil sector will remain limited as long as most of the country’s oil fields remain outside of Damascus’ control. Syria’s territorial fragmentation, with the Syrian Democratic Forces controlling over 85% of oil production, severely restricts both the Syrian government’s ability to develop the sector and potential investors’ willingness to engage.
However, a recent landmark agreement between interim President Ahmad al-Sharaa and SDF commander Mazloum Abdi aims to integrate the SDF into state institutions, bringing northeastern oil fields under central government control by the end of the year. This development could enhance the government’s capacity to attract investment and revitalize the oil sector. This might take a long time to materialize, as the agreement stipulates a time frame of nine months for implementation.
Additionally, the full impact of these changes depends on whether Syria’s banking sector reconnects with European financial institutions. Although the EU now permits transactions related to energy activities, payments for oil imports, spare parts, and infrastructure projects will remain difficult to process if Syrian banks stay isolated from the global financial system. European companies will hesitate to engage in Syria’s energy sector if they cannot reliably receive payments or access banking channels to finance projects. In this sense, the success of the EU’s sanctions relief hinges on whether financial institutions are willing to resume transactions with Syrian counterparts.
The formal integration of humanitarian exemptions into the broader European sanctions program stems from the emergency measures adopted following the February 2023 earthquake in Syria and the EU’s attempt to include the spirit of UNSC Resolution 2664 within its autonomous sanctions framework3. These exemptions allow financial transactions and resource allocations that would otherwise be prohibited under the EU’s restrictive measures, provided they are strictly intended for humanitarian relief and essential services. Beneficiaries include the UN, international NGOs, humanitarian organizations, and EU-certified aid groups, enabling them to transfer funds, procure essential goods, and sustain critical operations in Syria. Additionally, the exemption permits funds to be allocated for the purchase and transport of petroleum products, a crucial provision to ensure energy supply for humanitarian efforts.
The February 2023 exemption has been renewed multiple times, with the last extension occurring on 27 May 2024, for an additional year. However, on 24 February 2025, the EU removed the time limit from the exemption, eliminating the reference to “until 1 June 2025” and effectively making it permanent within the sanctions framework.
The EU sanctions program previously prohibited the sale, supply, transfer, or export of luxury goods4 to Syria. The restriction applied to all EU nationals, companies, and flagged vessels or aircraft, regardless of whether the goods originated in the EU. The revised measures introduce an exemption for certain cases, allowing for limited transactions under specific conditions. Under the new exemption, the prohibition does not apply when luxury goods are intended strictly for personal use by individuals traveling from the EU to Syria. This includes both EU nationals and non-nationals, and members of their immediate families accompanying them.
There are clear limitations to this exemption. The items must be personally owned and used by the traveler, and cannot be newly acquired for commercial resale in Syria.
The rationale behind this exemption appears to be a pragmatic adjustment rather than a fundamental policy shift. It acknowledges that individuals returning to Syria—including Syrian expatriates or dual nationals—should be allowed to bring their personal belongings. It also reflects a recognition of humanitarian considerations, ensuring that individuals are not unduly restricted from taking essential or valuable possessions with them when relocating.
Interaction with other Sanctions Programs
Despite the EU’s significant relaxation of sanctions on Syria, the US-imposed Caesar Syria Civilian Protection Act (Caesar Act) remains a major obstacle to the practical implementation of these exemptions. Enacted in June 2020, the Caesar Act imposes secondary sanctions on any foreign company or individual that conducts transactions with the Syrian government or its affiliates. While some EU firms may now legally trade with and invest in Syria, most European multinationals will likely avoid any business that violates the Caesar Act as long as US sanctions remain in place—despite the EU lifting some of its own sanctions. These European companies risk penalties from US authorities if their activities are deemed to benefit Damascus.
Qatar’s recent decision to hold off on providing Syria’s new government with funds to increase public sector pay illustrates the global impact of US sanctions and the resulting policy inertia in third-party jurisdictions. Despite GL 24 authorizing third parties to provide Syria funds to cover and expand government salaries, concerns over whether these transfers would breach US sanctions led Qatar to delay the payments, foreshadowing the challenges European businesses will face despite the EU’s policy shift on sanctions. Some sources, however, have argued behind closed doors that Qatar itself might be reluctant to support the current government in Syria over the lack of assurances over how it can benefit politically from the financial contribution.
Beyond the direct legal risks, the Caesar Act has also reinforced a broader de-risking effect, in which banks, insurers, logistics providers, and other businesses avoid transactions related to Syria altogether—regardless of whether they are technically permitted under EU law. This overcompliance dynamic has already led to the near-total financial and commercial isolation of Syria, and without a clear signal from the US Treasury’s Office of Foreign Assets Control (OFAC) that penalties will not be enforced against European firms engaging in newly authorized activities, many companies are likely to remain reluctant to re-enter the Syrian market. The most prominent example of this is when French company Lafarge faced US penalties for its dealings in Syria.
More sanctions remain beyond the EU’s control, such as those imposed under UNSC resolutions. Specifically, sanctions related to counterterrorism and the listing of individuals and entities under the UN’s ISIL (Da’esh) and Al-Qaeda sanctions framework remain binding on all EU member states. These include restrictions on funds, economic resources, and financial transactions involving designated persons or groups operating in Syria, such as Hay’at Tahrir al-Sham (HTS) and its leadership. As long as these designations remain in place, the EU cannot unilaterally lift sanctions on entities or individuals that are subject to binding UN measures, limiting the impact of its new decision.
The Caesar Act is not the only barrier preventing EU sanctions relief from taking full effect. With a Foreign Terrorist Organization-listed group (FTO) acting as Syria’s de facto government and a Specifically Designated Global Terrorist (SDGT)-designated individual serving as its Interim President, virtually all dealings in Syria are now fraught with legal risk.
Both the FTO and SDGT designations prohibit the provision of “material support”—a broad term that includes not only financial assistance but also training, logistical aid, and other forms of support. Any meaningful shift in Syria’s ability to reintegrate into the global economy would require action at the UNSC, where any permanent members may still oppose broad sanctions relief.
Conclusion
The European Union’s recalibration of its sanctions framework on Syria marks a significant step toward facilitating the country’s economic recovery and humanitarian efforts. By easing financial restrictions, enabling energy sector engagement, and lifting barriers to trade, this recalibration offers a much-needed pathway for Syria to rebuild after more than a decade of conflict and economic isolation. While challenges remain—particularly in terms of financial reintegration, compliance concerns, and coordination with other sanctions programs—this policy shift signals a recognition that sustainable recovery requires a more flexible and pragmatic approach.
Looking ahead, the success of these measures will depend on whether the US will follow suit and how quickly international actors, financial institutions, and businesses regain confidence in engaging with Syria’s economy. If implemented effectively, these exemptions could lay the groundwork for broader economic stabilization, infrastructure rehabilitation, and the return of displaced Syrians. While the road to full reintegration remains complex, this move by the EU represents a hopeful step toward a more stable and prosperous future for Syria and its people.
References
1 While the Council Regulation and Council Decision share similarities, they differ in legal scope. The Council Decision binds EU Member States politically, while the Regulation enforces these commitments as legal obligations for entities like banks and NGOs. The Regulation also details sectoral and financial sanctions, whereas travel bans and arms embargoes remain under the Council Decision, as they fall within Member States’ authority.
2 As per Council Regulation (EU) 2025/407, the following articles of Council Regulation (EU) No 36/2012 are suspended: 6, 6a, 6b, 7, 7a, 8, 9, 9a, 10, 11, 12, 13, 13a,21a, 21b and 26a.
3 UN Security Council Resolution 2664 (2022) establishes a humanitarian exemption to asset-freeze measures in all UN sanctions programs, allowing the provision of funds and resources necessary for humanitarian assistance without violating sanctions.
4 As per “Annex X” of the Council Regulation (EU) No 36/2012, “luxury goods” include high-value items such as purebred horses, caviar, truffles, fine wines, high-end perfumes, luxury vehicles, precious jewelry, designer clothing, and works of art.