Beirut/Amman: Arab states have landed a hefty blow on Syria's crisis-hit economy by stopping deals with its central bank and halting investment, but unease among Syria's neighbours about sanctions' impact on their own economies may weaken the impact.
At their meeting in Cairo on Sunday, Arab League foreign ministers also agreed to freeze assets related to President Bashar Al Assad's government and impose a travel ban on top Syrian officials in response to Al Assad's crackdown on eight months of protests.
Syria's economy is already expected to contract up to six per cent this year. The unrest has halted tourism — a major source of foreign revenue — hit foreign investment and trade and started eating into the country's foreign reserves.
European Union sanctions on Syrian crude oil, announced in September, have all but wiped out exports worth up to $400 million (Dh1.4 billion) a month, at least until Syria finds other customers for its oil.
The Arab League's announcement fell short of a full trade embargo on Syria, and ministers made clear they sought to avoid measures that would hurt ordinary Syrians.
Difficulty for traders
"But boycotting the Central Bank of Syria, which used to offer credit notes [for trade], would make imports and exports very difficult for Syrian traders," said Chris Phillips of the Economic Intelligence Unit.
However, he added it was difficult to see Lebanon or Iraq implementing sanctions. Lebanon, with close political and business ties with Syria, voted against them, as did Iraq. Baghdad said before the meeting it would not impose sanctions.
"Iraq has reservations about this decision. For us, this decision... will harm the interests of our country and our people as we have a large community in Syria," Iraqi Deputy Foreign Minister Labeed Abbawi said.
Lebanon has sent mixed messages about whether it would participate in sanctions. Foreign Minister Adnan Mansour said last week Beirut would not take steps against Syria, but Prime Minister Najeeb Mikati said on Thursday his government would implement Arab League decisions, whatever its misgivings.
Bankers in Jordan and Lebanon said it would take time to assess the impact of Sunday's decision, as details were sketchy and states might implement the measures differently.
"The picture is not clear but it could really make doing business with Syria very difficult," said one Jordanian banker. A leading Lebanese banker declined to comment on Sunday until he had discussed the implications with other banks.
Several Lebanese banks have units in Syria, set up in recent years after Al Assad lifted restrictions on private banking operations. Most of the larger Syrian private banks have already been hit by sharp falls in customer deposits.
Dragging their feet
A banker in Jordan whose bank also operates in Syria suggested some countries might drag their feet.
"If every country starts saying it has special considerations then I expect the move will be more symbolic than practical. Countries will try to find a way out of it," he said.
"It will be a step by step approach, but will no doubt have a negative impact on both the Syrian and Jordanian economies."
Jordan's King Abdullah is the only Arab leader so far to have called for Al Assad to step down and a Jordanian official said economic losses were a price that had to be paid for increasing the pressure on Al Assad.
"Of course there will be economic pain in the sort term and some Jordanian importers and exporters will suffer because of the cut inties with Syria," he said. "But political considerations outweigh the economic losses."
Turkey, Syria's largest trade partner with bilateral trade worth $2.5 billion last year, also attended Sunday's Arab League meeting, and Foreign Minister Ahmad Davutoglu said Ankara would act in unison with Arabs.
