AMMAN — Shortly before the Caesar Act went into effect, the United States announced the exemption of the region controlled by the Kurdish-dominated Autonomous Administration of North and East Syria (AA) from the sanctions imposed by the new law. It “will not target the regions of North and East Syria or the Syrian people,” Deputy Special Envoy of the Global Coalition to Defeat ISIS Ambassador William Roebuck said after a meeting with Kurdish officials in Syria on June 16. “Rather, it will target the Syrian regime only,” Roebuck added.

The AA, however, seeks to obtain an additional exemption, allowing it to deal with Damascus “since we were surprised by the mechanism of the law’s implementation,” Salman Barodo, president of the AA’s Commission on Economy and Agriculture, told Syria Direct.

“In practice, it is not possible to apply an exception to the [Autonomous] Administration’s areas from the sanctions, since they are part of Syria and we use the Syrian pound,” said Barodo. There is “economic, social and geographic intertwinement with inner Syria [the regime-held territories],” he added, “and dealings with Damascus cannot be entirely separated when it comes to importing and exporting basic and necessary goods.” 

The Caesar Act, which imposes American sanctions on states, entities and individuals dealing with the Syrian government, went into effect on June 17. Afterward, negotiations were revealed between the AA and the Americans to allow the former to deal with Damascus without being subject to sanctions. 

“Until now, there is no clear [American] mechanism to exempt the Autonomous Administration from the Caesar sanctions,” said economics expert Chalang Omar. 

Omar told Syria Direct that any such mechanism could be expected to provide “direct financial and technical support from the American government, or by way of western governments in the [Global] Coalition [against Daesh (ISIS)], and perhaps also through companies or non-governmental organizations implementing development and infrastructure projects.” 

In this context, the co-chair of the Executive Council of the AA, Berivan Khaled, said after the meeting with Roebuck that the “American party assured its continuous support of the Autonomous Administration on economic and political levels.”

Omar did not rule out the possibility of “the AA being granted exemptions or given concessions from the American administration to deal with the Syrian [regime-held territories],” particularly since interaction between the two areas “goes on under the eyes of the Coalition and everyone.” In the case that “America insists on imposing sanctions on internal collaborators,” said Omar, “then they will have to find alternative outlets, markets and sources for goods if they are serious about ensuring the stability of the AA areas.”

Preventive measures

A few days before the Caesar Act came into force, the AA announced that it had formed an economic crisis unit aimed at “avoiding the economic sanctions imposed on Syria under the Caesar Act and improving the standard of living for the workers of the Autonomous Administration,” according to a statement by Salwa al-Sayyed, co-president of the AA’s Commission on Finance.

Before that on May 28, as the Syrian lira fell sharply, The AA announced measures to prevent the exit of US dollars from its territories. The move aimed to control the exchange rate while continuing to use the Syrian lira—in contrast to areas controlled by the opposition and Hayat Tahrir al-Sham (HTS) in northwestern Syria, which has started replacing the Syrian lira with Turkish lira.

Still, both of the moves made by the AA must be accompanied by the“monitoring of food supplies, establishing self-sufficiency projects, developing the economy and raising the level of individual income,” according to Barodo. On June 18, the AA announced a 150 percent increase in the salaries of its workers. 

Omar also expressed support for the decision not to replace the Syrian lira with foreign currency because the AA does not have enough foreign currency—like the dollar or the euro—and does not want to use “the currency of neighboring countries, such as Turkey or Iraq, [as that] would leave the AA at the mercy of their economies.” 

However, Omar doubts that the moves by the AA “will make a difference in controlling the exchange rate, because this task exceeds the capabilities of the AA. It is the role of the central bank in any country, and the Administration does not have the monetary policy tools that would allow it to perform this task,” he said. Nonetheless, this step aims to “preserve the Administration’s balances of hard currencies in order to conduct its economic policy and secure its need for imported goods.” 

In contrast, Suleiman Khalil, Vice President of the Qamishlo (Qamishli) Provincial Council, believes that “controlling the exchange rate can be achieved by exporting and bringing in hard currency,” and that the AA is “able to make a difference in the exchange rate between its region and the other regions in Syria.”

The presence of the “Semalka border crossing [with Iraqi Kurdistan], through which we export some goods, including agricultural products and livestock, and is an outlet that generates dollars for the region,” he explained to Syria Direct. “Additionally, [there is] freedom to deal in dollars in our areas because of supply and demand, and supply in the AA areas is greater than demand, which regulates the exchange rate.”

Pending the outcome of negotiations with the US side regarding an exemption from the Caesar Act sanctions, the AA still has some tools in its pocket to face the repercussions of the law, particularly“ oil and natural gas resources, vast agricultural areas and dams,” said Omar, “providing there is optimal investment.” 

This report was originally published in Arabic and translated into English by Mateo Nelson. It reflects changes made on 01/07/2020 at 12:30 pm.