External Sector: Between Congestion and Sanctions—‘Syrian Economy Case, 1987–2018’

AuthorHomam Khwanda,Forat Suliman
Publication Date01 Aug 2020
External Sector:
Between Congestion
and Sanctions—‘Syrian
Economy Case,
Forat Suliman1 and Homam Khwanda2
Since the outbreak of the Syrian crisis in March 2011, the USA, European Union,
Arab League and several other regulatory entities imposed negative economic
sanctions on Syria—some of the most comprehensive ever implemented.
This article first provides an assessment of Syrian foreign trade sector during
the reform period of the 2000s and its impact on economic growth. Second,
it estimates the impact of sanctions and conflict on the trade sector of the Syrian
economy. The analysis is conducted using a panel-gravity model between Syria
and 78 trading partners (1987–2017). Multilateral sanctions and conflict-related
disruptions demonstrate a large significant negative impact on Syria-bilateral
trade flow by 65 per cent. We attempt to find out whether the Syrian economy
was able to divert trade away from Europe and/or conduct de-Europeanisation.
Findings confirm that the Syrian economy was unable to divert trade flow
to Asian and other countries due to the conflict-related congestion and
distance factor.
JEL: C33, F10
Sanctions, trade policy, gravity model, conflict, Syria
1 School of Economics, University of Hyderabad, Hyderabad, Telangana, India.
2 Higher Institute for Administrative Development, Damascus University, Damascus, Syria.
Corresponding author:
Forat Suliman, School of Economics, University of Hyderabad, Prof. CR Rao Road, Gachibowli,
Hyderabad, Telangana 500046, India.
E-mails: 16seph01@uohyd.ac.in; forat88.m.s@gmail.com
Foreign Trade Review
55(3) 382–401, 2020
© 2020 Indian Institute of
Foreign Trade
Reprints and permissions:
DOI: 10.1177/0015732520919839
Suliman and Khwanda 383
Syria’s access to a long-distance trade network has played a vital role in its eco-
nomic development path since early times. Over the decade of 2000–2010, a gov-
ernment reform agenda coupled with International Monetary Fund (IMF) technical
assessment placed an emphasis on trade and trade-related reforms in anticipation
of Syria’s post-oil outlook. In this stage, the Syrian government had understood
completely that the flow of international trade is determined-beside geography
and political factors—by economic factors.1 A breakthrough had been achieved
in September 2004 with the implementation of Syria/European Union (EU)
Association Agreement; ‘EU–Syria MEDA Co-operations’. Yet, a few unresolved
issues imbedded the Syrian government to be an integral part of the WTO. These
issues related to the competition policy and regulations which are not yet to come
into the WTO regime (Gogia, 2004).
However, the assessment of external sector developments shows that trade was
significantly liberalised and that free trade agreements (FTAs), generally, proved
successful; despite declining oil production, total foreign trade accounted for 60
per cent of GDP in 2010 (Official data: 2010, Central Bureau of Statistics [Syria];
IMF, 2009; The World Bank, 2011).
Later on, by Spring-2011, with the outbreak of conflict in Syria and, on the
account of it, the USA, EU and Arab League (AL) imposed negative economic
sanctions on the Syrian government, individuals and companies (2011: human
rights, democracy). The sanctions campaign imposed by multilateral organisa-
tions—OFAC, HM Treasury, the EU, the UN and several other regulatory enti-
ties—was unprecedented and one of the most comprehensives ever implemented
(Portela, 2012).
In practical terms, international economic negative sanctions have become a
common and recurring instrument used in order to coerce the target to change its
political behaviour (Pape, 1997, pp. 93–94). Yet, empirical studies on its effi-
ciency in bringing about a specific change in government behaviour or war out-
comes (as in the case of Syria) are mixed and have not produced clear-cut results.
The answer to this question remains a purely political and relative to country-
specific conditions.
The aim of this article is not to assess the political outcomes of sanctions, since
the Syrian regime neither collapsed nor changed its political behaviour. Our aim
is to prove that economic sanctions brought a threat of another social collapse in
addition to the enormous human and economic disasters caused by the ongoing
armed conflict, setting the country decades back in terms of development and
social welfare.
To accomplish this, our study reports panel gravity estimates of the bilateral
trade between Syria and 78 countries over the period 1987–2017. The results
show that multilateral sanctions, imposed by multilateral international institutions
and bodies have contributed significantly to what can be called the ‘collapse of
foreign trade’.
The article proceeds as follows. First, we summarise the literature concerning
economic negative sanctions in different countries. Next, we deal with the effects

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