Even with sanctions, Syrians embrace KFC and Gap

With American goods already flooding Damascus, analysts say lifting restrictions will help counter Iran's influence.

The brightness of the KFC is hard to miss on the drab Damascus street corner with its iconic Col. Harland Sanders logo, bringing a bit of Americana to a country that Washington has long deemed one of its chief nemeses.

But the political bitterness between the two countries has not dampened the appetite for US products here – nor has it stopped American companies from finding a way past sanctions in order to do business in Syria.

American goods are indeed booming here and its iconic brands are popping up all over Damascus despite years of this country's own self-imposed economic isolation and the US trade sanctions that were imposed in 2003 to punish the Syrians for allegedly meddling in Lebanon.

President Bashar al-Assad's push to liberalize the economy and nudge Syria into the age of globalization is providing a back door for everything from Betty Crocker cake mix to Johnson & Johnson baby oil. Even Cargill, one of America's largest private companies, is currently building a sugar refinery in the town of Homs.

By October last year, official imports from the US in 2007 already bettered any previous recorded annual total according to US trade figures. In September, monthly imports reached US$61.2 million, a dramatic increase on the June 2004 postsanction low of US$12.7 million.

Abdullah Dardari, Syrian Deputy Prime Minister and the country's economic guru, calls the trade sanctions "ridiculous." And observers say that as Washington considers drawing in Syria from the cold – or at least away from its growing relationship with Iran – it could do worse than play the economic hand.

"Sanctions on Syria haven't worked. Officially, trade has gone up between the two countries and the Syrian market is full of American goods," says Andrew Tabler, who authored a trade study for the Stanley Foundation. [Editor's note: The original version incorrectly stated Mr. Tabler's affiliation.]

Provided that goods are not manufactured in the US or produced with more than 10 percent of American content, both increasingly the case with the globalization of production, American companies are not restricted from selling goods in Syria – although the goods are not then classified as American.

"Typically you have Ford cars inside the market. When they opened the showroom you had people from the US embassy attending. Ford cars are manufactured in Germany, not the US, so they are not banned from being exported here," says Syrian economist Jihad Yazigi.

Proponents of sanctions say that the measures serve an important purpose of political punishment, demonstrating that the US will not tolerate policies that obstruct its regional interests.

However, some observers argue that the effect has been counterproductive, restricting transparent economic ties that could soften political frigidity and, significantly, opening the door to greater Iranian influence in Syria, itself seeking stronger regional ties to counter US hostility.

"Iran has filled the gap created by sanctions," says Umran al-Zaube, a political analyst close to government circles, pointing to both the fueling of anti-Americanism as well as the economic possibilities. "While Iran is looking for more openings, sanctions have been a lost opportunity for America."

Every day new Syrian-Iranian economic joint ventures are announced from car companies to oil refineries.

"The sanctions keep American companies from getting directly involved in Syria and competing with Iranian businesses. Given the fact that American policy is behavior change, these sanctions are counterproductive," says Mr. Tabler, who argues that America is losing out by not engaging Syria's developing private sector. While sanctions have not greatly restricted the inflow of American goods, they have prevented American firms – fearful of a domestic backlash – from openly building ties with Syria's businesses.