Caesar’s magic wand

After a series of exemptions, licences, and the partial suspension of certain provisions of the Caesar Act since the fall of the Assad regime, US President Donald Trump signed the repeal of the law as part of a defence bill package, following its approval by both chambers of the US Congress, the House of Representatives and the Senate. 

Whatever is said about future oversight mechanisms meant to prevent a return to sanctions, a more immediate question demands attention: does lifting the Caesar Act mean that the wheels of economic, social, and political recovery will finally begin to turn after a year of uneven improvement? Or will it instead expose entrenched corruption, institutional fragility, and structural flaws in the banking system, revealing the risks of a hollow legislative framework and an unstable security and political environment?

Five core challenges stand in the way of turning sanctions relief into recovery. Investor confidence in the legal and governance environment remains weak. Laws inherited from the former regime continue to constrain investment, while long-promised legislative reform remains stalled. The judiciary suffers from deep structural and functional deficiencies that prevent it from credibly guaranteeing investors’ rights, while patronage continues to shape access, opportunity, and outcomes across state institutions.

A second major problem is the absence of a clear sectoral vision from the transitional government. There is no coherent prioritisation of sectors that should anchor recovery - energy, health, banking, transport - nor any articulation of how these sectors are meant to develop or interact. In the absence of such clarity, investors cannot assess risk or viability, and productive sectors stay paralysed. 

Financing needs remain undefined, and no credible framework exists for cooperation between the state, the private sector, and civil society. While dozens of major investors rushed to Syria in the immediate aftermath of the regime’s fall, that momentum has since reversed, with capital now retreating even as sanctions are lifted.

The third problem lies in the continued reliance on a rentier economic model rather than any serious effort to protect or rebuild national industry. Treasury revenues as a share of GDP remain negligible, leaving the state dependent on grants to cover public sector salaries. No authority has been established to support small projects, develop local production chains, or invest in the knowledge economy. By the end of the first year after liberation, several industrial facilities had already shut down, while small and medium-sized enterprises remained exposed to collapse in the absence of effective market regulation and import controls.

The fourth challenge is the fragility of the banking system and its lack of creditworthiness. Syrian banks remain cut off from global markets, without credible credit ratings and incapable of financing large-scale projects. The economy is thus left without basic financing instruments, as official discourse rejects borrowing without offering a viable alternative funding model.

These economic constraints are inseparable from social and political ones. An economy cannot recover within a fractured society, a divided state, or under conditions of mutual fear between social groups. The absence of civil peace constitutes one of the most serious obstacles to recovery. Many stakeholders view the Civil Peace Commission as ineffective, arguing that civil peace cannot function as a parallel track to recovery but must precede it.

Civil peace, however, requires the activation of transitional justice through a genuine partnership between the state and society. Yet the National Transitional Justice Commission remains stalled, failing to meet victims’ expectations or to prevent cycles of retaliatory violence. This failure is costly: meaningful political reform would do more than any economic measure to restore confidence in state institutions. A sustained national dialogue is equally essential to rebuilding trust between the state and its citizens.

The repeal of the Caesar Act marks a pivotal moment in Syria’s economic and political trajectory, but it is not a magic wand that can conjure recovery. As long as deep-seated failures persist in governance, the legislative environment, the banking system, and sectoral planning, any economic recovery will remain fragile and vulnerable to reversal.

Syria’s recovery will depend on political will for reform, a credible partnership between the state, the private sector, and civil society, and the reconstruction of the social contract on the basis of freedom, justice, and accountable governance. Only under these conditions can the repeal of the Caesar Act become the starting point of a durable recovery.