Syria seeks Russian investment as U.S. sanctions hammer economy

Russian Deputy Prime Minister Yuri Borisov and Foreign Minister Sergei Lavrov attend a meeting with Syrian President Bashar al-Assad in Damascus

MOSCOW/AMMAN (Reuters) – President Bashar al Assad said on Monday he wanted to expand business ties with Russia to help Syria cope with new U.S. sanctions on its already crippled economy that threaten to undermine military gains Damascus achieved with Moscow’s help.

Assad spoke during a meeting in Damascus with Russian Deputy Prime Minister Yuri Borisov and Foreign Minister Sergei Lavrov.

Lavrov told a news conference Syria needed international help to rebuild its economy. Borisov said Russia was helping Syria to fix its power plants but said oil output could not resume as the fields were in areas outside government control.

Syria and Russia, whose military support since 2015 helped Damascus reverse gains by Islamists and other rebels in an almost decade-long war, had said the two sides planned to boost trade ties and would review energy, mining and power projects.

“The government was determined to continue to work with Russian allies to implement signed agreements and to ensure the success of Russian investments in Syria,” Assad said, according to state media.

Borisov said Moscow had presented proposals in July to expand economic ties and expected an agreement would be sealed in December on his next visit to Syria’s capital. He said Moscow wanted to help Damascus break the blockade of U.S. sanctions.

Syria has pinned hopes on Russia, its main foreign ally, while Western diplomats say Russia’s military involvement in Syria has secured Moscow major regional influence and a bigger foothold in a naval base in Syria’s Tartus port.

“Russia turned the tide for Assad and with the regime now facing its gravest challenges, Moscow is in a better position than any other time to further squeeze Assad,” said one Western diplomat who follows Syria.

Although Assad has now regained most of the territory he had lost in the war, the economy is in tatters, leaving many Syrians in poverty as the currency has lost 80% of its value.

Russia has criticised the new U.S. sanctions that took effect in June under the so-called Caesar Act.

Washington says the sanctions, which penalise foreign firms dealing with Syrian government entities, aim to cut revenue for Assad’s government and push him back into U.N.-led talks to end the conflict.

(Reporting by Anton Kolodyazhnyy in Moscow and Kinda Makieh in Damascus; Writing by Tom Balmforth and Suleiman Al-Khalidi; Editing by Toby Chopra and Edmund Blair)