Syria’s removal by the United States from its “state sponsors of terrorism” list clears one of the last major hurdles to the country’s integration into the global financial system, analysts tell Al Jazeera.

On July 8, US President Donald Trump announced he was formally notifying Congress of his intention to rescind Syria’s designation, which had been in place since 1979. A 45-day congressional review period passed on Saturday, and the US completed the formal delisting on Monday.

While Washington had already lifted many of the restrictions preventing transactions with Syrian banks, the “terrorism” designation continued to carry additional financial and trade restrictions, and Syria’s removal will give the country – still struggling to pick itself up after a nearly 14-year war – a badly needed economic boost.

“The momentum is great for this announcement, and it was the last main barrier to banks reconnecting [with the global community],” Vittorio Maresca di Serracapriola, sanctions lead analyst for Karam Shaar Advisory, a consulting company with a focus on the political economy of the Middle East, told Al Jazeera.

Longstanding sanctions

Syria was first designated by the US as a “state sponsor of terrorism” in 1979 under the presidency of Hafez al-Assad.

The country was originally placed on the list for its support of Palestinian armed groups. Syrian-US relations were later strained when the US invaded Iraq in 2003, just a few years after Hafez died and his son Bashar succeeded him. Washington pulled out of its embassy in Syria in 2012, a year after Syrians rose up against the al-Assad regime, which responded with brutal suppression and violence, leading to war.

During the conflict, Syria became increasingly isolated from the global community as more international sanctions were placed on the regime.

When the al-Assad regime finally collapsed in December 2024, a new government, including members of former rebel groups, took its place. One of its first priorities was trying to reintegrate Syria into the regional and international community by removing the sanctions, which has largely been accomplished.

Syrian President Ahmed al-Sharaa and Hayat Tahrir al-Sham, the former rebel group he led, were also previously under US sanctions, which have been removed.

While Syria has moved on from its isolation since the fall of al-Assad, its economy remains weak with almost 90 percent of the population living below the poverty line.

“For nearly five decades, Syria’s designation as a state sponsor of terrorism resulted in severe restrictions on financing and exports and contributed to significant hesitation and overcompliance among banks and investors who were reluctant to engage with Syria, fearing secondary sanctions,” Obai Kurd Ali, a Syrian expert with the Tahrir Institute for Middle East Policy, told Al Jazeera.

“People in Syria are suffering from severe poverty and a deteriorating economic situation with decent living standards becoming unaffordable day after day,” he added. “For Syrians, any step that may lead to better living conditions is worth celebrating, and removing [the] designation is not only one such step but also one of the final major actions toward dismantling the complex web of US sanctions that isolated Syria for so long.”

‘Great momentum’ for Syria’s economy

Maresca di Serracapriola said the decision to lift Syria’s designation reduces legal risks for banks working on Syria-related financing or transactions and allows US foreign assistance to Syria.

“The removal of restrictions on US foreign assistance and government contracting has the potential to open additional channels for development and reconstruction support,” he said, adding that “the biggest impact will likely be on financial flows and investment.”

International banks would often cite the designation as a reason against working with banks in Syria.

“The timing of the announcement is important because the Central Bank of Syria reactivated its account at the Federal Reserve Bank in New York in March, and recently, the World Bank has approved a $100m grant for financial sector modernisation in Syria,” Maresca di Serracapriola said.

Ibrahim Kochaji, a Syrian banking and economic expert, called the lifting of the sanctions “a pivotal moment in the trajectory of the national economy” but said it was “not an immediate remedy” for the country’s deep economic struggles.

Kochaji said any resolution to Syria’s issues requires “a long path of reforms and measures” that would be bolstered by stability and sound governance.

Kurd Ali agreed. “The transitional government must seize this opportunity to put its own house in order,” he said. “Good governance, transparency, robust anticorruption measures and meaningful judicial reform are essential to regain investors’ confidence and ensure that investment contributes to a sustainable and inclusive recovery that puts people’s priorities at its heart.”

Impacts on daily life

The fall of the al-Assad regime was met with jubilation across Syria. And many Syrians still speak about the improvements to their day-to-day lives since the regime’s demise.

But increasingly, Syrians are expressing frustration at the soaring cost of energy and the stuttering local economy.

Kochaji said the removal of sanctions would impact Syrians daily lives but the impact may not be as immediate as some may hope.

“The realistic answer is that the impact will be gradual, but it can become tangible if the government manages the transition wisely,” he said, adding that if managed correctly, production and transportation costs could decrease and new job opportunities could develop, among other potential benefits.

While many of the main economic barriers have been removed, analysts said they believe Syria’s banking sector is not guaranteed to automatically rebound.

“International banks and investors will still look at Syria’s antimoney-laundering and counter-financing of terrorism framework and overall risk environment, also general governance and political stability,” Maresca di Serracapriola said. “So that will not necessarily shift the picture entirely with respect to banking.”