Washington is expected to review its existing sanctions on Damascus in early 2007, following the publication of a report due to be issued in January being prepared by former US Secretary of State James Baker.

'The main focus of the Baker report is on how to change US foreign policy towards Tehran,' David Hale, chairman of Chicago-based Hale Advisers and a consultant to the US Department of Defence told the Syrian Banking & Financial Services conference in

Damascus in early November. 'But Baker will also aim to engage with Syria and in January the report is expected to offer an opportunity to [President] Asad.'

The Bush administration's softening stance towards Damascus is a marked shift in policy compared with earlier in the year. In mid-February, Damascus announced it had switched all of the state's foreign currency transactions from US dollars to euros. The decision affected all public transactions and was taken in light of Damascus' deteriorating political relationship with Washington.

Then in early March, the US Treasury Department finalised its proposed sanctions against the Commercial Bank of Syria (CBS) and its subsidiary, the Syrian Lebanese Commercial Bank, requiring US financial institutions to terminate all accounts with CBS. Sanctions on Damascus fall under the Syria Accountability & Lebanese Sovereignty Restoration act of 2003 (MEED 17:3:06).

'There are still obstacles to overcome with regard to the image of Syria in the US, particularly in relation to Lebanon. But over the next three months, there is hope for some improvement [in US-Syrian relations]. Unhappiness at US foreign policy was main reason for the heavy Republican losses in the US Congressional elections. That is why President [Bush] needs a new policy. In the next 18 months there is a hope, although no guarantees, of eliminating sanctions [on Syria],' said Hale.