Thursday, Feb 23, 2012

(Adds detail on sanctions, comments on gold ban impact.)

By Laurence Norman and Alessandro Torello

Of DOW JONES NEWSWIRES

BRUSSELS (Dow Jones)--European Union governments are set to push ahead with sanctions on Syria's central bank next week and impose a ban on air cargo flights into the EU and sales of gold and other precious metals, European diplomats confirmed Thursday.

The fresh round of sanctions against Syrian President Bashar al-Assad's regime comes amid intensifying violence in the country which is facing growing regional and international criticism.

EU foreign ministers meet in Brussels on Monday and EU foreign policy chief Catherine Ashton had already warned the EU would tighten its already extensive sanctions regime.

Diplomats confirmed agreement that Syria's central bank would be added to the sanctions list. But as in the case of EU sanctions on Iran's central bank last month, there will be a broad exemption for legitimate trade purposes.

Payments to the central bank will be permitted when they are destined for a non-sanctioned financial firm for a commercial contract.

Diplomats said there was also agreement on a ban on air cargo flights by Syrian airlines to EU airports even if the flights originate outside of Syria. Only mixed passenger and cargo flights will be permitted, according to a senior EU official. Germany had pushed a ban on all flights.

One senior EU source said the regional bloc would also add seven more Syrian ministers to its asset freeze and travel ban list.

The EU is also set to ban the export or import of gold and other precious metals, although a proposed ban on Syrian phosphate exports looks unlikely to go ahead, diplomats said. The 27-nation bloc took the same step with Iran.

Gold market analysts say the ban is unlikely to impact the international price of bullion.

"I don't think it's of great importance for gold. It is a relatively small economy, with relatively small gold consumption," said HSBC analyst James Steel.

Syria has 7.1% of its foreign reserves in gold, according to the World Gold Council. While it is the world's 55th largest official holdings of the metal, at 25.8 metric tons it is well below the U.S.--which has the world's largest holdings--at 8,133.5 tons, and 75% of its reserves.

The EU is also concerned about the humanitarian situation in Syria, and is keen to ensure that aid can be delivered, the senior official explained. He said one idea being floated, mainly by humanitarian organizations, is the possibility of a daily ceasefire of several hours that would allow the delivery of some aid.

The EU has already imposed stringent sanctions on the Assad regime, agreeing a crude oil embargo last year, tight restrictions on investments in Syria's energy sector and including Assad and many of his top officials, family members and business supporters on the sanctions list.

However, despite the escalating violence and death toll, EU foreign ministers have repeatedly ruled out any repeat of the military action many member states joined against former Libyan leader Col. Moammar Gadhafi.

The sanctions move will come after the EU joins a meeting of the Friends of Syria in Tunis.

The group--including foreign ministers from the U.S., France, U.K., and European Union--are set to meet for the first time on Friday. It was proposed after Russia and China this month vetoed a United Nations Security Council resolution calling for President Assad to step aside.

-By Alessandro Torello and Laurence Norman, Dow Jones Newswires; +32 (0)2 741 1481; laurence.norman@dowjones.com

(Rhiannon Hoyle contributed to this article)

(END) Dow Jones Newswires

23-02-12 1729GMT