Syria is trying to sell gold reserves to raise revenue as Western and Arab sanctions targeting its central bank and oil exports begin to bite, diplomats and traders said.
Western sanctions have halved Syria's foreign exchange reserves from about $17 billion, French Foreign Minister Alain Juppe said on Tuesday after a meeting with about 60 nations aimed at coordinating measures against President Bashar Al-Assad's government.
"Syria is selling its gold at rock bottom prices," said a Western diplomatic source, declining to say where it was being sold.
A second diplomatic source confirmed the information, adding that Damascus was looking to offload everything it could to raise cash, including currency reserves.
On 27 February, the European Union agreed more sanctions including prohibiting trade in gold and other precious metals with Syrian state institutions, including the central bank.
Two gold traders in the United Arab Emirates said the Syrian government had been offering gold at a discount, with one saying it was making offers at about 15 percent below the market price.
The trader said Damascus was selling small volumes of around 20-30 kilos which were easier to offload, with offers being made through private accounts set up with free email providers.
Another trader said deals as of yet had not gone through in Dubai because the Emirati authorities were blocking unauthorised trades and few potential buyers were willing to take the risk of these deals.
"We have been getting offers for gold purchases from Syria and North African countries at 15 percent discount, but there are tough restrictions in Dubai that don't allow any unauthorised trades," said the trader.
The meeting on Tuesday was aimed in part at tightening up existing sanctions and trying to pinpoint countries that were offering Damascus ways to sidestep them.
The World Gold Council estimates Syria had about 25.8 metric tonnes of gold as of February 2012, representing about 7.1 percent of its total reserves.
At Wednesday's spot prices, Syria's total gold reserves are worth around $1.36 billion. Around $33.8 billion worth of gold is cleared through London on a daily basis.
Syria has not published economic statistics since May 2011, making it impossible to verify gold figures or forex reserves.
Spot gold inched up 0.2 percent to $1,652.84 per ounce on Wednesday, after touching a one-week low near $1,634 in the previous session.
Diplomatic sources estimated the sanctions had cut Syria's oil output by 30 percent, costing Assad's government $400 million a month in revenue, or $2 billion since November. Prior to EU sanctions, Damascus sold 90 percent of its oil to Europe.
The Syrian pound hit a record low on the black market in March of around 100 to the dollar, compared to 47 before the protests erupted, sharply raising the cost of imports.
Diplomats said that sort of economic difficulty would over time increase the pressure on Assad's government.
"Sanctions are a particularly effective instrument to deprive the Syrian regime of the resources it uses to finance and arm militias," Juppe said on Tuesday.