By Gus Trompiz
PARIS (Reuters) - Paris-based Union de Banques Arabes Francaises (UBAF) said on Thursday it had agreed to release Syrian funds to pay for food deals, suggesting Damascus is making headway in its complex moves to finance imports of staple supplies.
Western countries have imposed sanctions on President Bashar al-Assad's government, but these do not apply to food and France has cleared the use of frozen Syrian assets as part of a European Union scheme that allows funds to be used for humanitarian ends.
Assad had hoped to achieve self-sufficiency in food to help sidestep the sanctions, but the war has caused the worst harvest in nearly three decades, leaving Syria's population increasingly reliant on food aid.
The United Nations said it delivered food to a record 3.3 million people in October, up from 2.7 million the previous month, and that civilians were going hungry in besieged areas.
"At the request of trading house clients who had previously obtained an export permit from the French Economy and Finance Ministry, UBAF has accepted, in this context, to conduct the payment of humanitarian/food products destined for Syria," UBAF said in an emailed response to Reuters.
"To this end, the Economy and Finance Ministry has authorized the use of frozen funds of Syrian banks that are in our books," said the bank, whose core activity is trade finance, mostly in relation to Arab countries.
UBAF's statement confirmed comments made by the head of Syria's General Foreign Trade Organisation to Reuters on Sunday, saying the bank had agreed to release funds.
No one at UBAF was immediately available to respond to requests for further details. The French Finance Ministry was not available either to provide details about Syrian assets.
While foodstuffs are not covered by the sanctions, banking sanctions and asset freezes imposed by Washington and Brussels have created a climate that had made it difficult for some trading houses to do business with Damascus.
Commodity traders say access to frozen assets has helped the Syrian government complete import deals for staples such as wheat and partly alleviate supply problems caused by the two-and-half year civil war.
As part of these flows, several cargoes of wheat and barley have been shipped from France since the start of 2013.
But the Syrian authorities have repeatedly failed to conclude sugar and rice purchases in international tenders, highlighting continued difficulties in securing food imports.
Unlisted UBAF is owned by Credit Agricole Corporate & Investment Bank, part of French bank Credit Agricole, which has a 47 percent stake, and a bloc of Arab banks that hold the remaining capital.
In a note this week, credit rating agency Fitch said a decrease in trade finance business in countries such as Egypt, Libya and Syria put pressure on UBAF's profits in the first half of 2013. In 2012, UBAF made a group net profit of 16.8 million euros ($22.62 million).
(Editing by Alison Williams)