It says it has shut down the offices of Islamic Jihad and Hamas, the main authors of suicide bombings against Israel. But it hasn't expelled its operatives.
The busloads of fighters who crossed the border into Iraq to fight the Americans have stopped, but others may be slipping through all the same, albeit in smaller numbers and without government connivance, Western diplomats say.
Syrian President Bashar Assad has refused, as has the Arab League, to recognize Iraq's U.S.-appointed Governing Council, but has indicated he would cooperate in efforts to freeze Iraqi assets.
Diplomats in Damascus and analysts abroad say the Syrians haven't grasped that the Bush administration expects much more of them.
U.S.-Syrian relations are "a point of high tension right now," Peter W. Singer, national security fellow at the Brookings Institution, said in an interview. Defiance of Washington is "gaining neither the Arab region nor Syria herself much advantage."
Jeremy Binnie, Middle East editor for Jane's Sentinel Security Assessments magazine in London, sees Assad "under a lot of pressure at the moment" as the United States seeks to stabilize Iraq and remove the Islamic extremists as a hindrance to an Israeli-Palestinian peace deal.
Western diplomats in Damascus, speaking on condition of anonymity, sound worried that the Syrians are misjudging the Bush administration's determination to get its way in the Middle East.
When it became clear that Iraq had crumbled, Syria, fearing it was next, went out of its way to look helpful to the Americans. Almost five months later, however, with the occupation of Iraq running into trouble, Syria seems less nervous and less pliant.
The Americans may not think they're helpful enough, but the Syrians feel they've done a lot, and they fear that relinquishing all their cards now would leave them no leverage for recovering the Golan Heights, which Israel captured in the 1967 Mideast war.
Syria's relationship with the United States has always been rocky — when it was a Soviet client state, as well as in the years that followed.
On the one hand, it wants good ties, and neither the government nor Syrian citizens are intrinsically anti-American. Younger Syrians want to master English and the Internet, not pursue the anti-imperialist wave that isolated their parents' generation from the West.
On the other hand, Syria has always promoted itself as the defender of Arab nationalism and doesn't want to be seen as America's puppet.
"Syria represents the pulse of the Arab world. ... (It) carries national, regional, Islamic weight with it," Bouthaina Shaaban, director of the Foreign Ministry's Foreign Media Department, told The Associated Press. "Syria has been here for 5,000 years, and it will continue to be here no matter who is on its borders."
Ayman Abdel-Nour, a political analyst, said the American presence in Iraq doesn't bother him.
"The way I see it, America is sandwiched between the Iraqis and the Syrians," he said. "Whoever tries to reach a settlement in the region without Syria is ignorant of Syria's influence in the region," he said.
Syria still holds some of the keys to Mideast peace and can help to pacify Iraq, the diplomats say, and Washington has several levers it could pull.
Diplomats say the U.S. administration could keep Syria on its official list of terrorism-supporting states, downgrade relations and isolate it. It could invoke the Patriot Act passed after the Sept. 11 attacks that empowers the U.S. government to go after terrorists and terrorist financing. The Syrian Accountability Act, if passed by Congress, would ban U.S. firms from trading with Syria or investing in it — a serious blow to Assad's hopes of making Syria more market-friendly.
The Americans say a cooperative Syria could gain by resuming trade with Iraq and reopening the pipeline that carries Iraqi oil across its territory.
Washington's main preoccupation now is to get Syria to expel Khaled Mashaal and Ramadan Shallah, the leaders of Hamas and Islamic Jihad respectively, before further suicide bombings blow up the latest American push for Israeli-Palestinian peace.
Syria insists these leaders have nothing to do with the bombings and other attacks that have killed dozens of Israelis. But Washington believes they give overall direction, diplomats said.
Another potential flash point is the Syrian-backed Hezbollah guerrillas in Lebanon who are fighting Israel.
After the latest Hezbollah shelling killed an Israeli teenager last month, Israeli warplanes buzzed Assad's holiday residence in northern Syria, according to an Israeli TV station. Syrian officials never confirmed it.