Washington ? John Kerry’s first task as incoming secretary of state should be to develop a coherent policy for Syria, where U.S. sanctions are proving counterproductive, the fighting around Damascus is deadlocked, the economy is in ruins and the country is headed toward a sectarian breakup.

This grim prognosis for Syria is based on the latest reports provided to the State Department by opposition forces working with the Free Syrian Army.

The military situation in Damascus is described as a stalemate. The regime controls the city center and the northern suburbs, while Free Syrian Army rebels are strong in the eastern, western and southern suburbs. Corruption is spreading in the liberated southern suburbs. As Syrians pass through regime and Free Syrian Army checkpoints, “sometimes you hardly know which is which, and you lose track of what FSA are trying to achieve,” notes a summary of the report.

With these fluid battle lines, it’s possible to move stealthily throughout the capital. Main streets are guarded by checkpoints manned by troops loyal to President Bashar al-Assad, “but there is always [an] alternative that opposition (forces) can use to reach almost any point in Damascus.” I found a similar ease of movement in northern Syria when I traveled there with the Free Syrian Army in October.

As rival Free Syrian Army battalions recruit fighters, they “buy them with money,” notes the summary, explaining: “This is what he (the extremist Jabhat al-Nusra) is doing to increase their supporters; now people become an open market, you pay, and you can sell your ideology. … People are easily signing up to something they did not dare to do before.”

Doctors who work in military hospitals report that most casualties are from the regular army, “which indicates that the regime is still keeping the 8k to 12k Republicans Guards as last resort,” the report says.

U.S.-led economic sanctions appear to have backfired, much as they did in Iraq in the 1990s, hurting poor and middle-class people while allowing regime loyalists to get even richer. The report calls this effort “the epitome of failure,” explaining: “The regime is capable of bypassing most sanctions by using non-U.S. and non-Western productions. … High-ranking regime figures have sophisticated networks to channel and move their large accounts.”

“It’s the Syrian people who do not have the means and the connections to bypass these sanctions,” the report continues. “These conditions have produced the largest transfer of wealth from the people to the government supporters. Under the current shortages and rising prices, the only businessmen who can sustain a profitable business are the ones who have military might at their disposal to protect their convoys. … The middle class and most of the wealthy have lost their cash flow.”

The Assad regime is rationing access to fuel and electricity to reward friends and punish enemies. “The number of hours (of electricity) each neighborhood receives is directly proportional to their level of support for the government. … Lucky ones get 18 hours of power every day. Not-so-lucky ones get three hours of power every day, defiant ones get no power or cellphone coverage at all.”

The U.S.-led embargo on imports of diesel fuel is also “very ineffective,” the report explains. “Of course the military gets first dibs on it, and the civilians bid up the price of what is left.” Desperate for heating fuel, poor people are burning plastic and tree leaves.

U.S. policy to deal with the Syria disaster has been idling for months, as the administration waited out the presidential election and then the appointment of new secretaries of state and defense and a new CIA director. Kerry is seen as the person most likely to galvanize a clearer, tougher U.S. policy, but President Obama is said to be skeptical, asking “can we make a difference?” in a recent interview with The New Republic.

Rebel military sources argue that the most effective step the U.S. could take would be to train hundreds of elite commando forces, which would be well-armed and have the strong command-and-control that has generally been lacking in the Free Syrian Army. These disciplined paramilitary forces, like groups the CIA has trained in Iraq, Lebanon and Afghanistan, could shift the balance on the ground — away from the Assad forces, but also away from the extremist Jabhat al-Nusra.

“Many people now have lost hope with everything,” writes one of my Syrian sources. “Many people now hate Assad, but they hate the FSA as well. They just want a way out.”