* Syria says sanctions will have no impact
* Sanctions "may prolong protests but won't topple regime" * Govt has offered national dialogue, activists sceptical
By Dominic Evans
BEIRUT, May 19 (Reuters) - U.S. sanctions against Bashar al-Assad will not deter a defiant Syria from its campaign to crush protests and may come too late to give fresh impetus to a two-month wave of demonstrations calling for greater freedom.
Targeting the Syrian head of state directly for the first time, Washington imposed sanctions which freeze assets held by Assad, and a senior U.S. administration official said he faced a choice to lead "a transition to democracy or to leave".
But the steps were dismissed in Damascus by officials and Syrian analysts. State news agency SANA said the sanctions were an attack on the Syrian people on behalf of arch-foe Israel and vowed they would have no impact on "Syria's independent will".
The United States announced the largely symbolic steps on Wednesday to escalate pressure on Assad to end the crackdown in which rights groups say at least 700 civilians have been killed. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
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Assad, whose minority Alawite family has held power over majority Sunni Muslim Syria for four decades, faces the most serious challenge to his 11-year rule from the wave of protests which erupted in the southern city of Deraa on March 18.
It is not clear what assets would be blocked, but a U.S. official suggested the sanctions would be significant if they were matched in coming days by similar European Union steps.
"These sanctions are a formality, they will not affect Syria," said Syrian political analyst Imad Shuaibi, adding they also appeared aimed at prodding Europe into following suit.
Assad has sent tanks and soldiers into the main protest centres in a determined effort to crush opposition inspired by Arab uprisings which toppled leaders in Egypt and Tunisia.
Washington has condemned the repression as "barbaric", but Syria says it is battling armed, Islamist-backed groups that have killed 120 soldiers and police -- a battle it says it is winning.
"Sanctions against Syria's top government figures come at a time when the regime is gaining control over the protest movement and suppressing dissent," said Joshua Landis, associate professor of Middle East studies at Oklahoma University.
"The sanctions come too late to add momentum to the protest movement. They may prolong the movement but will not topple the regime," Landis wrote in his blog, Syria Comment.
CONDEMNATION
Before the unrest broke out, Western powers had been re-engaging with Assad after years of seeking to isolate him over Syria's backing of militant groups Hezbollah and Hamas and its alleged help for militants fighting U.S. forces in Iraq.
Some had hoped to loosen Syria's strong alliance with Iran, which Assad reinforced after taking power on his father's death in 2000, and encourage it to make peace with Israel which still occupies the Golan Heights seized from Syria in a 1967 war.
The United States and Europe have led the condemnation of Assad's crackdown, but he has also faced growing criticism from regional power Turkey, whose prime minister, Tayyip Erdogan, has dismissed Damascus' explanations for the violence.
But, in contrast to the international response to fighting in Libya, Syria faces little prospect of military intervention and Russia and China have made clear they oppose any action against Syria at the United Nations Security Council.
Hazem Saghieh, columnist with the pan-Arab newspaper al-Hayat, said protesters would take heart that the United States was increasing pressure on Assad but predicted the Syrian leader would step up the crackdown in response.
"I don't think Assad has the luxury to change," he said. "To change means to relinquish power and advantages ... I think he will escalate the repression".
Last week an adviser to Assad said Syria had "passed the most dangerous moment" of the uprising and a government minister promised a national dialogue across the country within days.
Activists gave a sceptical response, calling on authorities to release political prisoners, amend laws which give sweeping powers to security forces and guarantee free speech.
"The opposition is not against dialogue, but it must have a purpose, which is the transformation of Syria from a dictatorship into a democracy," said Walid al-Bunni, who has been jailed twice for calling for democracy in Syria.
PROMISE OF NATIONAL DIALOGUE
But Syrian academic Sami Moubayed said the government was unlikely to offer concessions while the unrest continued, and suggested a "truce" under which demonstrators called off protests to give authorities time to implement reform.
"The government will not make concessions so long as the street is in a frenzy and the security scene is chaotic," said Moubayed, editor-in-chief of Forward Magazine in Syria.
Nearly a week since the dialogue was promised, there have been no announcements about when it will actually take place, or who might be involved, and critics see it as a stalling tactic.
"They say they will launch national dialogue, but there are no grounds for this dialogue," said Hilal Khashan, a political scientist at the American University of Beirut.
"An authoritarian regime is incapable of reform."
A Damscus-based analyst said the government promise of talks ran counter to its "sweeping, chaotic and counterproductive repressive campaign" against protesters.
"The regime ... calls for a national dialogue while suppressing any possibility that credible interlocutors will emerge," said the analyst, who declined to be named.
"With this approach, it will be left with only the Muslim Brotherhood and local religious opinion leaders to deal with, although these are precisely the people it would rather marginalise." (Additional reporting by Khaled Yacoub Oweis)
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