Syrian Economy Tumbles as U.S. Sanctions Come Into Effect

Views from the Region

6/22/2020

Syria’s president Bashar al-Assad has fired the country’s prime minister as the country teeters precariously on the edge of economic ruin. This time the culprit seems to be the country’s monetary situation, as the Syrian pound continues to fall amidst a shortage of foreign, especially U.S., currency. The economic deterioration could not have come at a worse time as the US government announces the start of sanctions aimed at putting further pressure on the Assad regime as well as those supporting it. Assad’s survival may once again depend on Russian support. However, the Russians, aware of the difficulties in which Mr. Assad finds himself, are likely to extract hefty concessions in exchange for their continued support.

Reporting on the domestic economic situation, Syria Times’s Obaida Hamad and Inas Abdulkareem note that Syrian shopkeepers are struggling to cope with unpredictable currency fluctuations: “Damascus and other Syrian cities have witnessed inflation of prices of foodstuffs, garments and other imported goods because of the dramatic changes of the US dollar…. Most of traders closed their stores and stopped selling because they don’t know how to price their stuff…. The Syrian government subsidizes the price of bread and considers it a redline. This harvest season, the government increased the purchase price from farmers from 225 SP to 400 SP for each kilo of wheat. This increased what the Syrian government is paying in subsidies to 400 billion SP.”

Last week, The National’s Khaled Yacoub Oweis pointed out two main sources for the worsening economic conditions in Syria: the economic crisis in Lebanon, and U.S. sanctions: “Regional bankers say the sharp fall in the value of the pound earlier this month are related to the drying up of the dollar supply from Lebanon after a financial crisis that hit Lebanon in October-November last year deepened. They say a tougher US stance against the regime also dampened expectations of any international reconstruction assistance. The pound was trading at about 50 to the dollar on the eve of the Syrian revolt in March 2011. The Caesar Act is due to come into effect on Wednesday. It specifically targets individuals and companies whose ties with the Syrian regime are deemed [to be] perpetuating its human rights violations.”

Syrian Observer’s Enab Baladi writes that, faced with the likelihood of domestic unrest, the Syrian president has decided he needed to replace the current prime minister, Imad Khamis, naming Hussein Arnous as his replacement: “Khamis’ dismissal comes as the government witnesses a suffocating economic crisis that has caused the deterioration of the Syrian pound’s exchange rate. The rate dropped to 3,000 pounds to the dollar over the past week, rising again to around 2,000 pounds to the dollar in the past two days…. The economy was also impacted by the crisis between the government and Syrian businessman Rami Makhlouf, who is a cousin of Bashar al-Assad.”

It is against this background that the United States announced this week the implementation of ‘the Caesar Syria Civilian Protection Act of 2019’ (the Caesar Act), named after a Syrian photographer who leaked photos documenting atrocities committed by the Assad regime. According to the US State Department, “Mandatory sanctions under the Caesar Act target foreign persons who facilitate the Assad regime’s acquisition of goods, services, or technologies that support the regime’s military activities as well as its aviation and oil and gas production industries. The Caesar Act also mandates sanctions on those profiting off the Syrian conflict by engaging in reconstruction activities.”

Not all are convinced that the U.S. sanctions will achieve their stated goal, with Daily Sabah’s Hakkı Öcal expressing concern that Assad and his allies will manage to find ways to circumvent the sanctions, while the Syrians on the street feel the pinch: “The designers of the new U.S. sanctions claim they are not only going to devastate the already dying Syrian economy but will also crush the regime’s main backer, Iran and Lebanese Hezbollah, too…. [But] the Caesar Act is not going to hurt the illegal mechanisms the Syrian and Iranian dictators put in place for the last decade. Assad and his cousins in Syria and Iranian mullahs in Tehran will find ample ways around the U.S. sanctions, so would Hezbollah in Lebanon. Yet again, 60% of the Syrians in the areas where the Assad forces reign will suffer.”

However, in an op-ed for Al Arabiya, Makram Rabah asserts that the sanctions’ impact may stretch beyond Syria and may even help countries like Lebanon to decouple from the Syrian regime: “The Caesar Act, as it was designed, aims … to deter the reconstruction of Syria without the presence of a political settlement supported by the United States that the Russians would also be able to uphold, while simultaneously limiting and ultimately removing Iran’s influence over Syria, which seems highly unlikely at this stage…. With their country occupied by forces of corruption and tyranny, the Lebanese are better off with the international community in their corner and for tools, such as the Caesar Act, to be implemented that will help them liberate their country from the domestic and foreign forces they once called friends.”

Characterizing the sanctions as a “shock that aims to awaken everyone from the delusion that they were living in,”Elias Harfhoush suggests in the pages of Asharq Alawsat that Syria may find its allies in short supply: “Bashar al-Assad’s regime is facing accountability now and it is certain that its network of support, especially Moscow and Tehran, are no longer sufficient to help it against the economic crisis and tightening siege that will impact anyone who deals with it – especially now that those who support the regime, not doing so much better than the ruler of Damascus, are looking for someone to support them.”

One of the questions that is being asked by many in the region, including Arab News’ Maria Maalouf, is whether the sanctions will have any measurable impact on the stability of the Assad regime and whether it could “be successful in ending the civil war in Syria? This depends on a number of factors, including the degree of Russia’s support or hesitation in bringing Assad and his opponents into serious negotiations, and also on the US’ assessment over whether or not Assad can be removed peacefully and if such a move would further destabilize the Levant. Consequently, the debate over the Caesar Act should shift from the desire to see Assad falling to the implications of his regime’s collapse. One major problem is that the act does not offer a timeframe on change in Syria.”

The Russians have been quick to provide assurances to Damascus, with the Syrian News Agency (SANA) reporting that the Russian ambassador to Syria, Alexander Yevimov, even went so far as to characterize the sanctions as “economic terrorism” as he “described the relations between Syria and Russia as ‘strong and solid’…. The Russian ambassador reaffirmed that his country has been supporting Syria as both States succeeded, over the past years, in fighting the common enemy and will continue to cooperate with each other to complete all causes, especially with the success of the Syrian government to liberate more Syrian lands and transform the political process to an operational stage by launching the work of the Committee of Constitution.”

Pleasantries aside, the Russians have sent mixed signals about their commitment to the Assad regime and have made it clear that Kremlin support comes at a high cost, which, judging by this Gulf News report, includes the “ expansion of Russian facilities in Syria…. The new territory will increase Russia’s already paramount influence in Syria, possibly even undermining that of the Iranians, who have no similar bases throughout the country, although their troops remain embedded with the Syrians throughout the battlefield…. The only concern though is whether Russia is actually able to compete with the Iranian entrenchments in Syria, or its assessment of the region is based on facts and not just wishful thinking.”