Syria: an economic catastrophe

Syria — it’s about to embark on its toughest crisis yet.

If there’s one thing that leaders ought to learn from history, it’s that economic stability is needed for political stability. The Roman Emperor Commodus learnt the lesson when a grain shortage nearly burnt down his beloved city of Rome and cost him the head of his trusted chamberlain Cleander. Famine and taxation in France were huge contributing factors to the revolution, and the economic failures of the Weimar Republic paved the way for Herr Hitler’s accession, and the demise of Germany’s democratic institution for twelve years. The reason behind this trend is that governments should be able to maintain their economies for the public to afford basic needs or else why sacrifice some of our freedoms and pay taxes?

However, Syrian President Bashar Al-Assad does not seem to have understood this lesson yet. To give some context, the Syrian economy was and still is heavily monopolised by his friends and relatives, most notably to his cousin, Rami Makhlouf, who owns one of the only two telecommunications companies (Syriatel), amongst other businesses and corporations in Syria. Official records indicate his net worth being at around 5 billion USD (as of 2008) and controlling a staggering 60% of the Syrian economy. Furthermore, the Syrian Pound (also known as Lira) was at around 50 Liras per USD (early 2011).

Throughout the conflict, its value slowly depreciated until this year, where it shot up from around 550 to 1256 officially and up to 3000 on the black market. 80% of Syrians are below the poverty line and queues for fuel during winter has been the new norm for two years now. Alas, it is difficult to obtain other figures as the government lacks the skills to measure the economy as well as not willing to conduct the research, which adds insult to injury. For instance, we can’t pinpoint inflation figures, GPD and GDP per capita, mean income … Hence, we’ll try and make the most with what we have.

With a weak economy, inflation and devaluation of the currency are simply a matter of time

With all this taken into account, why is Syria about to embark on an economic crisis?

Firstly, government debt and mismanaging the economy. Throughout the years of conflict, Syria, Russia, and Iran prioritised defeating Bashar’s enemies and ISIS. In 2019, with Iran going through its economic crisis, politicians pressed the Iranian leadership to demand from Syria to pay back for the Iranian support. Moreover, Putin started pressuring Bashar to pay for the cost of Russian intervention, to which the former stated he could not pay. Putin suggested that the Makhloufs should assist in paying the debt and Bashar placed Rami under house arrest in mid-2019. This created tensions between the Makhloufs and the Assads. In 2020, these clashes came to a head, with Asma Al Assad (Bashar’s wife) thought to have had a business standoff with Rami. The consequences were ugly for Rami; the government slapped him with a heavy fine of $120 million for “tax evasion”, which was never levied against him until now.

With the temporary lack of support of a man who controls 60% of the economy, the value of the Lira crashed and left an already crumbling economy to rot by decreasing physical capital accumulation thus preventing the forlorn recovery of the economy. What’s stark is that the government does not have an economic recovery plan, with the prime minister allegedly calling for an urgent economic package of 20 billion dollars, which the regime does not have and that led to his “resignation”. What makes matters worse is the lack of liquidity from the Central Bank to inject in the economy and the lack of vision for any sort of monetary policy. As it stands procedures are heavily centralised, bureaucratic and puts barriers to economic activity. With a weak economy, inflation and devaluation of the currency are simply a matter of time. That means an increase in living costs, which can be seen with people reportedly avoiding purchasing meat, as they are unable to afford what seems to them extortionate prices.

A secondary factor for the decline of the economy is the new American sanctions against the regime, known as the Caesar law. Passed quite recently, on 17th of June, the sanctions target 39 regime entities and individuals in the regime and those who are supporting it. Pro-regime supporters are devouring this excuse like a wake of starving vultures preying on a sick lamb. Having followed Syrian media online, the impact of these sanctions is hugely exaggerated amongst supporters of Bashar.

Yet one must acknowledge that they do cause, to some extent, a considerable impact on the regime, for it is exasperated its efforts in maintaining the support it needs from Iran, Hezbollah and Russia as well as tightening up the technical aspects of providing such support. This is where Lebanon seems to have suffered the consequences, with any attempts of the Lebanese central bank in conducting a sound monetary policy, in this case pumping US dollars in the Lebanese economy, only for it to be taken by Hezbollah to Syria. Lebanon is now witnessing a huge economic downturn as well. Hence, the Caesar law is slowly constraining the economies of Syria and Lebanon and the Americans have no intention of reversing these sanctions anytime soon.

If the current situation remains as it is, Syria is not heading towards the unknown, it is heading to an economic catastrophe.

On the streets, the common people are asking why the prices of their local produces such as citrus fruit, olives and cotton are unaffordable. Syria, a country once leading exports on these products, is witnessing shortages and price hikes. If the current situation remains as it is, Syria is not heading towards the unknown, it is heading to an economic catastrophe. With no functioning economy, a state with empty coffers cannot embark on an economic recovery for a war-torn country. Western Europe was saved by the Marshall Plan post WWII, but as for Syria, as long as the current political establishment remains in place, the economy will crash. However, there are some signs of a crack, with protests over the dire economic situation intensifying to worse than the wave of 2011.

For now, all that I can do is listen to news from my hometown and reminisce on the old days.

By Mike Salem

Image: by Marc Veraart via Flickr

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