Syria and Lebanon in the dollar mess
It is typical of the situation that comments on the current state of affairs are full of bitter ridicule that resembles a gallows humor
It comes down to it. The level of difficulty in solving the interrelated crises in Syria, Iran, Iraq and Lebanon is considerable. It is fermenting in all four countries for very different reasons; What they have in common is that large sections of the population face economic hardship and uncertain prospects, especially for young people, who have been protesting on the streets in three of the countries mentioned for months.
They also have in common that their economy is heavily dependent on the dollar, which is why the US sanctions, which have now been announced for Iraq, hit with great force.
There is now a new government in Lebanon. While in the “West” one looks at the influence of Hezbollah, which again provides ministers, and puts pressure on the organization allied with Iran to provide economic aid, the Lebanese have something else in the foreground: a gigantic banking crisis that has put the country in a situation that is compared to times of the civil war (concise explanation of the development here).
The behavior of the countless banks in Lebanon and the central bank there in the past years, which is tantamount to evil satire, has meant that deposits are not only at risk from the wealthier, but also from “ordinary people”. On the one hand, this means that Lebanon needs external financial aid, which releases the leverage for political pressure, and on the other hand, it ignites anger among the population, which is reflected in the protests.
It is still completely unclear how the new government can get out of the deep mess. It is typical of the situation that comments on the current state of affairs are full of bitter ridicule that resembles a gallows humor.
A major problem is the dollar exchange rate, which was fixed in Lebanon in 1997 with the Lebanese pound, which meant that imports had to be subsidized; the central bank took the money from the dollar deposits from Lebanese expats in Lebanese banks, which promise this interest rate positions that were much higher than those otherwise granted, but were not economically covered at this level.
The result is roughly simplified that Lebanon’s financial system now has a dollar shortage – with a black market that has a much higher dollar exchange rate than officially specified, coupled with huge problems, or the impossibility for individual investors to get their dollar deposits (officially allowed you can withdraw $ 300 a week for a while, this is nothing for large deposits; recently, “small investors” were reportedly only allowed to withdraw in Lebanese currency. In addition, as far as the larger stores are concerned, there are considerable difficulties in paying for imports that are offset against US dollars.
Impact on Syria
The effects of the banking crisis in Lebanon are also directly and indirectly affecting the Syrian population. Even before the war broke out, there were close ties between Syrian and Lebanese banks. Lebanon has long been a financial hub for Syrian businesspeople, but also for “ordinary people” who promised themselves better and safer conditions there, which worked for decades.
When Syria became an area of war in increasing numbers from 2011 onwards, the tendency to bring Syrian money to the “safer port” of Lebanon increased, especially for smaller businesspeople, employees and workers. The effect increased even further with the US sanctions. The size of Syrian deposits in Lebanese banks is unknown; there are only estimates based on “billions”, but in economically better times in Syria. The basis of the sources is questionable and it is also unclear how large the share of larger assets is.
However, there is no dispute about the reinforcing effect that the Lebanese dollar problem has on the Syrian dollar problem. Syria also has a growing problem with paying imports with US dollars. Bashar al-Assad has now limited import licenses, and there are penalties for payments in US dollars. Apparently, the import difficulties due to the currency crisis even extend to wheat imports from Russia, at least as indicated by a Reuters report.
Propaganda and reality
Now, with news from Middle Eastern countries, political and psychological moments are often with him, the common accusation is propaganda. So be careful with particularly spectacular news that shows how bad a country is. This is combined with a political agenda that aims to change government.
Wheat imports are very important for the nutritional situation of the Syrian population. And if you can no longer afford such help from your ally, that would be very bad news for the government in Damascus. The Syrian President Assad has apparently even issued a regulation that punishes false news regarding the Syrian currency with prison terms.
But you don’t have to look far to find the worst possible news about the economic situation in Syria. They exist in abundance, they literally jump into your eyes. The Syrian pound is in free fall against the dollar, now over 1 thousand pounds have to be paid for 1 US dollar, last year 500 Syrian pounds were enough. 80 percent of Syrians live below the poverty line, the Financial Times reports.
Food prices have increased dramatically. According to the British financial newspaper, the prices of basic goods have risen by 20 to 30 percent since October. The shortage of heating oil and fuel was already a problem last winter, which was shown with pictures of long queues. The situation should not look any better this winter, on the contrary, as the supply of Iranian oil is likely to be more difficult.
A recent report by the certainly not neutral neutral Middle East Eye, which is largely based on Jihad Yazigi (Syria Report), who is not exactly a friend of the government in Damascus, provides a bad picture of the situation in the Syrian economy, as with many concrete examples and insights a report of the German-language January print edition of Le Monde diplomatique.
Its title “Surviving in Syria” says almost everything. It is about the country’s economic emergency, which is depicted as a struggle for survival. The political message is right at the beginning: “The government in Damascus has won militarily, but it faces enormous problems on the economic front. The hollowed-out state must increasingly finance itself through bribes and the plundering of its own citizens.”
Downward spiral and political goals
This roughly fits the goal of the US government, which, according to its Syrian special envoy James Jeffrey, is concerned that Bashar al-Assad and his government will not have a leg on earth (and a Syria under this rule a “carcass state” remains), even if one officially declares in Washington that the regime change itself is no longer a goal. But the United States administration, Jeffrey made clear several times, would try to prevent any economic efforts to rebuild the country. The next sanctions awaiting Syria will affect everyone who is involved in any way in economic aid to Syria.
The authors of the Le Monde diplomatique report paint a blatant picture of the Assad government: “Financially and in terms of personnel, the government is practically only performing its tasks pro forma and, above all, is out to get money. And that in a way that only drives the country further and faster into a downward spiral. “
Since the Synaps collective, which is responsible for the article, works with the support of the Konrad-Adenauer-Stiftung, the hard, politically unambiguously worked woodcut, which also draws the countries associated with Syria, Russia, Iran and China, is not surprising whose economic self-interests are described in a way that countries like France or Great Britain or Germany rarely or not at all find: “Assad pledges the economic future,” it says. “Most blatantly” this shows that “the Russians are demanding an increasing say in the exploitation of the Syrian oil, gas and phosphorus deposits”.
No word is said about the illegal occupation of the Syrian oil fields by US troops …
Nevertheless: Syria’s economic misery is plausibly illustrated with many examples and, unlike reports that are completely ideological, it is also emphasized that the US sanctions, contrary to the claims from Washington, hit the population hard. One even dares to describe the accompanying rhetoric of the West as disturbing, which believes that with “increasingly severe sanctions” political goals can sound absurdly sounding.
The EU still believes that Damascus can be forced to provide political solutions in its sense through continued financial pressure, as an example. Another is the United States, where politicians would believe that they could bring about regime change through sanctions.
It doesn’t look like that. Rather, it means that the credibility of the West continues to decline, not only in Syria, but also in the other countries mentioned above, among those who are dissatisfied, protesters and opponents of the government. The political capital of the West is also in crisis. [end]
The author of the article is Thomas Pany. Thomas Pany studied political science with Kurt Sontheimer at the Ludwig Maximilian University in Munich, plus modern history and Semitic studies. The original article has been published in Telepolis. Translation and editing by Defenseweek’s team.