Economic Sanctions Assessed by Andrew Tabler
BAD MOON RISING
"Syria Today," November
By Andrew Tabler
US sanctions on Damascus have been largely ineffectual, writes Andrew Tabler. UN sanctions, however, could have serious implications for everyday life in Syria.
On October 31, the UN Security Council unanimously adopted Resolution 1636, which demands Syria's full cooperation with the UN investigation of the assassination of Former Lebanese Premier Rafik al-Hariri. The resolution warned of possible “further action” in case of Syrian non-compliance. While Damascus has promised to cooperate with the investigation, and has launched one of its own, it is now important that Syria take a hard look at the possible sanctions looming on the horizon and their implications.
Sanctions are nothing new to Syria, as it has been on Washington’s list of state sponsors of terrorism since 1979. These restrictions were tightened in May 2004 with the implementation of a series of measures under the Congressional ‘Syrian Accountability and Lebanese Sovereignty Restoration Act’.
The measures include a ban all US exports to Syria (other than food and medicine) and already non-existent Syrian flights to the US, an investigation into the Commercial Bank of Syria as a potential money laundering institution, and the seizing of assets of certain Syrians - including the late Ghazi Kanaan, the former head of Syria’s intelligence services in Lebanon and his successor Rustom Ghazali - in the United States. So far, these measures have had limited impact because they are fairly easy to circumvent. US products can be substituted, or re-exported from places such as Dubai, Syria now has private banks, and Syrian officials probably do not save their money in US institutions.
UN sanctions are an entirely different matter, however. Resolution 1636 was enacted under Article 7 of the UN charter, which involves “use of force.” Russian and Chinese pressure prevented the resolution from being passed under Article 41, which deals with sanctions. Nevertheless, press reports coming out of the United States and Europe indicate that UN pressure on Syria will likely be in the form of “smart sanctions” – tailor-made measures targeting the Syrian regime and not the Syrian people. Practice shows, however, that no matter how “smart” sanctions are, they can have a profound impact on a country’s economic development.
The first measure is likely to include an air and arms embargo similar to those placed on Libya in 1992 over the Lockerbie bombing incident. This could be accompanied by a travel ban or some other kind of restriction of movement on members of the Syrian leadership. Both measures will certainly make it difficult for Syrians, as well as the Syrian regime, to communicate with the Arab World and beyond. Isolation will make negotiations with the international community that much harder.
The second measure could include a ban on foreign involvement in Syrian energy, either in terms of vital components or company operations. As pressure from Washington has increased and US energy companies have departed, Damascus has relied on a host of Croatian, Russian, and Chinese energy companies for exploration and field development activities. At the same time, Anglo-Dutch Shell and French Total companies have continued to help keep Syrian oil flowing.
Should the UN restrict foreign energy companies in Syria, energy activities would then be increasingly in the hands of the state-owned Syrian Petroleum Company (SPC). While the SPC is involved in all Syrian energy projects in one way or another, it would likely find it difficult to employ the kind of technology necessary to make new discoveries and develop Syria’s already declining fields. Syrian oil production would certainly be negatively impacted, precisely when it needs to boost output the most. Development of Syria’s sizeable natural gas fields would slow considerably.
These measures could be followed by a ban on Syrian oil exports. Currently, Syria produces around 480,000 bpd, of which some 200,000 bpd are exported. Currently, oil proceeds account for around 50 percent of the state budget, and high oil prices over the last few years have helped Syria build up foreign currency reserves approaching $18 billion. With a ban, the Syrian state’s ability to fund its large public sector and development plans would be seriously curtailed, even if the state introduces austerity measures to survive what is in effect a siege. Tax rates and their enforcement would increase, with deep implications for the country’s business community. Financing of imports, which in 2004 amounted to $6.199 billion, would also become difficult.
This would almost certainly restrict the availability of machinery and transport equipment, electrical power machinery, food and livestock, metals, chemicals, plastics, yarn, and paper.
The growing role of Syria’s private sector and its ability to finance imports from Lebanon and elsewhere, however, could help keep the country running. But it might not be that easy. Should Beirut restrict Syrian trade financing through Lebanese institutions, the private sector’s ability to trade could then be put at the mercy of a possible ban on financial transactions with Syria. Such a measure would not only impact Syria’s public sector banks – which the international community is targeting – but its budding private sector financial institutions as well.
The ability of Syrians to finance trade is therefore key to promoting overall economic growth. Any restrictions on financial transactions would therefore cut off a vital lifeline to private banking at a key moment in the sector’s development, with negative implications for the country’s troubled reform process as a whole.
Here are the new monetary measures to stabilize the Syrian Pound.
For Syria's latest GDP figures see: Global Investment House - Syria Economic & Strategic Outlook I - Gross Domestic Product and Public Finance
Syria: Saturday, November 19 - 2005
The economy of Syria has witnessed a moderate growth over the last few years as can be depicted in the real GDP growth rate which grew at a CAGR of 3.5% over the last fives years.Also see Ferry Biedermann's article in the November 14 Finacial Times,UN inquiry spreads fear through Syria’s elites
In 2004, nominal GDP grew significantly by 12.8% to reach SP1,203.5bn up from SP1,067.3bn in 2003. This was the highest growth recorded by the country over the last few years. It achieved a real GDP growth rate of 2% in 2004 and the IMF has forecasted a growth rate of 3.5% for the year 2005.
British Foreign Secretary: "A military strike against Syria is not on the agenda of any party"
By Mina Al-Oraibi
Manama, Asharq Al-Awsat- British Foreign Office Secretary Jack Straw spoke to journalists on return from his visit to Bahrain about Syria, his recent visit to Iraq and the failure of the signing of the Bahrain Declaration.Kaan Atac writes from Turkey about FM Abdullah Gul's visit to Syria.
Speaking to Asharq al-Awsat correspondents, Straw said, "A military strike against Syria is not on the agenda of any party. Syria must be given time to implement Resolution 1636," before judging the level of its cooperation with the international inquiry commission, which deals with the investigation of former Lebanese Prime Minister Rafik Hariri...
Secretary Straw emphasized that the few weeks after the passing of the international resolution is not enough time to judge Syria. He added that it is international investigator, Detlev Mehlis, who will decide whether Syria is cooperating with the inquiry commission.
He dismissed reports that he encouraged a meeting of the UN Security Council at the end of this month to discuss Syria's cooperation. He said, "I am not pushing for a Security Council meeting." However, he noted, "Syria said it will cooperate, and I believe that it may cooperate."
Turkish FM Abdullah Gul made a surprised visit to Damascus to meet with his counterpart Al Sharaa and Syrian leader Bashar al-Asad yesterday. This visit is important for two reasons:
First, it just happened a few hours after a crucial cabinet meeting, in which Turkish government and top military and security officials discussed the incidents that have happened during the last few days in the southern and the eastern part of Turkey. According to some, terrorism has been raising due to unstable and uncontrollable conditions in the whole region, namely in Iraq and Syria. Last terrorists attacks has claimed dozens of lives both civilian and security forces. The Turkish government is worrying that if Syria would be dragged into the conflict already enflaming the Middle East, Turkey will undoubtedly suffer greater uncertainty.
Second, The Bush administration probably wanted to send a “strong signal” via Turkey to the Syrian regime that Asad should cooperate with the UN Commission led by Mehlis. In the second Forum for the Future meeting hold in Bahrain last week, the US Secretary of State Rice urged Damascus to cooperate. According to Turkish media, FM Gul has warned Damascus about Turkish anxiety that if Syrian regime does not settle with Mehlis, Bashar's end will be the same destiny as former Iraqi leader Saddam’s.
Same media sources claimed FM Gul urged Syrian authorities about 3 additional issues 1) Don’t support terrorism 2) Don’t support Palestinians terror groups and 3) Don’t interfere Lebanon and Iraqi internal affairs.
Turkey’s main concern is that it does not want to suffer anymore from both internal and international terrorism which has caused Turkey thousands lives and billons dollars. Most importantly Turkey could not cope with the burden of more American military invasion just happening south of Turkey.