Fadi Hassan is a research associate at the London School of Economics’ Centre for Economic Performance and Andrea Presbitero is an associate professor of economics at Johns Hopkins University. In this guest post they argue the economic sanctions against Syria should be reconsidered after a year of shocks that have put further pressure on the war-torn nation.
Ten years has passed since the beginning of the Syrian war. Its refugees have spawned international headlines, but how are the people remaining in Syria doing? Not good, and over the past year it’s got much worse. According to the World Food Programme, more than 12m Syrians — 60 per cent of the population — are suffering from food insecurity. Facing increasing hardship, the vast majority of Syrian families are struggling to eat and are even cutting out basic necessities to deal with their diminished purchasing power.
Take this one example: in Syria a kilogramme of beef now costs about a quarter of a public employee’s average monthly salary. For perspective, in Italy this translate as €700 per kg. In the UK? £300 per lb. Most necessities like rice, sugar or fuel are de facto rationed: the Syrian state guarantees access to a minimal quantity at a controlled price. Currently, an individual receives one kilogramme of rice per month and 25 litres of fuel per car a week. Larger quantities can be bought on the free market, but for most people that’s unaffordable.
To boot, a combination of three negative shocks has disrupted the economy even more than anyone expected over the past year. For any nation such shocks would be a disaster, for Syria it’s a perfect storm.
The Caesar Act was the first. Approved by the Trump administration in December 2019, and supported by the EU, its immediate effect was a strong depreciation of the Syrian pound, which lost almost 70 per cent of its value against the dollar in the following months. This spurred an inflationary spiral affecting food prices, which more than tripled in 2020.
On principle, the sanctions should have weakened the political regime of Syrian president Bashar al-Assad, but as the United Nations highlighted, its effect has only worsened the humanitarian crisis. In particular, the Caesar Act imposes secondary sanctions, which means they apply not only to American citizens or firms that engage in economic activities in a large number of economic areas in Syria, but also to any entity — regardless of its nationality. These sanctions are severely affecting the local economy especially in the construction, energy, and financial sectors, blocking any possibility of reconstruction in this phase of lower-intensity conflict.
The second shock was the financial and economic crisis in Lebanon. Lebanon serves as a hub for Syrian international financial transactions, and many Syrian households and firms hold deposits there estimated to be worth billions of dollar — at least $20bn, according to Mr Assad. Hence, Lebanon’s deposit freeze and capital controls have translated into a liquidity shock in Syria alongside a depreciation in the exchange rate. Moreover, the economic downturn in Lebanon led to a lower demand for Syrian products, damaging exports. On top of this, the devastating explosion at Beirut’s port in August 2020 destroyed, among many things, crucial silos, used for holding bulk materials, affecting Syria’s grain supply.
The third shock needs no introduction. Coronavirus landed in a Syrian healthcare system already weakened by war. Over the past 10 years, 70 per cent of medical personnel has fled the country and only half of pre-existing hospitals are still operating. While the pandemic could have turned into a real tragedy for Syria, the international isolation and the low degree of internal mobility helped to limit its spread. But the economic consequences have still been high. According to UNOCHA, Syria’s experienced a 50 per cent decline in foreign remittances due to the loss of expat jobs abroad and a lack of international travel, which has physically hindered cash transfers.
Perhaps one of the most dangerous consequences of COVID-19 has been the international community has forgotten about Syria.
Economic support, media attention, and political willingness to fix the crisis have been missing and the most recent steps are not sufficient to meet the magnitude of the problem. In March at the fifth Brussels Conference on “Supporting the future of Syria and the region” international donors pledged $4.4bn in 2021 (and additional $2bn in 2022 and beyond). That may sound like a lot, but in a joint statement preceding the conference several UN agencies declared that over $10bn was necessary. Given Syria’s pressing financing needs, the lack of sufficient external support will probably force the government to rely on money financing, which could further increase prices and make food insecurity even worse.
In order to overcome the humanitarian crisis and stabilise a free-falling economy, a serious review of the current sanctions regime is needed. Unfortunately, the Biden administration does not seem willing to change Trump’s approach, and in a recent speech to the European Parliament Josep Borrell, the EU High Commissioner for Foreign Affairs and Security Policy, declared that “There will be no end to sanctions, no normalisation, no support for reconstruction, until a political transition will be under way.”
To what extent a population should be put under strain in order to compel political change in a foreign country is an old and open question. But the inaction by the international community in finding a political solution to the crisis is no longer tolerable and the disastrous costs on the ground — which will only get worse — should not be forgotten.