To mitigate Caesar Act’s economic impact, Syria bets on neighbors, would they come to its rescue?

BERLIN – The Caesar Syria Civilian Protection Act will be enforced mid-June; however, the economy squad of the Syrian government is already fretting with anxiety. The legislation is all about economic sanctions, imposed on the Syrian government and the countries bracing it. Moreover, the Act’s approaching deadline syncs to a dramatically broken chart of exchange rates, with the U.S. dollar amounting to over 2800 Syrian Pounds, for the first time in the latter’s history. 

Worse yet, the Act corresponds to an acute decline of the gross domestic product (GDP), which sloped down from $61 billion in 2011 to a staggering  $10 billion in 2019, according to the Damascus-based Central Bureau of Statistics. The state’s general budget, however, dwindled from $18 billion in 2011 to $8 billion in 2020, while unemployment’s rates jumped from 10% to about 83% this year, with poverty’s rates amounting to 93% at the onset of 2020 compared to 24% in 2011.

 These figures mirror the dilapidated state of economy and the unserviceable infrastructure, with 27% of the country’s housing units destroyed and 76% of its industrial capacity disabled, in addition to losses in the sector of agriculture that hit $25 billion while tourism lost $14 billion, leaving the oil sector to struggle the most, as it approximately lost $60 billion.

Looking south for solutions

Seeking a solution, the Syrian government attempted to resume commercial ties with its southern neighboring country, Jordan. Thus, early 2019, signs of the Jordanian-Syrian rapprochement grew, though the affairs between the two countries have been almost frozen since 2011.  The Hashemite Kingdom of Jordan, for its part, upgraded its diplomatic representation in Syria by assigning a Jordanian counsellor grade diplomat as the Chargé D’affaires.

These diplomatic démarches were hailed by the reopening of the Jaber-Naseeb border crossing in mid-October 2018, after a three-year-closure. The crossing’s reopening is thus weighted because that border route is commercially significant for the two countries alike, the Syrian government alone makes about three billion dollars in transit trade every year.

However, Mohammad Sabra, the chief negotiator of the Syrian opposition’s delegation to “Geneva IV” talks, has a different idea. In an interview with Enab Baladi, an opposition media outlet, he said that Caesar Act’s importance “lies in the fact that it put the whole Syrian economy under the American microscope, including trade relations with neighbors.”

“No company can today initiate commercial relations with the regime, fearing the sanctions. This transpired months ago, when the U.S. advised the Amman Chamber of Commerce and Industry not to embark on any joint commercial pursuits with the regime,” Sabra added.

Nonetheless, Khalil Haj Tawfiq, the chairman of the Amman Chamber of Commerce, refuted Sabra’s statement. “The Amman Chamber of Commerce has not held a meeting with anyone from the U.S. embassy or administration at least since 2019. We have not been advised or contacted on the issue,” he told Mari.

“The Chamber’s position is clear. That is dealing with the Syrian private sector,” stressed Haj Tawfiq, especially since a delegation from the Damascus Chamber of Commerce has visited Amman just recently. “The Syrian delegation asked its Jordanian counterpart to return the visit, but the current Coronavirus outbreak stood in the way.” 

 “The information we have indicates that the U.S. Embassy Commercial Attaché in Amman met private-sector businessmen, not the Amman Chamber of Commerce,” he added, believing that, “The Caesar Act makes an exception of some commercial activities, such as contribution to the reconstruction of schools and certain sectors.”

In that respect, Mohammad al-Abdallah, CEO of the Washington-based Syria Justice and Accountability Center, disagreed with Haj Tawfiq on the probability of starting the reconstruction process in the meantime, for “reconstruction’s cost amounts to some $500 billion, while we cannot call the rebuilding of a house here and another there, helped by people abroad, a reconstruction.”

“Iraq was unable to help the regime out of the current distress, not even Iran, which is already suffering from severe fiscal strains and an economic problem that is looming just beneath the surface,” al-Abdallah said.

Lebanon playing Syria’s backyard

Lebanon has always been the Syrian government’s venting place, and its escape from sanctions too, with which it has been grabbling since the1980s. Furthermore, the repercussions of the recent Lebanese financial crisis have perhaps reflected the extent of the Syrian economy’s dependence on Lebanese banks and inflicted massive damage upon it, not to mention that it was then that the Syrian Pound hit its lowest record.

To block the commercial relations between the two countries is impossible, as they share more than 136 smuggling crossings, as stated by Lebanese government sources, which supplement the Lebanese Treasury with about $600 billion in custom revenues, keeping in mind the goods and commodities price disparities in both countries.

According to the CEO of Syria Justice and Accountability Center, “The Lebanese government has shut down about a hundred smuggling crossings between the two countries. It, further, attempted to close the whole lot,” for the Lebanese government is “enduring an acute financial hassle. It is, thus, impossible to violate the Caesar Act, fearing the backlash.”

 On top and above that, Hezbollah would not take chances by breaching the US-imposed sanctions, making Lebanon vulnerable to further ones, given that Lebanon is bearing witness to what sounds like a “a hunger revolution,” as he put it. “Any Hezbollah adventure, [therefore], will lead the street sentiment to an explosion, greater than its current one.”

The Syrian Pound’s decline rate, effected by the Lebanese economic crisis’ outbreak halfway through last October, being estimated at 30%, indicates the measure of the Syrian market’s dependence on deposits in Lebanese banks—estimated as amounting to $50 billion.

Lebanese journalist Fatima al-Othman said that, “Lebanese banks’ branches operating in Syria have acted ahead of the Caesar Act. They closed those branches and returned to Lebanon. This was what the BLOM Bank has done,” indicating that, “Lebanese banks will distance themselves from the sanctions, [given that] the Central Bank of Syria is subject to them.”

“The Lebanese government has avoided an open discussion of the Caesar Act and how it relates to Lebanese companies and businessmen that maintain commercial ties with the Syrian regime,” she told Mari.

The political activist Abdulqader Ammash, on his turn, believes that the Lebanese government will not abide by Caesar Act’s provisions, prohibiting dealing with the Syrian government, given “the mutual benefit achieved by the Syrian government and Hezbollah in Lebanon.”

In a statement to Mari, Ammash cautioned against the “setbacks” that will affect all Lebanese components that are politically at odds with Hezbollah, for “illegal crossings are all controlled by Hezbollah.” That is “they will be mainly used to escape international censorship. The revenues, however, will be Hezbollah’s and its loyalists at the disadvantage of the entire Lebanese economy.” 

Mohammad al-Abdallah again stressed that, “Lebanese banks would not dare to violate the U.S. sanctions as they did before,  through opening bank accounts for figures under international sanctions,” as Panama papers leaks revealed, pointing to  persons such as Ihab, Rami, and Mohammed Makhlouf, who covered themselves with proxies. He attributed this to the fact that “sanctions will deter these banks from opting for suspicious moves.”

“The U.S. will not better regard Lebanon than it did the United Arab Emirates, which is a strong ally. Despite this, Samer Foz’s assets in Dubai were frozen,” he said.