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Middle East

Syria: 30 years on, are sanctions finally starting to pinch?

Shipping container is seen at the port of Tartous in Syria. (Reuters)

BEIRUT: Syria’s political leadership has weathered sanctions for over three decades, but experts say a more multilateral approach from the United States and European Union may be taking its toll on the Syrian economy.

On Monday, citing anecdotal evidence, U.S. State Department spokesperson Victoria Nuland said the Assad government is beginning to feel the “pinch” of U.S. and EU sanctions.

“We do believe that the sanctions that we have put on Syria, that the EU in particular has put on Syria are beginning to pinch,” Nuland told reporters.

And late last month the Syrian Prime Minister Adel Safar told journalists in Damascus the economy was being “affected” by the ongoing developments in the country, without referring specifically to sanctions.

Despite no immediate sign of change on the ground, some say the agreement by the Syrian government on an Arab League plan last week represents a subtle switch from the usually defiant government policy toward outside pressure.

But to what extent can sanctions impact a government that has resisted such methods for decades?

“With the U.S. sanctions they could survive. But the EU sanctions are not something they bothered to think about. Now they can’t sell oil anywhere."
“With the U.S. sanctions they could survive. But the EU sanctions are not something they bothered to think about. Now they can’t sell oil anywhere. Even China is thinking twice about docking in Tartous,” says Rime Allaf, a Syrian researcher at Chatham House, who was against all previous sanctions on Syria but supports the current round because of its aim of ending the violent crackdown on civilian protesters.

“This is one of the reasons they publicly accepted the Arab League plan.”

Since the uprising began in mid-March, the U.S. and the EU have imposed sanctions on individuals connected with the government through freezing assets and on oil exports.

In 1979, after declaring Syria a state sponsor of terrorism, the U.S. Congress imposed its first set of sanctions on Syria. This was followed by new rounds of sanctions every few years, the most comprehensive and controversial of which was the Syrian Accountability Act, signed by Congress in 2003, which included bans on nearly all exports to Syria, U.S. businesses operating or investing in Syria and a pre-emptive ban on U.S. commercial flights to and over Syria.

The sanctions, which were generally condemned by the Syrian public and were shown to have loopholes, saw no change in Syria’s foreign policy or political leadership.

NEW SUPPORT

Experts say that the latest sanctions are different. Their multilateral approach, and the fact they are aimed at the Syrian government’s domestic, rather than international policy, means they are achieving their intended result.

Omar Dahi, assistant professor of economics at Hampshire College in Massachusetts, says previous sanctions on the Syrian government were imposed as a result of actions that perhaps many Syrians agreed with.

“This is not the case today,” he said.

“Syrians did not accept that Syria be punished for having an independent foreign policy, but now they do want to see the regime held accountable for human rights violations and killings.”

“Now people are demanding the sanctions,” says Chatham House’s Allaf, “even a lot of the so-called pro-stability people, after Hama [when it is believed around 200 people died between July 31 and Aug. 4 in a crackdown on civilian protesters]. There was only so much they could take.”

Today, almost all opposition groups are calling for some sort of sanctions, although they are not always in agreement as to how such measures should be implemented.

“There seems to be significant support within large segments of Syrian society for international actions aimed at weakening the regime and speeding a transition to democracy,” says Steven Heydemann, a senior adviser at the U.S. Institute for Peace who focuses on Syria. “The regime’s response to the uprising is the single most important cause of economic suffering experienced by most Syrians, and they are keenly aware of this.”

FACT BOX:
History of sanctions on Syria

»  1979: The United States begins imposing sanctions on Syria, the same year it declares it a terrorist-sponsoring state. This includes restrictions on arms imports, in line with the 1976 International Security Assistance and Arms Export Control Act, requiring the termination of foreign assistance to countries that sponsor terrorism. In addition, the 1979 Export Administration Act requires the Secretary of Commerce and the Secretary of State to notify Congress before licensing export of goods or technology valued at more than $7 million to countries determined to have supported acts of international terrorism.

» 1985: The maximum export value to Syria without the required notification is amended to $1 million.

» 1994: The passage of the Anti-Economic Discrimination Act bans the sale or lease of U.S. defense articles and services to any country that has requested companies’ compliance on their boycott of Israel.

» 2003: The U.S. House of Representatives signs the Syrian Accountability Act, putting into place its most comprehensive set of sanctions on Syria to date. The sanctions include: bans on nearly all exports to Syria; U.S. businesses operating or investing in Syria; the operation of already non-existent U.S. commercial flights to and over Syria.

» 2004: The U.S. Treasury identifies the Commercial Bank of Syria as a primary money-laundering concern.

» 2009: U.S. president Barack Obama, in line with a campaign promise to reach out to former foes, allows for the import of computer and airplane parts.

» August 2011: Obama adds further financial restrictions on Syria, banning U.S. citizens from new investment or exporting to Syria. Since the beginning of the unrest, the U.S. has frozen the assets of 32 Iranians and Syrians and their companies, prohibiting them from doing business in the U.S. financial system. The same month, the EU extends its sanctions to ban oil imports from Syria, costing Syria 90 percent of its export market in that sector.

Source: U.S. Treasury/The Daily Star

A DIVIDED BUSINESS COMMUNITY

The urban educated are mobilizing. Last week, hundreds of students staged a demonstration demanding the fall of the government at Kalamoun, a private university in Damascus. But at this point, both the sanctions and the protest movement are still only openly supported by a minority of the population.

Attendees told The Daily Star tensions were high at a recent Chamber of Commerce meeting in the central business district of Aleppo, where individuals voiced discontent over recently imposed, then quickly scrapped plans to enforce self-sanctions which banned imports.

“There are many members of the business community who remained loyal to the government,” says Dahi, who traveled to Syria in July to observe what was taking place inside the country. “On the other hand there are members of the business community who are opposed but who find it difficult to speak out for fear of repression.”

This, combined with the fact that Syria has long been accustomed to living under sanctions, makes it likely that the government can sustain at least several more months of economic pressure.

“Syria has the most self-sufficiency of any Arab country with most products,” notes Assem Seifeddine, associate dean of the business school at the American University of Beirut.

IS LEBANON A VIABLE ESCAPE ROUTE?

Seifeddine believes that even with the new banking restrictions, sanctions will be difficult to enforce inside Lebanon, particularly with the country’s policy of banking secrecy.

“It’s easy to get around sanctions,” he says. “It’s difficult for Lebanon to comply with the terms, especially when the two countries are so interdependent … It’s very difficult and delicate, telling them they can’t do business with Syria.

“Lebanon has a vested interest in seeing the [Syrian banking] sector succeed,” he added.

“I don’t think Lebanon could benefit from any crisis in Syria,” says Sami Nader, economist and professor at St. Joseph University in Beirut … The Lebanese financial system is at stake. It’s the pillar of our economy. One has to be very cautious.”

Syria has historically overcome sanctions through illegal trading routes with Lebanon, where for years smugglers have thrived in the Bekaa Valley. But now, with Syrian and Lebanese troops amassed along the border, and land mines reportedly having been planted by the Syrian military, the informal trade between the two countries has nearly come to a halt, local businessmen told The Daily Star in late October.

CAN SYRIA REACH FOR ITS ALLIES?

Syria has long been adept at circumventing economic pressure from the West through its Eastern allies. It continues to have a close relationship with Russia, including hosting Russian bases, and over the past 10 years China has become a strong trading partner. Both countries vetoed a U.N. resolution last month condemning Syria’s crackdown on protesters.

In September, Syrian Finance Minister Mohammad al-Jleilati told Reuters that it could sidestep oil sanctions from the EU, which accounts for at least 90 percent of Syria’s energy market, by selling oil to Russia and China.

“We will either refine it … or sell it directly to Russia, China or any country that accepts to buy our extra oil,” Jleilati told Reuters. “Otherwise we will keep it as reserves.”

China has said it would only be interested if the oil were sold at a huge discount, and Russia, an energy exporter, is even less likely switch to Syrian oil.

But last week Lithuania banned Syrian cargo planes from crossing its airspace amid concerns that they could transport military cargo, in line with EU sanctions, the Defense Ministry said.

Syria’s state oil company Sytrol last Thursday announced that it had canceled a tender to sell 50,000 tons of fuels – a possible sign that oil firms are concerned about sanctions. Meanwhile, on Wednesday Swiss refiner Petroplus said it had to switch from Syrian to Iraqi crude.

Not everyone favors sanctions.

Hussein Zeaiter, assistant professor of economics at Lebanese American University, said while sanctions are directed toward the Syrian government, they affect the Syrian people as well.

“These sanctions will leave the Syrian government fewer choices for any possible peaceful solution they might have, which will make the crisis worse.”

 
A version of this article appeared in the print edition of The Daily Star on November 09, 2011, on page 8.

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