Stasa Salacanin – Informed Comment Thoughts on the Middle East, History and Religion Sat, 22 Feb 2020 03:00:28 +0000 en-US hourly 1 With a Million Fresh Refugees and a 9-Year Civil War, Can Impoverished Syrians Survive? Sat, 22 Feb 2020 05:02:13 +0000 ( Middle East Monitor ) – A devastating civil war and international sanctions have destroyed Syria’s economy, leaving it with a GDP that is a third of what it was in 2010. The monetary crisis and depreciation of the currency is the latest chapter of the country’s economic meltdown. Despite the lack of accurate statistics, some agencies such as the UN Development Programme estimate that 83 per cent of Syrians live below the poverty line and close to 12 million are in immediate need of humanitarian aid.

The conflict has also had a drastic impact on economic activity. According to Chatham House researcher Zaki Mehchy, “By 2018, the total accumulated economic loss was estimated at about $428 billion, which equalled six times Syria’s GDP in 2010.”

The reduction in local purchasing power has hit Syrian citizens who are already facing a lack of basic services, such as access to clean drinking water, electricity, gas and fuel. The Syrian pound has nosedived to an all-time low, from 47 pounds to the US dollar in 2011, to almost 1,200 to the dollar last month.

Most of this can be attributed to the depletion of the country’s foreign currency reserves, which stood at $16 to 18 billion before the war. By supporting the regime’s war efforts, the Syrian Central Bank now has between just $700 million to $1.2 billion of foreign reserves left. This prevents the bank from taking any meaningful action against the falling currency.

READ: Turkey requests US air support as fighting heats up in Idlib

According to Souhail Belhadj-Klaz, a researcher on the transition process in Syria at the Geneva-based Graduate Institute, the country cannot reverse this trend if its regional and international isolation persists or increases. However, despite numerous obstacles, he said that Syria is not yet at the stage of hyperinflation. “This means that inflation in Syria is not out of control, and Lebanon and Russia are still providing stabilising support,” he told me.

Economic turmoil in neighbouring Lebanon, though, means that a vital source of hard currency from Syrians living there has been cut off. Syria’s economy has, in fact, depended on banking ties to Lebanon to keep business and commerce running. Lebanese banks imposed tight controls on hard currency transfers abroad and cash withdrawals, leaving many Syrians unable to access their accounts. The Syrian diaspora has been using Lebanon’s financial system as a conduit for sending funds to their relatives in Syria estimated at hundreds of millions per year. Cutting this off may be an existential blow to many individuals as well as to numerous Syrian importers, with a corresponding effect on the Syrian economy. Lebanon’s crisis has also affected the value of the Syrian pound, which has depreciated rapidly since mid-October when the protests broke out in Beirut and other major cities.

Syria’s President Bashar Al-Assad has taken some emergency steps to try to halt the dramatic fall of the pound. He has banned the use of foreign currencies, for example, and violators face a prison sentence with hard labour.

It is not clear, however, how Assad’s decree would apply to importers, as the government has stopped granting import licences for all but basic commodities. Since the beginning of the civil war, Damascus has become very dependent on external trade partners and almost all import payments are made in foreign currency, which increases the pressure on the Syrian pound.

In order to improve living standards, Assad’s regime announced an increase in monthly salaries for public servants of around $28 dollars last November. Many analysts, though, suggest that the government covered the cost by simply printing more money, further reducing the currency’s value.

In Belhadj-Klaz’s opinion, one of the ways to slow down currency depreciation and the destruction of the Syrian economy is to stabilise conflict at the national and regional levels — with Turkey — as a complete resolution is not possible at the moment, something of which the Syrian authorities are well aware. This would depend only partially on the will and capacity of the Assad regime.

What’s more, in the absence of direct foreign investments and ever-declining exports, the Assad regime’s space to manoeuvre is limited. The regime knows that Western states will not participate in the reconstruction process without a negotiated political transition, leaving Damascus with few options.

READ: Syrian opposition advances in Nairab

Assad has far better chances for negotiating economic support from the Gulf countries, said Belhadj-Klaz. Saudi Arabia and the UAE supported the late President Hafez Al-Assad in terms of grants, loans and investments, enabling the Syrian government to overcome several crises throughout the 70s, 80s, early 90s and later. Indeed, for the past two years, his son Bashar’s regime has been trying to set conditions for the re-establishment of relations with the Gulf States. However, any breakthrough would also require Assad to cut his links with Tehran, a precondition that he is unlikely to accept.

However, support from his fellow Arab regimes, if any at all, may be too late if accumulated economic problems spiral out of control as the recent protests suggest. After a decade of economic and existential despair, citizens of Shahba in Sweida province have lost their patience and gone out onto the streets to express their anger over rising prices, sanctions and the dire economic situation. While the protests have been anything but frequent, such public displays of dissatisfaction could spill over to the rest of the country, as has happened in Iraq, and perhaps lead to another Arab Spring and the overthrow of Assad.

According to Belhadj-Klaz, this is not likely, as the Syrian regime has managed to break up and isolate urban and village communities creating thousands of micro-territorial units with which it has negotiated micro-agreements of “non-aggression” or “support”. Hence, the spillover effect to other parts of the country is not very likely, with large parts of the country still insecure. Furthermore, the demography in Syria is against another popular uprising. As he pointed out, most of the younger generation have either left the country or are internally displaced and struggling for survival. Moreover, there is still no viable political alternative that could replace the current regime.

Nevertheless, Assad may barely survive the civil war. He may have retaken most of Syrian territory, but how long can he survive the economic crisis? Long term currency stability requires a healthy economy and a development strategy that at the moment seems like mission impossible.

Via Middle East Monitor

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TRT World: “Syrian pound continues to plummet”

After Trump Flaked Out re: Iran, Is the United Arab Emirates backing off Conflict? Thu, 05 Sep 2019 04:08:49 +0000 By Stasa Salacanin | –

The recently-held meetings between the United Arab Emirates (UAE) and Iranian officials have caught many by surprise, particularly given that, not long ago, the UAE – along with Saudi Arabia – was one of the main opponents of Tehran and a vocal supporter of the US administration’s policy of “maximum pressure” on Iran.

Despite long-lasting tensions between Tehran and Abu Dhabi, the UAE has dispatched two delegations to the Islamic Republic this summer, immediately raising questions about the reasons behind such a direct meeting between two arch-enemies.

The meetings come amid heightened tensions between the US and Iran as a result of the “tanker crisis”. Attacks on UAE tankers have made clear to Abu Dhabi’s authorities that Gulf countries would find themselves in the line of fire in the event of war between Iran and the US. The meetings should thus be understood as a response to Abu Dhabi’s support for the anti-Iranian agenda of Saudi Arabia and US President Donald Trump.

“The UAE had played with the lion’s tail, only to realize it would face the lion alone once he woke up,” Trita Parsi, the former president and founder of the National Iranian American Council, said of the situation.

According to Parsi, once the UAE realised that President Trump is not ready to engage in direct war with Iran, it decided to act preventively in order to secure its interests, making a gesture of goodwill towards Iran.

Yet according to Jonathan Cristol, a research fellow at the New York-based Adelphi University, these changes in regional relationships – for better or worse – are driven more by Saudi Crown Prince Mohammed Bin Salman (MBS) than by President Trump.

It is also likely that “Abu Dhabi Crown Prince Mohammed Bin Zayed (MBZ) realizes that being wedded to MBS’s KSA [Saudi Arabia] is not really paying the dividends that he thought it might,” Cristol explained.

Abu Dhabi Crown Prince Mohammed Bin Zayed [Roya News English/Facebook]

He continued: “The reputation of KSA in the US, which was never good, is worse than it has ever been (outside of the White House), and MBS’s failed regional gambits were starting to damage the reputation of the UAE in the US.”

However, the UAE’s manoeuvre has triggered opposing reactions. Some analysts have interpreted it as a sign of significant change in its regional foreign policy and evidence of a willingness to open up to Iran. Others, such as Theodor Karasik, a Middle East specialist at consultancy firm Gulf State Analytics, are convinced that the meeting is only about the UAE and Iran’s Coast Guards and “deals with fisheries and fishermen and nothing else”.

Both opinions are partly true. While it is undeniable that the UAE has lately demonstrated changes in its regional behaviour – especially in its decision to partly draw-down its troops in Yemen – it is premature to make any general conclusions as to whether these decisions, including maritime meetings with Iranian officials, may lead to a different foreign policy approach.

Yet, according to Cristol, “the UAE’s moves could be understood as an acknowledgement of reality, rather than changing their strategic approach.” As for Parsi, it all depends on whether this is a tactical play by the UAE or a strategic shift.

After all, two meetings with Iranian officials do not automatically lead to a strategic shift. One should not forget that both sides still see each other as great rivals in the region and hold opposing views on a number of regional issues. Moreover, a territorial dispute over three islands in the Gulf seriously blocks their capacity for bilateral cooperation.

Nevertheless, it seems that that the UAE is carefully trying to reassess its current policy, including is relations with a close ally – Saudi Arabia.

Matteo Colombo, associate research fellow at the Italian Institute for International Political Studies (ISPI), said that it is important to understand the current political context in which the decision was made. The UAE’s reconciliatory tone towards Iran should thus be understood in the context of each state pursuing its policy more autonomously than in the past.

Moreover, with President Trump who, in Cristol’s words, “changes his mind at the speed of a tweet,” so unpredictable when it comes to foreign policy, “it makes good sense for regional actors to explore all options and to have at least cordial relations with every actor, which is good practice for any small state”.

US President Donald Trump in Washington, US on 23 October 2018 [Ron Sachs – Pool/Getty Images]

Although officially Riyadh remained silent about the UAE’s two missions to Iran, it is very likely that the move is seriously testing the strength of the Saudi-UAE alliance. The Kingdom is also unsure how the UAE’s latest diplomatic manoeuvres will affect the relationship between Saudi Crown Prince MBS and his mentor, Abu Dhabi Crown Prince MBZ.

According to Colombo though there might be significant behind-the-scenes tension between Saudi Arabia and the UAE, none of the experts contacted believe their historical alliance will collapse. While the Saudis may feel betrayed and offended by the unilateral shift of its close ally, they may also use the UAE to test Tehran’s will to commit to constructive dialogue, which would ease tensions in the region.

“I do not think Saudi Arabia is in a position to lose such a key ally in the current context, meaning it will ‘forgive’ the Emirates and turn a blind eye towards Abu Dhabi,” Colombo told MEMO. At the end of the day, he added, “to have a mediated line of communication with Tehran might also be in the Saudi interest in the future”.

For his part, Colombo does not rule out the possibility of the UAE acting as mediator between the US administration and Iran in the event of a worsening political crisis. Distancing itself from Saudi Arabia would make the UAE a more credible broker in this scenario.

This would also be a win-win situation for Abu Dhabi, given that “if the crisis grows worse, it could still side with the US and the other Gulf States, and if it gets better, it can launch an initiative to ease the tension,” Colombo noted.

To sum up, the UAE’s recent decisions regarding Iran and Yemen, according to Colombo, form part of an ongoing trend which has seen the main states in the region adopt a more-autonomous foreign policy. This trend has also seen increased fragmentation, in which traditional alliances are less stable and states tend to pursue their policies more independently.

This trend will likely continue in the case of the UAE, albeit within certain limits. While the UAE will probably not make any U-turns, one may expect more carefully balanced initiatives that will not always be met with sympathy by their powerful neighbour.

Above all, it seems that the UAE is introducing a “UAE-first approach”, primarily focusing on its national interests which could sometimes oppose Saudi Arabia and even the US. This is, according to Colombo, quite a change in the worldview of the Emirati leadership.

Stasa Salacanin is senior correspondent for Qatar’s business newspaper BQ Magazine, Salacanin concentrates on issues relating to the GCC, including in-depth analysis of the oil and gas sector, aviation, hospitality, as well as international relations and geopolitical subjects.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor or Informed Comment.

Via Middle East Monitor

This work by Middle East Monitor is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.