The economic war on Syria: Why Europe risks losing

The economic war on Syria: Why Europe risks losing

Commentary


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Sanctions can never be ‘smart’; new EU and US measures on Syria are only likely to strengthen the regime, not weaken it

As the frontlines in Syria largely fall silent and the Syrian government works on reasserting its control across the country, a new war is in the making: that of the West on the Syrian economy.

Over the last few months several new punitive measures have been inflicted on the Syrian state. In November the US Treasury Office of Foreign Assets Control issued a new advisory threatening sanctions on ships transporting oil and gas to Syrian ports. And this month the European Union issued new sanctions against several Syrian businessmen and companies operating inside the country. In the United States an expansive bill is awaiting Senate approval, one which would see crushing sanctions not just against Syrian government entities and affiliates, but also third parties and states that take part in reconstruction. These are on top of the numerous sanctions imposed over the last eight years. The new measures aim to ensure that Western actors do not play any role in strengthening the reconstituted Assad order; they seek to pressure the Syrian government into changing its behaviour in return for sanctions relief and reconstruction aid.

These targeted sanctions criminalise the Syrian government as a whole, and consequently those who do any work in government-held territories

Yet this policy reveals a dangerous and fundamental misreading of both the Syrian government’s proven history of seeking to withstand pressure – at the expense of the Syrian population – and the extent to which the government’s allies will step in to ease the pressure – increasing their own influence within the country in the process. Not only will this policy prove ineffective in shifting the government’s behaviour towards the West’s desired goal, it will also have a hugely detrimental impact on the most vulnerable members of Syria’s population, significantly increasing the likelihood of further flight from Syria to countries with more opportunities and stability.

Sanctions often serve as an expression of moral outrage for Western policymakers.  And certainly, moral outrage is justified. The Syrian regime has committed enormous crimes against its own people. But outrage is not a strategy and Western sanctions as currently envisioned reveal a scorched earth policy that indiscriminately and arbitrarily punishes ordinary Syrians and threaten legitimate businesses.

Sanctions impact

While the government’s behaviour plays a central role in creating the desperate conditions on the ground, the sanctions on Syria have also exacerbated this suffering, as UN officials point out. Described by experts as the “most complicated and far-reaching sanctions regimes ever imposed”, the mixture of targeted, financial, and sectoral sanctions has created a situation today where Syrians are being punished twice: once by an authoritarian and corrupt government, and again by the international community through the imposition of inhumane and destructive sanctions.

And this is only getting worse. The latest OFAC advisory led to Syria’s most serious gas crisis in recent years, in the peak of winter. Within 48 hours of its issue, insurance companies cut their ties with vessels going to Syria, ships stopped sending their cargo, and the gas all but dried up. In an effort to deal with the crisis, the Syrian government asked prominent businessmen to buy vessels and transport gas from Iran and Russia, uninsured, which is highly risky and expensive. The cost of shipping has now soared due to the risk.

Inside the country today, ordinary Syrians are queueing for hours to buy a canister of gas to heat and cook with. Electricity cuts are plaguing the country. There is growing and very public discontent among the population. The situation has become so dire that government officials are acknowledging it and warning the population to brace themselves for ‘storms ahead’. As one Syrian official pointed out to this author, “the economic war is far worse than the military one, as the economic one enters into every single household and no one is untouched by it.”

Sanctions have left a larger and, in some cases, fatal impact beyond their intended goals: much has been reported about critical medical equipment and pharmaceuticals still being prevented from reaching Syria, including life-saving cancer medication and hospital equipment, because of the terms stipulated in the sanctions.

After eight years of conflict it is clear that sanctions have made absolutely no impact on shifting government positions. Meanwhile, sanctioned figures remain the dominant business actors in Syria today and, where it closes off opportunities for some, other government-affiliated figures quickly rise up in their place. The recent visit to the United Arab Emirates by a large delegation of Syrian businessmen and officials to drum up investment in Syria’s private sector was headed by Mohammad Hamsho – who has been on the sanctions list since 2011. Some actors are now profiting as a direct result of the sanctions-based economy, while average Syrians are forced to find alternative – and increasingly expensive – ways to bring in basic materials in order to survive.

A major flaw in the recent EU sanctions and the proposed US sanctions is that they fail to distinguish between the regime, the government, and non-official institutions. They do not define what the regime is, and what behaviour and business practices they accept as legitimate. Essentially these targeted sanctions criminalise the Syrian government as a whole, and consequently those who do any work in government-held territories.

The most recent instance saw several wealthy Syrian businessmen, including prominent Samer Foz, named in the recent EU sanctions. Foz rose to prominence when he became one of the very few businessmen to stay in Syria in 2012 following massive flight of the Syrian business community. Foz is listed because he is one of several developers who has invested in the Marotta Project, which is frequently conflated with Law 10, a recently introduced measure which is seen as an ‘anti-opposition’ bill that legalises the deliberate displacement of opposition supporters from certain areas.

In theory, Law 10 is based on an international practice that has been widely used across continents for decades. This provides a model through which countries affected by war and destruction can rebuild, using minimal state investment and depend instead on the private sector to invest. Meanwhile, the Marotta City project is a luxury real estate development project based on the notion of buying plots of land in return for shares in the project. It is not a project based on Law 10 – it was developed prior to the law’s creation. While it has bought out those who lived there, it is not an anti-opposition political project, rather a project that should be defined as neoliberal, serving upper-class investors at the expense of the lower classes.

What the Syrian government did was take the international practice and develop it into very poorly constructed legislation; it saw the Marotta City project as a viable redevelopment project that could be applied across the country in order to extract money from private investors and limit its own funding in reconstruction. What subsequently came out was a bill that discriminates against the poor and sees all land seized for small entitlements that will not be enough to secure their access to the newly developed residential areas.

For the government, Foz and others are useful as their businesses and investments inside the country contribute towards keeping the economy running. But at the same time, there is no friendship or loyalty to the top businessmen. Like the population as a whole – rich or poor – they are viewed as a resource to plunder.

In this context the sanctioning of Foz effectively represents a European attempt to crack down on business activity in government-held territories, equating it with “regime” efforts. It also implies that Syrian businessmen are guilty of regime crimes simply for participating in business opportunities inside Syria, warning them it is now illegal to work with local governing bodies and institutions. Such targeted sanctions also fuel the businesses of less savoury characters who are wholly embedded with the regime.

This may, in part, be the Western objective, but it risks debilitating the entire economy for which the wider population will pay the largest price. Foz and others like him represent an important source of wider economic activity and jobs, which risk now being curtailed.

The view from Damascus

The perspective from Damascus is that the Syrian state, and the population living under its control, will weather the sanctions storm. Not because people necessarily support the government, but because there is no alternative – both the state and the population know this. Indeed, this provides an easy alibi for the government to blame its own shortcomings on the actions of hostile external actors. In fact, the government’s control of patronage networks means that increased shortages caused by sanctions will help further solidify its control.

The Syrian government will continue to seek out partners to help alleviate the pressure, and today there are more actors willing to work with it, with few or no preconditions, in an effort to secure their own interests and get a slice of the post-conflict Syria pie. There are now ongoing talks between Iran, Iraq, and Syria to boost energy links between the three countries across their land borders. Within a week of the new EU sanctions, the Syrian government signed nine memoranda of understanding with Iran.  If successful, all these business ventures will address a number of the economic issues inside the country, including the gas shortage, removing this pressure from the government, while also giving Iran more access to the Syrian market.

The Syrian government has been under various sanctions since the 1980s and is therefore used to them. These new sanctions, and the possibility of even wider sanctions that would place punitive measures on partners who are looking to participate in reconstruction and investment opportunities in the country, will only strengthen interdependence between actors in Syria that the West considers to be problematic.

Moving forward

Sanctions are not ‘smart’. They create and empower oligarchs who, when targeted by sanctions, double down, become more powerful, and multiply in number. Sanctions also force the worst impulses of economic interaction across the entire market and destroy legitimate businesses while strengthening illegitimate ones. And many small- and medium-sized enterprise owners in Damascus are today suffering because of the rise of war profiteers, who have been enabled by the sanctions. These sanctions are likely to make life miserable for the ordinary Syrian, which in turn will feed ongoing instability and the prospect that some may choose to migrate to Europe.

In recognition of the dilemma of how to deal with Syria’s post-conflict phase with the Assad government still in place, the West clearly does not need to actively do business with Assad or “regime” elements. Nor does it need to actively fund reconstruction. But, even as it maintains this distance, it needs to be far more honest about the counter-productiveness of a tool, and particularly sectoral sanctions, which will produce little in its stated intentions and instead have a detrimental impact on the wider population.

Read more on: The Middle East and North Africa,Syria / Iraq / Lebanon,Syria

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