The collapse of the Syrian pound… its causes and implications

The Syrian pound has fallen, since the beginning of May this year, to a level not seen in its history to 1805 pounds against one dollar, so that the Syrian market will be affected in one way or another by that collapse, which resulted in a new rise in prices.

There are factors and reasons that still wreak havoc with the economy of the Syrian regime, almost toppling it had it not been for the laziness of the international community and the failure of the active states in the Syrian equation to find a synthesis of the common denominator for all, a task that is not impossible if there is political will.

Coronavirus pandemic, oil price falling, and Washington’s continued policy of maximum pressure on Iran, the main supporters of Syrian President Bashar Al Assad, conditions that confused Tehran and pushed it to retreat and preoccupy its internal concerns, and forced it to curtail its foreign arms, especially in Syria, Iraq, and Lebanon.

Iran’s weakness, the almost exclusive supporter of Syrian government, has deepened the wounds of the latter, exacerbated its economic and financial crisis, which it has suffered for years, and caused the collapse of the Syrian pound against the dollar.

What increased the calamity of the Syrian government, the increase in the frequency of intra-regional differences within its infrastructure, and within the narrow circle of the Assad family.

These differences and cracks began to appear to the public, after it was anthrax.

The last differences between the components of the Syrian government are that Rami Makhlouf, the president’s cousin and one of the main pillars of the Assad regime, raised the banner of disobedience against the president.

However, what sounded the alarm bell, accompanied by Makhlouf’s disobedience of media exchanges between those close to the Kremlin on the one hand, and those close to the Syrian government on the other side, which confirms that the differences have an international external dimension that transcends the internal Assad regime circle.

The Syrian pound fell in the parallel market for currencies inside the Syrian cities, to record levels that exceeded 1,800 pounds per one dollar.

This decline is driven by the escalation of differences within the structure of the Syrian government, reinforced by the defection of businessman Rami Makhlouf, the cousin of President Bashar Al Assad.

Since the beginning of 2020, the exchange of the US dollar has risen against the Syrian pound by about 60 percent, as the lira ended the 2019 trading on the black market at 915 against the dollar.

According to the exchange rates of the last days, the Syrian currency has lost more than 29 times its value against foreign exchange since the revolution in 2011, when the price of the dollar was an average of 50 pounds.

 

Reasons of the Syrian pound decline

The Syrian pound is experiencing the worst period and the lowest level in the history of the Syrian state, due to several reasons that can be summarized through three main factors.

First: economic factors

– The drop in oil prices on the international market, which negatively affected the countries supporting the system, due to their heavy dependence on oil trade in their economies.

As a result, Iran’s cash assistance to Syria decreased.

– The Central Bank of Syria is free from foreign exchange and gold, as the presence of foreign currency reserves and gold are the main pillars upon which national currencies are based.

The central bank has become empty of foreign exchange reserves, due to the stoppage of the transit revenues of land, sea and air transport, and the stopping of the export movement, the largest contributor to foreign currency revenues.

– The production wheel almost completely stopped, and the system became importing the necessary commodities from abroad, whereby purchases are made in foreign currency, especially the dollar, which led to an increase in demand for it, a shortage in the market, and thus a rise in its price at the expense of the local currency.

– The exit of petroleum, wheat, legumes and a number of important strategic commodities from the hands of the government.

– The decrease of the local national product in Syria, and the wheel of production and the economy was largely stopped.

As factories and production lines were destroyed, the infrastructure was heavy demolished, which is considered the most important pillar of the economy.

The high level of poverty among Syrians, due to internal displacement and emigration, and more than half of the population has turned from productive workers to unemployed consumers.

Remittances from abroad have stopped, as Syrians abroad have become concerned with supporting and providing relief to their families, who have become internally displaced people and refugees in the diaspora.

Second: Political factors

– Economic sanctions on the countries that support the Syrian government, Iran first and then Russia, in addition to instability in both Lebanon and Iraq, the two lungs of the system through which they breathe, especially Lebanon, especially the Lebanese banks and banks that are the storehouse of the currencies of merchants who deal with the system by securing currencies foreign currency, as these banks prevented the disbursement of large sums of money to their customers, which created a cash and liquidity crisis at the end of the system to a large extent.

– US and European sanctions imposed on key figures in the Syrian government, which are considered economic arms, such as Rami Makhlouf, Samer Al Fouz, Wasim Qattan, and quite a few officials and merchants who believe in the needs of the government from abroad.

– Funding the military campaigns against the opposition forces, and insisting on the option of a military settlement for nine consecutive years, which took away the regime from all its economic capabilities.

Low activity of international organizations, in both opposition and order areas;

These organizations were providing grants and opening relief projects in foreign exchange, which was one of the important sources of hard currency in Syria.

– The aggravation of the disagreement between Makhlouf and Assad led to the cessation of many economic activities that were related to Makhlouf’s companies, and his companies became converting their assets from the local currency to foreign currencies, then transferred them out of the country, so the demand for the latter increased, and the supply of the Syrian pound increased, and the price decreased.

Warlords are turning their balances of dollars out of Syria, with the US implementation of the Caesar Act approaching.

Fears of the escalating tensions in the Middle East, which reflects Iran’s weakness and its inability to support the Syrian economy.

Third: Administrative factors

The absence of the state’s logic among governmental institutions, since the Iranian model imposed itself in Syria, so the Syrian state / regime has turned from institutions to mere militias that consider themselves the guardians of the homeland, do not respect the law, do not apply policy, and do not observe instructions, so that the economy becomes a prisoner of warlords, Among the field commanders in the army of the regime and the militias that have made large sums of money from the war, crippled the movement of state institutions and lost their ability to make their own independent decision.

The central bank comes at the forefront of state institutions that suffer from paralysis, and the inability to take the appropriate sovereign decision; It was natural for him to not be able to deal with the problem of the depreciation of the lira.

This is in addition to a series of failed monetary policies that have led to the deterioration of the price of the lira against the dollar over the years of the war, and this has contributed to losing its value against the rest of the currencies.

In an attempt to control the state of chaos in the Syrian market, amidst widespread public discontent with high prices and inconsistencies with the price bulletin of the Ministry of Internal Trade and Consumer Protection, the president Bashar Al Assad issued two presidential decrees, the first of which was the exemption of the Minister of Interior Trade and Consumer Protection, Atef Al Naddaf , From his position, and the appointment of the “controversial” governor of Homs, Talal Al Barazi, as his replacement.

As for the second decree, it stipulates that imported raw materials subject to a customs fee of 1 percent will be exempt from all customs duties and taxes imposed on import for a period of one year, as of June 1st.

According to the head of the Damascus Chamber of Industry and its countryside, Samer Al Debs, in an interview with the local Syrian newspaper Al Watan, the issued decree would reduce the prices of local products in the Syrian market, as it saves the Syrian industrialist about 10% of the value of his bill of raw materials imports, which was paid as a non-customs duty and add-on.

However, the suffering experienced by the Syrian economy, from the deterioration of the Syrian pound and the Western economic sanctions imposed on the government, in addition to the Coronavirus pandemic and the subsequent measures, make it almost impossible to control markets and monitor prices, and make them commensurate with the income of individuals, and therefore the government’s procedures that came in lost time, you will only be a temporary dressing for a deep wound.

There are actual economic factors related to the decrease in Syria’s foreign exchange resources, and the increase in expenditures from it to secure the needs of citizens, especially in light of the low level of domestic production and the lack of exports, compared to the total dependence on import.

The economic and political crises that the Syrian government suffers from will push its pillars to reconsider their own accounts, after realizing the limited capabilities of Syria to confront the sanctions and the isolation imposed on it, in light of the inability of Iran and Russia to help it due to their internal crises.

Moscow has become convinced that if the current situation in Syria continues, without profound reforms affecting the foundations of the political system, the collapse and the fall will inevitably come.

And that as long as the Assad family remains in power, no serious reforms will be achieved, and that Assad is still playing on the contradictions of Tehran and Moscow and trying to raise funds in his hands, through the role played by his wife Asma, through its hegemony over Syria Tell and other institutions that constitute the backbone of the Syrian economy.

Moscow admits that it failed during its intervention in Syria to win an elite loyal to it, and that it did not work to establish a political force supporting it.

Russia, which raised its global role and achieved great strategic gains, after returning to the Middle East, through the Syrian gate, is today threatened by “Middle Eastern obstruction”, according to the Russian experts: Anton Mardasov and Kirill Simeonov, it is unreasonable to allow the Assad government to destroy Russia’s accomplishments.

It is true that knocking on the door of Washington will be one of the most hated matters for the Russians, but it remains the lesser evil than seeing Syria turns into new Afghanistan for Russia.