Cratering Syrian Economy? Blame it on Assad, not on Caesar
The Caesar Act debuted on June 17, preceded by warnings of dire consequences for the Syrian and Lebanese people and institutions that do business with the country. Many analysts built their doomsday scenarios largely on comparisons to the suffering of the Iraqi people during Saddam Hussein’s regime. They raise a legitimate concern with the accuracy of the notion that you can target sanctions well enough to prevent “collateral damage.”
In fact, there are several considerations in determining the likely impact of the Caesar Act sanctions: the current state of the Syrian economy and how it got there; the likely targets and how these affect the Syrian people, Lebanon, and the Lebanese doing business with Syria; how the sanctions will be implemented and sustained; and possible responses from external actors, mainly Russia and Iran, and even China.
As Joseph Daher mentioned in a Diwan interview, “Contrary to the claims repeated on an almost daily basis by Syrian government officials, sanctions, and so-called “foreign conspirators” are not the main reasons for the socioeconomic problems in the country. The Assad regime is mainly responsible for this situation thanks to its economic policies and the destruction it caused during the war, alongside its allies Russia and Iran.”
He acknowledges that the Caesar Act sanctions may well contribute to increasing the socioeconomic problems in Syria indirectly, for example, by causing energy prices to increase, which would affect consumers, farmers, transportation, and related occupations. In addition, Daher notes, “Lebanon’s economic crisis and the capital controls that Lebanese banks have imposed have negatively impacted Syria’s economy and businesses and Syrians with bank accounts in Lebanon. In addition, the Caesar Act might create downstream problems in that banks in Lebanon will be even more unwilling to have Syrian depositors, fearing possible links or operations linked to the Syrian government.” This will put increased pressure on Syrian businesses supplying the regime to avoid potential illicit behavior; and the choice of targets will also reverberate with Lebanese companies and individuals reluctant to take risks in an uncertain environment.
Although the Caesar Act mentions exemptions for humanitarian, small business, and cross-border transactions of needed foodstuffs and pharmaceuticals, it’s too early to tell how it will be implemented. The targets announced June 17 included regime associates and local and foreign companies doing business considered abetting the regime’s survival. The US has stated that this will be a “summer of sanctions," and trends in applying sanctions should be quite clear by the end of the year. In fact, the threat of Caesar Act sanctions may have more of an impact in the immediate future than longer term as businesses and NGOs seek to avoid possible infractions by reducing activities with and in Syria. Another negative impact is that “Criminal syndicates and black-market economies will flourish, and the network around the Syrian president, which has protected his power, will only hold tighter to that power as they weather this considerable, but not insurmountable, challenge.”
Looking at the potential consequences of Caesar for the government, “Analysts say Syria's imploding economy after years of war, mismanagement, and corruption was caused by the government, and civilians are likely to suffer the most from the new US sanction regime.” As Ibrahim Olabi, a lawyer at the London-based Guernica 37 Chambers and founder of the Syrian Legal Development Program said, "The Assad government maintains control over the Syrian economy and its institutions, making it an incredibly difficult task to target it for its war crimes without affecting the people. It is critical that the US puts a huge effort in making sure it affects those who deserve to be affected," he warned, adding, "practically, this will not be an easy task due to lack of transparency in Syria and disinformation tactics adopted by the regime and its allies."
This is where the reactions of Russia and Iran are yet to be apparent aside from the usual charges of genocide and imperialism leveled against the US. Their companies are clearly targeted by the act despite the reality that neither has the resources to undertake reconstruction projects requiring billions of dollars. So there may be a marriage of convenience if China becomes the major development partner in exchange for concessions on the Mediterranean Coast and other infrastructure projects such as roads. Then the US will have to decide how to play this new round of great power competition.