Syrians are cautiously awaiting the implementation of the Caesar Act, which is supposed to target countries, companies and individuals supporting Damascus. The economic and political crisis that the country has been undergoing for nine years has ravaged the living conditions of the Syrian citizen, leading the value of consumer goods to increase fourteen times since the war broke out in the country, according to a report of published by WFP at the end of April.
Although according to US statements, sanctions will be imposed on the Syrian government and its supporters, it is not entirely clear what negative consequences this will have for areas that are not under the Syrian government’s control.
Washington is unclear
Despite a US State Department official’s statement to North-Press earlier this month that “the sanctions do not include areas not under the control of the Syrian government, and these areas will not be affected by those sanctions,” there are concerns about the deteriorating economic and living conditions of the region’s residents in the absence of any clear US plan regarding how to exclude these areas.
In a similar context, Deputy Special Envoy to the Global Coalition to Defeat ISIS Ambassador William Roebuck told North-Press earlier that “the Caesar Act will not target the regions of northeastern Syria or the Syrian people, but it will target the Syrian regime only.”
However, in an interview with North-Press, Washington-based journalist Ahed al-Hindi said that the US official’s statement “stems from his lack of a real answer to the concerns. His words are incorrect.”
Bedran Chiya Kurd, the Deputy Joint Presidency of the Executive Council of the Autonomous Administration of North and East Syria, said that “the mechanisms of the US administration regarding the exclusion of our regions are still unclear,” especially since the Autonomous Administration areas “have been suffering from an economic blockade for years.”
Search for solutions
In an exclusive interview with North-Press, Bedran Chiya Kurd said that they discussed the implications of the Caesar Act on the areas of northeastern Syria “extensively” and how to mitigate and overcome the coming crisis “with minimal losses.”
The discussions concluded that whatever the measures are, Autonomous Administration areas will be affected by the expected sanctions “because these areas are part of the Syrian geography, and there is still vital commercial movement between these areas and the Syrian interior.”
Kurd expected that the value of the Syrian pound will deteriorate more in the coming days, “and this constitutes the core of the economic issue.”
“We have in the areas of the Autonomous Administration more opportunities than in other areas in terms of the presence of reasonable quantities of the US dollar, which can help us hinder the deterioration of the value of the Syrian pound. Maintaining a certain amount of dollars in the region will lead to the creation of important and crucial results,” he said.
The Autonomous Administration is expected to take “severe administrative measures against the smuggling of foreign currency out of the region,” he added, noting that “the regime’s attempts will be intensive in terms of bolstering its markets with that smuggled currency through hard currency brokers, but the Autonomous Administration made a decision to prevent smuggling and the movement of hard currency out of its regions.”
The Autonomous Administration calls for opening the official Tel Kochar/al-Yaroubiya crossing with Iraq, starting commercial movement, and pushing international institutions and organizations to work strategically according to medium- and long-term development projects, as “the region is afflicted by destroyed infrastructure and needs international economic support just as it received military support in fighting terrorism, because if economic support is not available, this will lead to instability in the region,” according to Kurd.
Hard currency tank
At the national level, the northeastern regions of Syria have the highest amount of available hard currency due to the heavy presence of the Global Coalition forces operating in their bases, along with local companies who deal in hard currency, in addition to the presence of international organizations.
However, as a result of the Turkish offensive on the region on October 9th, many international organizations operating in northeastern Syria stopped their activities, which led to a shortage in the dollar supply that was coming from those organizations.
However, the region’s shortage of hard currency is being exploited by a group of “currency traders” who take advantage of the fluctuations in the dollar price to achieve significant gains in light of the lack of controls imposed by the Autonomous Administration on currency trading.
These traders transfer this money to other regions that it needs in its economic deliberations, whether they are merchants or administrative entities in Syria.
Exchange market in Qamishli (Muhammad Habash)
Earlier, North-Press Agency published a report on a network of traders who withdraw the dollar from the Qamishli markets and send it through the airport to supply the Central Bank of Syrian in Damascus with hard currency in order to increase its foreign exchange reserves.
Observers believe that the disregard of the Autonomous Administration in preventing the flow of foreign currency to Damascus may lead it to struggle in the face of Caesar Act sanctions.
With the approaching date of the act’s implementation, merchants and capital owners have begun to withdraw their currencies from the markets, which led to a rise in the value of the dollar exchange against the Syrian pound, which also weakened trade movement.
“The wealthy follow political developments more than the politicians themselves, based on the requirements of profit and benefit. It is their opportunity,” the owner of a money exchange bureau in Qamishli said.
A month ago, the exchange rate of one dollar was about 1,300 SYP, but the value of the Syrian pound rapidly decreased, reaching 2,000 SYP. Observers linked this collapse with the businessman and most important government supporter Rami Makhlouf’s dispute with the Syrian government and the Assad family.
Observers of economic affairs believe that the sanctions will affect all of Syria, and Washington will not be able to exclude the areas outside the Syrian regime’s control, in contrast to US statements.
Syrian economic researcher Khorshid Alika said that the sanctions will have an impact on the entirety of Syria, but “the areas under the control of the Syrian government will be more vulnerable to political, economic, and social disruptions, and their impacts will negatively impact the government, its allies, and all classes of society.”
He also believes that “the government will be subjected to more internal pressure from its Russian ally to submit to and move towards a political solution. Without a political solution in accordance with the Geneva resolutions, it is difficult to begin the process of reconstruction and investment in its areas of control.”
Ahed al-Hindi believes that all Syrian regions will be affected by the sanctions, whether they are the opposition areas or the Autonomous Administration ones, stating that “Congress cannot control the results of the sanctions that it has drafted.”
“I do not think that the one who drafted the law remedied it with the Syrian reality. The human reality in Syria is very tragic,” he added.
Likewise, Salman Barudo, co-chair of the Economy and Agriculture Board of the Autonomous Administration, believes that US sanctions will not only affect areas under the control of the Syrian government, but will affect all Syrian regions, including Autonomous Administration areas, “as dealings with the Syrian interior exist, especially for food and basic supplies.”
He also believes that “the effects of US sanctions on the Syrian economy will become apparent days after their implementation. The Caesar Act will have negative effects that will affect the livelihood of the population. Not only this, but the implementation of the act will affect the efforts of the Syrian Democratic Forces (SDF) in combating terrorism.”
Putting Damascus allies in trouble
The US is scheduled to start implementing the Caesar Act on June 16th, according to a decision passed by the US Senate in December last year to pressure the Syrian government, its allies, and supporters.
The main feature of the law is that it imposes sanctions on institutions and individuals from non-US countries that engage in economic activities with Syria – something called “secondary sanctions” - rather than targeting US companies or US individuals with business relationships in Syria.
The law provides for prosecuting companies from Russia, China, the UAE, and Iran, which have commercial relations with Syrian institutions.
In other words, Russian and Iranian investors cannot benefit from extracting oil and starting reconstruction, because the sanctions that will be imposed on supporters of the Syrian government are massive economic sanctions that prevent them from supporting the government until a comprehensive solution is reached in Syria.
Government forces checkpoint in Qamishli (Muhammad Habash)
Aqil Mahfoud, director of the Damascus Center for Research and Studies (DCRS), said: “The sanctions are part of Washington’s economic strangling policies against Syria for decades, and are part of the US involvement in the Syrian war.”
“Now, the US is directly and indirectly occupying large parts of Syria, continuing to blockade Syria politically, and preventing a number of Arab countries from relationships with it. It also prevents any solution or settlement between Damascus and Kurds, while it controls the oil and gas areas and steals resources. It prevents Damascus from obtaining many economic and human resources,” he added.
However, Ahed al-Hindi believes that the imposition of sanctions stems from the absence of US strategy toward Syria, so it resorts to means called “non-military means of pressure.”
“The way the US politicians deal comes according to two principles, and both of them have no connection with Syria,” he added.
“The first strategy is to confront Iran and weaken the Iranian regime and its relationship with regional countries, while the second is the strategy to combat terrorism and extremist organizations, which was strengthened after the events of September 11th, 2001. Within the two strategies, US politicians are failing regarding the Syrian issue. There is no clear strategy for changing the regime.” He also said.
Ahmad Youssef, a Qamishli-based academic studying economic development financing policies, said that “through sanctions, the US seeks to thwart Russian efforts to end the Syrian crisis according to its own interests, and raises the threat level to the Syrian government and its allies by preventing Western countries from any contribution to reconstruction processes if they do not match the US vision.”
In general, Syria has been subject to US sanctions since 1979, when the US placed it on the list of state sponsors of terrorism “because of its continued support of terrorism and terrorism groups, its pursuit of weapons of mass destruction and missile programs and use of chemical weapons, and its ongoing efforts to undermine U.S. and international stabilization activities in Iraq,” according to the US State Department.
The Iraqi model
Syria is not the first country to be subjected to US economic sanctions as a means of pressure. Iraq suffered 13 years of US sanctions after invading Kuwait under Saddam Hussein’s rule and refusing to withdraw from it in 1990.
However, the political scene in Syria is different from Iraq. The latter possessed energy resources, but it was prevented from exporting and benefiting from them. In Syria, areas where oil wells and other resources abound fall outside the control of the Syrian government, and the government cannot benefit from them without reaching a political solution with the Autonomous Administration that controls most of the energy and agricultural resources.
The results of the blockade imposed on Iraq were disastrous, as it suffered politically and economically from severe isolation from most countries, leading it to become one of the most devastated countries in the region. Its infrastructure, including factories, refineries, power and water stations, was destroyed, which returned it to the pre-industrial era, according to former US Secretary of State James Baker.
These sanctions included a complete trade embargo, destroyed the country’s economy, lowered the level of healthcare and education, and caused food and drug shortages.
In April 1995, the Security Council issued a resolution that included the oil-for-food program, which Saddam Hussein initially rejected and approved after a year. Iraq was able to export part of the oil stock in exchange for importing food, where the import limit did not exceed more than two billion dollars, and under strong oversight and supervision by the UN.
Work on this program officially ended on November 22nd, 2003, 7 months after the fall of Saddam Hussein’s rule, but the results of the sanctions continued for years, especially sanctions that covered the oil sector.
According to human rights reports, the result of years of famine and the embargo imposed on Iraq resulted in a disruption in the structure of Iraqi society. The Iraqi government suffered from its inability to secure government jobs, especially in the industrial sectors that were suspended as a result of the blockade, and nearly two-thirds of the workforce was demobilized. This contributed to the increase in unemployment rates and the destruction of family life as a result of high crime rates, social violence, corruption, suicide, theft, and smuggling, according to various reports.
The factories and commercial projects started to close, leaving people without work. Government employees remained in their jobs, but inflation undermined their salaries. University professors and academic staff abandoned their jobs to sell cigarettes on the streets, drive taxis, or fish for a living.
The crime and prostitution rate increased so dramatically that the government imposed the death penalty for some prohibited professions such as pimping, prostitution, and theft.
Ahed al-Hindi believes that sanctions were never a means to reach a comprehensive solution. “There are several examples of this, for example, Saddam Hussein’s regime did not fall until after a military strike, and not with sanctions. The US sanctions led to famines and shortages of food and money in many areas, with no commercial relations for countries, and led to greater wealth for the ruling class in Iraq,” he added.
Return to Autonomous Administration areas
The spheres of influence in Syria are divided into three areas: the areas of the Syrian government, supported by Russia and Iran, the Autonomous Administration areas supported by the US-led Global Coalition, and the Syrian opposition areas supported by Turkey.
Autonomous Administration areas and areas with US presence are among the most vulnerable areas affected by the sanctions as a result of the massive destruction of infrastructure due to the war against ISIS, the recent displacement of the residents of Sere Kaniye (Ras al-Ain) and Tel Abyad (Gre - Spi), the presence of more than 17 IDP camps, among them two camps housing ISIS families, and the presence of a number of prisons and ISIS detention centers that place an additional burden on the Autonomous Administration.
Northeastern Syria lacks official border crossings, and the UN closed the only official Tel Kochar (al-Yaroubiya) crossing, despite an appeal by the Autonomous Administration to reopen it. The Semalka crossing with the Kurdistan Regional Government of Iraq is informal and not fully equipped for import and export.
Qamishli market during curfew (Muhammad Habash)
On February 18th, US Envoy to Syria James Jeffrey met with the SDF General Commander to discuss the economic crisis in northeastern Syria and the impact of the expected sanctions on Syria, according to a diplomatic source who spoke to North-Press.
The source did not reveal any information about the details of the economic issues that they discussed during the meeting, but on March 5th, a delegation of the Global Coalition met with local private companies in northeastern Syria. The delegation discussed with the heads of the companies ways to promote investment projects to prevent the region from being affected by US sanctions, but no practical results have been released from this meeting so far.
On May 23rd, William Roebuck met virtually with representatives of civil councils and departments in the cities of Kobani and Manbij to discuss the security and economic situation in northeastern Syria.
In a special statement to North-Press after the end of the meeting, Roebuck said that he “listened to the comments of the civil council officials and dispelled their concerns about the Caesar Act, that will be applied to the Syrian regime only.”
“The US sanctions do not target the areas of northeastern Syria, nor the Syrian people,” he said.
Commenting on this issue, Aqil Mahfoud said: “Kurdish and non-Kurdish politicians should check options and bets.”
“The only reliable response is the re-opening of the Damascus-Qamishli road in both directions, with a great deal of rationality in politics and in calculating and monitoring risks and threats,” he added.
Who will pay the bill?
The currency exchange rate is the question that the Syrian citizen asks every morning as a result volatility in the exchange rate and its effect on the living situation and value of basic materials. This is despite Damascus’ various policies that attempt to save the Syrian pound from collapse, including the issuance of decrees that stressed the prevention of hard currency circulation and the control of materials imported from abroad.
Pastry shop in Qamishli Market (Muhammad Habash)
Exchange market volatility affects Syrians directly. The economic crisis that the country has been experiencing for nine years has greatly affected the average citizen's income and livelihood. Before the Syrian war, middle-class employees had an average salary of 15,000 SYP, where the average exchange rate was 45 pounds to one dollar, making it about $325. After several years, employees get paid an average of 50,000 SYP at a time when the dollar exchange rate is 1,600 SYP, making their salary approximately $30.
A Syrian government employee said that "salaries prior to the crisis were good, there was the possibility to save. But nowadays, the situation is difficult overall amid the high cost of consumables and the inability to control the exchange market.”
As for the Syrian opposition regions, an employee who works with the Syrian Salvation government, affiliated with Hayat Tahrir al-Sham (HTS, formerly al-Nusra Front or Jabhat al-Nusra) receive an average salary of approximately 70,000 SYP, which is equivalent to $40 at the exchange rate of 1,691 SYP.
On May 19th, the Syrian Salvation government issued a declaration that they would raise salaries by 80% after the rise in the dollar exchange rate.
There are two crossings with Turkey in the Syrian opposition-controlled areas, Bab al-Salama and Bab al-Hawa. They import most basic goods because of the loss of local production in these areas, which contributes to higher prices, in addition to Turkish merchants controlling prices.
Syrian Salvation government areas depend on several fields that contribute to pumping dollars to these areas through the funding that is provided to them from different countries, some of them which support the Salvation government such as Qatar and Turkey.
However, the opposition regions lack production sources, so they are among the most consuming regions for resources entering Syria in hard currency, which will be affected by economic sanctions, according to observers.
In Autonomous Administration areas, the average employee’s salary in local institutions ranges between 90,000 SYP ($50) and 170,000 SYP ($100) at an exchange rate of 1,690 SYP.
The Autonomous Administration depends on Syrian currency for local financial dealings, but the market for buying and selling basic and industrial materials depends on hard currency. This directly affects the living conditions of the residents of North and East Syria.
Salman Barudo says that they are "reviewing the salaries of workers within their institutions in the coming days after the rise in the dollar exchange rate and its impact on the standard of living of the population.”
The emergence of the coronavirus pandemic in Syria has made matters worse, at a time when the consequences of the curfew imposed in different regions were negative for people with low income.
Industrial work and production of both the Syrian government and the Autonomous Administration has slowed, since their regions have domestic production, unlike the Syrian opposition regions. Movement of transport and internal trade has stopped, and export and import has decreased. The income of large segments of Syrian society has decreased, unemployment has increased, the economic deficit has increased, and they fear that they will pay the US sanctions bill on their own in the absence of a clearly defined strategy.