SYRIA: Casualty of war
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Emerging Markets

SYRIA: Casualty of war

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The economic crisis wrought by Syria’s civil war could have disastrous effects on an already beleaguered population, as trade and investment grind to a halt

The commercial hub of Aleppo was the driving force of Syria’s economy during the more than four decades of rule by the Assad clan. It was home to a wealthy business class whose loyalty could be counted on. And it was bound to be stoutly defended. When rebels entered the city on July 19, there was every suggestion that their bid to bring the battle to the heart of their enemy would prove a short-lived failure.

Yet eight weeks later, despite being outgunned, outmanned and not much liked by the city’s residents, opposition groups are consolidating their presence in Aleppo. The best the Syrian regime can say about its hold on the city is that it isn’t – yet – fully in opposition hands.

Despite weeks of frontline skirmishes, relentless shelling from its jets and tanks and repeated claims that a victory is near, a new reality is dawning in what is widely reputed to be the world’s oldest city: the engine room of the country is steadily slipping from the regime’s control.

And without it, Bashar al-Assad’s hold on the rest of Syria seems parlous. The Syrian leader’s defence of his country has been rooted in two key beliefs: that those challenging them would be deterred by fear and brutality, and that their supporters would be shown clear reasons to remain loyal.

With the uprising into its nineteenth month and now unambiguously a full-blown armed insurrection, there is little sign that either strategy appears to be working for Damascus, which has been unable to press home its superiority despite daily security sweeps and death tolls that are escalating each week.

Since the rebel assault on Aleppo in August and a similar foray into the capital, daily tolls of more than 150 dead have become commonplace. More than 4,000 people, many of them civilians, died in August alone. And September’s figures are likely to be near that, or even higher. Put into perspective, even the height of Iraq’s ugly sectarian war in September and October 2006 did not see a monthly toll of higher than 4,000 dead.

Attempts by western nations to impose tougher measures against Assad’s regime in the UN Security Council have been repeatedly blocked by China and Russia, despite the increasing violence.

Tensions rose close to boiling point on October 4 when, in response to Syrian shelling that killed five civilians in a Turkish village close to the border, the Turkish parliament approved the launch of cross-border action by troops into Syria and strikes against Syrian targets.

LEAVING

Even rusted-on regime supporters are now acknowledging the gravity of the situation in Syria. The commercial class, who were supposed to be a buffer to what is taking place, are increasingly seeking refuge outside the two leading cities – and in many cases outside Syria.

The UN now says 300,000 Syrians have fled the country to neighbouring Lebanon, Turkey, Jordan and Iraq. The real figure is likely to be sharply higher than that once unregistered refugees are factored in. The UN High Commission for Refugees is recording close to 3,000 new arrivals each day – a number it expects to escalate as the end of the year approaches. By December, the refugee tally is expected to have reached 700,000.

Across the spectre of the Syrian conflict, the numbers are steadily worsening. More than 30,000 people have now been killed in the fighting, the majority of them civilians.

ECONOMIC CRISIS

The economy, meanwhile, has all but ground to a halt. The value of the Syrian pound has plunged by as much as 60% against the dollar and euro at various times this year. Currency reserves have fallen by more than 65%, tourism has slumped by up to 90%, and foreign investment is all but non-existent.

Industry and trade inside Syria are also suffering severely. All trade, and all but a basic produce market have shut down in the eastern half of Aleppo, held by opposition groups. The west of the city, which is still in regime hands, is faring little better. The conflict has made already weakened supply lines from Damascus, as well as the cities of Homs and Hama, unreliable. And, as of the last week of September, military helicopters were dropping bread to soldiers and residents in regime-held areas.

“It has been reported in the chamber of commerce in Damascus and among the business community that more than 70% of businessmen have left the country,” says Damascus trader Mohammed Bagawi, who fled to Beirut with his family. “It is not possible to do anything other than survive at the moment. Why would anyone take any investment risks now?”

“And these sanctions,” he says of the increasing range of trade bans being placed on Syria by the international community, “Who do you think they are impacting most? Assad, his family, the Makhloufs?

No, it’s us. We are paying the price. It is a collective punishment, something the West says is wrong elsewhere.”

It is clear, however, that the regime is feeling the pinch. Well-informed government sources have told Emerging Markets that the Syrian leader personally asked for $1 billion from Lebanese prime minister Najib Mikati, in July – a request that Mikati stalled. “He told Assad that we could not do this because the US Treasury is all over the Lebanese banking system,” the source says. “$1 billion missing dollars would be noticed.”

That a Lebanese leader would be prepared to defy Assad at this point in the crisis is an indicator of where it is heading. So too was the move by Lebanese authorities in late August to arrest the country’s former information minister, Michel Samaha, and charge him with receiving bombs from Assad’s key intelligence chief, with the alleged knowledge of the president himself. The bombs were to be used to target anti-regime figures in Lebanon, Samaha’s interrogations have revealed.

“Our assessment is that they would not have done that if they felt the regime was strong,” says a senior US official in Beirut. “It is a sign of the regime’s weakness.”

Lebanon’s tentative claim on sovereignty, after so long under the tutelage of its powerful neighbour, does not suggest that the feeble state is becoming stronger as Syria crumbles. Its borders remain weak, and tensions among the country’s restive sects, all of whom have a stake on either side of the crisis over the border, remain on high simmer.

Borders elsewhere in the region remain just as troubled. Clashes have taken place with border guards in Iraq and Jordan. And Turkey’s large and porous frontier with northern Syria is now being used as an entry point for scores of jihadist fighters, who started descending on the north of the country at the start of Ramadan, and who are increasingly adding a dangerous dimension to the civil war.

What to do with the jihadists, who hail from across the Sunni Muslim world, is troubling the rebel movement and its supporters. “They are good fighters, and they are men of God,” one rebel said in Aleppo in late August. “But we will not let them hijack this revolution. It started from the street, and it will finish there too. We will not let this become a global war.

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