Economic sanctions, internal conflicts and power struggle behind the frequent jumps in prices, experts say
Amid a suffocating economic crisis and a desperate shortage of foreign currency, the Syrian government has raised the price of subsidized gasoline for the second time in three months.
The Ministry of Internal Trade and Consumer Protection on Wednesday increased the price per liter from $0.87 (450 Syrian pounds) to $0.93 (475 Syrian pounds). In addition, it set the price of unsupported gasoline at $1.3 (675 Syrian pounds) per liter, up from $1.26 (650 Syrian pounds).
This in a county where annual gross domestic product per capita in 2020 was $1,978, according to International Monetary Fund estimates.
In October, the ministry raised the subsidized price by 100%. It said the decision came as a result of the huge expense incurred by the government to secure oil derivatives, as well as the high cost of transportation, in light of “the unjust siege imposed by America on Syria and its people.”
France-based Syrian economist Younes AlKarim, who studies economic risks and crises, told The Media Line the jumps in petroleum product prices were due to several factors: first, the weakness of the central authority in Damascus, because of the prolonged period of war and revolution, including its loss of control over oil-rich areas in the country’s northeast. “This weakened the Syrian regime’s supply of oil products,” ALKarim said.
Second, he explained, the regime’s Russian and Iranian allies have taken over other oil fields that were formerly under Damascus’ control, in places “such as Palmyra, Homs and the Damascus countryside, which weakened the regime’s access to oil supplies from which it could provide petroleum products.”
Third, AKarim said, the regime, as a result of its weakness, had handed over control of the oil refineries to warlords in exchange for their support in fighting against the opposition in the civil war.
“This led to disinvestment, the spread of corruption, the supply of [oil] shipments that are not suitable for refining, and their sale at an inflated price,” the economist said.
He also pointed to the financial and monetary policies in Syria, which as a result of the decline in the central bank’s reserves and the depreciation of the national currency, meant the regime’s ability to pay for oil products had sharply declined.
“[Monetary] reserves are almost zero, and on the other hand, there’s inflation, widespread unemployment and corruption, as well as the halt of monetary transfers [from Syrians aboard], due in part to the US sanctions, and the ongoing struggle between the wings of the regime, which led to a decrease in its ability to secure liquidity,” i.e., cash, ALKarim said.
He added that economic sanctions, including under the US Caesar Syria Civilian Protection Act, have prevented the regime from working with companies supplying parts needed to maintain the oil sector, and prevented the purchase of oil from abroad, “although the system’s ability to purchase oil was already low.”
These sanctions increased the cost of obtaining oil imports by 40% and sometimes delayed their arrival by two or three months,ALKarim said. “This caused the market to reach frequent highs in prices.”
The sanctions put an end to the shipments from the Gulf and from Iran, he clarified. “All of this has played a big role. In addition, there is the coronavirus pandemic and the consequent closing of borders, which affected the regime’s ability to circumvent sanctions through its allies and through businessmen scattered around the world.”
Moreover, after last August’s explosion in the Beirut port, through which imports used to arrive to Syria, Lebanon became subject to international controls, especially from the European Union led by France, which aim to contain Hizbullah and to rehabilitate the situation in the Land of the Cedars, Karim said.
Hizbullah, according to American information, conducts trade with the Assad regime through 120 unofficial border crossings. Smuggling of Lebanese state-subsidized fuel to Syria costs the central bank of Lebanon an estimated $4 billion a year.
“The banking and financial crisis in Lebanon has led to the inability of banks to extend bonds of credit to Lebanese merchants and to the hidden partners of the regime to import fuel,” he explained.
Karim said that according to international and official statistics, 85% of the Syrian people are poor, but studies indicated that actually, 95% are poor, and more than 70% live below the poverty line.
“Consequently, they require state support to obtain basic commodities, and the state cannot provide this, not only because of its low monetary reserves but also because of its inability to generate dollars due to its abandonment of sectors that produce such revenue, such as phosphates and the ports. Also, foreign aid is suspended, and the regime’s allies have taken control of institutions that produce dollars,” he said.
US sanctions on the regime took effect last June, over war crimes committed during the civil war that has been going on for almost a decade. The measures target President Bashar al-Assad, Iranian and Russian entities and any company cooperating with or contributing to the regime.
The sanctions come under the US Caesar Act, which also covers Syrian officials, any foreign person who deals with the Syrian government, and several sectors in the country from construction to oil and gas. Its name was taken from the code name of a military photographer who escaped Syria with 53,275 images of torture and death from inside its prisons.
Malek AlHafez, an Amman-based Syrian writer and political researcher, told The Media Line that the collapse of the Syrian economy, which has been underway for quite some time, is one of the main reasons for the rise in prices, and the Damascus government will soon cease its subsidies for food and other basic items that citizens desperately need.
“The government has no ability to continue subsidizing items whose cost is rising, and the government is also unable to interfere with the rate of exchange that led to the rise of the dollar against the Syrian pound, and thus there is an additional reason for the price increases,” AlHafez said.
The ongoing economic crisis cannot be understood without taking into account the lack of foreign exchange insurance [to reduce risk of changes in currency values] and the absence of any exports to offset the continued sanctions and high costs of commodities, he explained.
“I think that the Damascus government will soon announce that it will give up government subsidies for those items whose prices have increased,” AlHafez said.
The repercussions will be clear in a further deterioration of citizens’ living standards, purchasing power, and inability to adequately satisfy their basic needs, he said.
“There will be a shortage of goods, but the terrifying part is that people will resort to unlawful acts such as theft and kidnapping. This means a further deterioration of the security situation and a decline and moral disintegration of society,” AlHafez said.
He doubts that the Biden Administration will ease the sanctions, as Washington’s conditions for this are anchored in US law and related to a Syrian commitment to a political solution in accordance with UN Security Council Resolution 2254.
The resolution, passed in 2015, demands, among other things, that all parties immediately cease any attacks against civilian targets, and that within 18 months, free and fair elections be held under UN supervision.
“And if Washington wanted to reduce or even cancel the sanctions, this would be through an agreement or a political deal with Russia that provides for granting concessions commensurate with the vision of each party, and which both sides accept,” AlHafez clarified.
Washington will not ease the sanctions regardless of the economic situation, except under a deal and a political agreement that resolves all the tensions and conflict in Syria, he said.
“And this deal would not necessarily be to end the existence of the Syrian regime. Rather, it is possible that the two parties [the US and Russia] would agree on an appropriate formula that preserves the existence of the Syrian regime in exchange for ending the Iranian influence in all of Syria,” AlHafez said.
This article was published on the medialine website