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Sanctioning Syria: A Long And Winding Road

The long running Syrian melodrama, one in which nobody knows the endgame, continues to unfold.  Butcher Assad has essentially won the battle to control Syria’s streets.  He has also staved off any chance of international military intervention at least for now.

Today’s Arab League vote suspending Syria’s membership illustrates Assad’s isolation but is of little importance unless, as seems very unlikely, strong support develops in the Arab world for military action.  The remaining front is economic.  Although Russia and China will protect him from Security Council sanctions, the US, the EU and the Gulf have the ability to inflict serious damage on the Syrian economy, especially over time.  The aim of sanctions would be to separate the Damascus and Aleppo business elites from the regime, depriving the government of a critical base of support.

Nobody really knows how well this will work, how long it would take, and what the consequences in the meantime for Syria’s hard pressed population would be.  Economic sanctions tend to work slowly if they work at all, like a python digesting a pig, and over a long period of time they tend to degrade.  Companies and regimes find ways around them; the coalition upholding the sanctions tends to fray as hard hit economic groups press for relief and policy priorities change; sanctions often tighten the hold of a government over its society rather than weakening the grip; and the bad effects of sanctions on the lives of innocent ordinary people can be used by the government to turn public anger from the regime to the foreigners.

Over the years the strategy and tactics of sanctions have evolved, with both sanctioners and sanctionees developing new techniques.  Each case features its own particular problems and opportunities for both sides, and usually events provide both pleasant and unpleasant surprises for everyone involved.

The Syrian case is particularly complex.  On the one hand, this is not an oil-rich regime like Saddam’s Iraq or the mullahs’ Iran.  An oil thirsty world has a hard time making sanctions work against big oil exporters.  There are too many willing buyers and the oil market is big and complicated and in places non-transparent enough that a lot of games can be played.  Syria has some oil income, but it is easier to sanction a small producer than a large one.

Sanctions have another advantage: the Syrian economy is already in trouble.  For years the elder Assad pursued seventies style command and control economics with the usual results; reforms under the younger Assad have not transformed the situation.  The foundations remain weak.  Put that together with, first, the global crisis and then months of political unrest in Syria and the economic baseline is not good.  Foreign investors have little incentive to put money in Syria right now, and the unrest has both paralyzed the economy and given the regime a huge security bill.  All those thugs must be paid, and some are on overtime.

At the same time, the regime would really like some extra cash.  High profile development projects, pork barrel spending and food and fuel subsidies could help it blunt the force of the opposition and bring wavering groups and regions to its side. Denying Damascus extra spending money limits its options.

Cash hungry regime plus a weak and vulnerable economy: all that makes Syria a good target for sanctions based coercive diplomacy.

On the other hand, Syria has some advantages.  Lebanon is a complicated and not particularly transparent country with a weak political structure, Syrian sympathizers in power, and a large banking and trade sector.  Much can be smuggled or disguised here; both real goods and financial flows.  Iraq is a chaotic free for all; both its trade and its financial networks will be hard to police.  And of course there is Iran, which is not only committed, despite sanctions problems of its own, to support Assad politically and economically, but which also has a lot of influence in both Lebanon and Iraq.  Put that political support together with the decades of sanction fighting experience in both Iraq and Iran and the labyrinthine quality of Lebanese commercial life, and it is easy to see why Assad might think of sanctions as a nuisance rather than as an existential threat to his regime.

That is the background against which the news of the day should be read.  At the moment, Damascus clearly has some cash problems. As the FT reports, Syria has stopped paying foreign oil companies developing its oil resources, and its oil exports have been hit by the EU sanctions which at long last have truly kicked in.

Because Assad knows that leaving power is likely to leave him either dead or in prison, he will hang on hard.  The violent policies of the last few months have bound much of the regime much more closely to him; too many top officials have too much blood on their hands to think they can survive his fall.  In this sense more brutality serves Assad’s interests; the more people around him tainted by his crimes, the less he has to fear from treachery within.

The merchant community does not like either the poor business climate or the costs of sanctions, but many of the important business families have kinship and business networks in Lebanon and elsewhere that offer protection against sanctions.  Their fear of immediate torture and death if they cross Assad plus their ability to evade some of the costs of sanctions will likely keep many in line, at least for some time to come.

Assad’s calculation has to be that the internal political unrest will slowly die down under the unrelenting assault of the security forces and that for some time to come sanctions will not threaten his grip.  They may even tighten it; the merchants especially will be more vulnerable to government pressure.  With Europe (including Turkey) increasingly distracted by internal problems, and the Iran nuclear issue on the boil, laying low and biding his time seems to be Assad’s best bet.  So far, he has been a worse man but a better strategist than his opponents; we shall see when and if that begins to change.

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