How Did the Big Thieves and Their Economic “Liberalism” Contribute to Multiplying and Deepening the Effects of Western Sanctions?

Many countries around the world have been subjected to Western sanctions, and each dealt in a specific manner with those sanctions, which enabled some to reduce the effects of those sanctions, albeit to varying degrees. However, the case in Syria was “special” (as is our situation these days in breaking all sorts of records in the worst way possible).

In this review and compilation of a number of ideas that Kassioun presented over the last ten years, we attempt to show generally not the nature of sanctions impose on Syria, but what has allowed them to have such a great effect, even multiplying their effects to reach the catastrophic living situation that Syrians have been enduring for years.

The Sanctions

The West, especially the US, has always used unilateral economic sanctions – in fact the UN classifies this type of sanction as “unilateral coercive measures”, which is a more accurate description thereof. These sanctions have been used since WWII as a means – especially by the US – under the declared slogan of “behavior change” of regimes and governments. We will not get into the zero effectiveness (at best) of these sanctions with regards to bringing about any behavior change of any government or regime since they started using them, or the details of their catastrophic effects on the peoples of the countries on which sanctions were imposed, as there are many studies even by Western and American think tanks and experts about the ineffectiveness of this tool, and even its massive failure and counter results.

What we will focus on here is a review based on the current reality in dealing with these sanctions, which have “succeeded” for decades – that is from the point of view of those imposing them in achieving their real objectives, and not the declared ones. That is to say, this success is measured by the extent of weakening the state and its institutions, and impoverishing the peoples.

We will divide this article into two main sections. In the first section, we will look at the way Syrian governments dealt with Western sanctions, and the role this way of dealing had on what we are seeing today of a catastrophic situation for the Syrian people. In the second section, we will review some of the ideas of what Syria could have done to limit, as much as possible, the repercussions of the sanctions imposed thereon, within the Syrian reality. These ideas have been presented in previous Kassioun articles about sanctions, and they can be found on Kassioun’s website and through the links listed at the end of this article.

How did the Syrian governments deal with Western Sanctions?

Existing economic policies had a major role in giving way to the influence of Western sanctions on the Syrian economy in the way they have. Additionally, failing to modify these policies in a manner that avoids – or at least mitigates – these effects, was a contributing factor to deepening and perpetuating them, to the get the country to where it is today in terms of catastrophic economic collapse and low standard of living.

After more than a year from the start of the Syrian crisis and the sanctions imposed thereon, the government announced that it had requested from its ministries proposing solutions to mitigate the damage caused by the sanctions. From the outset, not even one study was issued by any of the government agencies about the actual effect of sanctions on the national economy and no alternatives were proposed, even though all sectors were affected thereby.

Prior to 2011, the Western market had a large share of exporting and importing in Syria. When the crisis started, exporting and importing dropped to 50% of what it was before, and the tourism and manufacturing sectors suffered greatly. The economic “openness” led to a decline in national manufacturing, where foreign products invaded the market, and national products got thrown out. Additionally, investment projects witnessed a great decline, either because they were foreign and stopped due to the sanctions, or because the major investors from the corruption mafias smuggled their money abroad.

The dependence or attachment to the Western market led to a high level of “exposure” of the country’s economy thereto, and this is linked to two main factors: financial and banking relations, and external trade. The larger these two factors are within the economy’s structure, the deeper the impact of sanctions on the country’s economy.

Taking this equation into consideration, one can understand the reasons that made the “Caesar Act” more effective in influencing the economy than the usual US sanctions, which were imposed on Syria for decades before the crisis. In other words, the “Caesar” sanctions went beyond direct dealings, that is the sanctions are not only imposed on the entities that directly deal with the sanctioned entities, but also any third-party deals with the sanctioned and sanctioning sides.

In 2010, foreign trade constituted about 40% of domestic production, which is why sanctions easily paralyzed the economy, in which even the state-owned sector and its manufacturing and service institutions depended on foreign imports to a large extent. This is especially true for a sector as important as the oil sector, a sharp decline in which, like that in Syria, leads to catastrophic effects on all the other sectors, mainly manufacturing and service. Also, in the manufacturing sector, for example, there was heavy reliance on Western technology, and required Western parts and experts for maintenance and repair. Local cadres were not trained to be able to repair them, even though there were local cadres who in reality had the ability to deal with the most complex malfunctions, nevertheless, bringing in the “foreign experts” and “Western parts” was and still is a way for massive plundering and corruption.

Returning to the oil sector, where foreign companies had a large share through drilling, exploration, extraction, and investment franchises. They also brought foreign experts whose salaries were a lot higher than the salaries of the local workforce. At the same time, national expertise and competencies went to work in the same sector abroad, especially in the Gulf countries.

The state, instead of trying to work on finding alternatives to cover the energy needs (oil, gas, diesel, and other fuels) of the economy and consumers, it took measures through which it put the greatest burden on the citizens by imposing austerity measures in consumption, by linking the purchase of these materials to the smart card. In doing this, the amounts were not enough for daily consumption, which opened the door wider to the black market (from which the local and international plunderer benefits) and very high prices that most people cannot afford.

The sanctions’ direct effect on the people cannot be ignored, where the sharp decline in importing basic goods does not only affect the manufacturing sectors and then the consumer, but also directly impacts materials for domestic consumption – for example, wheat and sugar – or the service sectors, like transportation – for example, diesel and gas. Sanctions led to difficulty in importing large quantities of imported goods in addition to difficulty in making payments, and a rise in insurance costs in the import process, which resulting in significantly raising prices. Sanctions were also used as an additional excuse for public sector entities to rely on private companies and importers for the importing process, and those raised the prices under the pretext of rising risks and insurance, which means those made very high profits from public money, which raised the prices to unprecedented high levels.

Kassioun has presented several studies about some of these prices and costs, a large portion of which was not justified, through comparison with global prices, and also because some of them are supposedly exempt from the sanctions because they are basic foodstuffs, e.g., sugar. Through some of the aforementioned studies, we found many loopholes in the official “narrative” for justifying raising prices, and that a large portion of the price hike was the result of deals heavy with corruption and plundering for the benefit of major traders, brokers, and intermediaries. For example, in a March 2015 study about importing sugar, it became clear to us that the inflation of costs as a result of corruption, plundering, and legal violations, exceeded 50% and resulted in wasting millions of dollars of public money.

In February 2019, Kassioun looked at another example, wheat, where it became apparent that the government was paying the equivalent of 14 billion SYP monthly to import wheat through business, and not directly between governments. This was problematic at several levels, including that payments were made in dollar, in addition to the fact that business could be sanctioned at any moment, which is what happened with some of them. At the same time, domestic production of wheat declined, and that was linked to several factors, according to farmers, including issues relating to government classification mechanisms of species, which resulted in lowering the price paid to farmers, in addition to the high cost of transporting to the few government receiving centers, as well as the rising costs of production.

These practices led to using a large portion of the dollar reserves to meet import needs, which resulted in withholding it from the contribution to production it was doing previously, and certainly from contributing to strengthening national production to bypass the sanctions.

Since the major corruption figures, brokers, and intermediaries benefited greatly from sanctions, and to a large extent before that from the “openness” to Western markets, they had a major role in combatting efforts that could reduce the level of “exposure” of the economy to the Western market and turning East, which as we will see in the next part could have been one of the effective mechanisms to reduce the impact of Western sanctions on national economy, and thus on the Syrian people. The major corruption forces also had a huge role in obstructing taking any steps to respond to sanctions, because that would have hit their interests and chances of exploiting sanctions to increase their wealth and plundering, as well as threatening the continuation of their relations with the West and stopping their plundering.

In general, the way sanctions were dealt with was by denouncing them and waiting for them to be lifted so that money would flow into Syria, or in other words, to resume working the same way as before the crisis and sanctions, that is, continuation of being economically connected to the West.

How could have Syria dealt with Western sanctions?

Since the beginning of the crisis, we said that one of the most important ways of confronting economic challenges, was to go back to self-reliance through reforming and activating the public sector, which had been left prey to corruption and brutal liberal economic policies, which had ravaged the country’s economy and left it weak, and vulnerable to risks and collapse. The sanctions were an opportunity that could have been benefited from to restore the national industry’s strength and activate national potentials and resources, so that the economy becomes productively stronger putting on the shelves national products in the space left by foreign products that disappeared due to sanctions. This could have had a fast positive role in getting around sanctions. Not to mention, job opportunities that some simple steps could have created, which would put in motion the economy, in a manner that secures the needs, while at the same time halts the deterioration of the standard of living and purchasing power, which would have kept alive other parts of the local and national economy.

As we have previously said, simply and concisely: halting the economic deterioration was/is possible if national resources and wealth are used in an organized manner to expand national investment, i.e., directly expanding the real production base, ensure reducing its costs through government subsidies, and distributing the results of this investment to the wage earners and the producers, which will enable them to continue working and consuming.

Supporting agriculture also falls within this. For example, in the aforementioned wheat issue, instead of paying the massive sums to businessmen to import wheat, the state could have turned those sums into loans for the farmers to lower the costs of producing wheat and transporting it to government centers to sell to the government. This would have encouraged continued wheat cultivation, and thus providing it to the state for lower prices and away from sanctions, while covering a great portion of the domestic need for this basic commodity. Additional needs could be covered through importing without intermediaries, using currencies other than the dollar and euro, and outside the scope of companies and banks linked with the West and its financial and banking system.

As we have previously said, “the broadest resources should have been the state’s resources, deposited and operating inside the country and prohibited from leaving it. Dealing should have been with the sides that were ready to bypass sanctions, at the highest official levels, and through independent mechanisms unaffected by sanctions, like agreements to deal using local currencies and between official banks, and barter dealing agreements, in addition to other mechanisms, when implemented, the poverty of all Syrians would have been less and the outrageous wealth for war brokers and sanctions less”.

In this context, one of the main steps – as we have noted since the beginning of the crisis – would have been through nationalization of companies and facilities affiliated with the countries imposing sanctions, the state taking over the machinery therein, and suspension of the licensing contracts for the operation of these facilities inside Syria. One of the most important sectors where these steps should have been taken is the oil sector, which could have been essential in supporting the economy’s resilience in the face of sanctions by moving national production and securing basic needs, including energy and fuel.

Although the majority of expertise that manufacturing relied on was also imported foreign expertise and a lot spent thereon, that did not mean that there was no national expertise that could have been developed and trained in cooperation with friendly countries. This national expertise could have been depended on to restore and repair the facilities that have stopped operating and collapsed due to the departure of the foreign experts. Additionally, the state could have invested in attracting the national expertise abroad, which had taken its experience and competencies abroad with the foreign expert influx, especially in the oil sector.

In addition to what could have been done domestically to better fortify the economy from the effects of Western sanction, it was possible to take steps externally, and specifically turning East. This would have not only been a solution to confront Western sanctions, but also an integrated strategic option that addresses at the time the repercussions of Western sanctions on the economy, but also in the long run be a strategy to fortify the economy, especially from the liberal policies that have made the economy and easy target for the West through sanctions.

For example, with regards to the sanctions that have tightened the ability of energy to reach Syria, it was important to have as one of the main objectives securing continuation of energy inflow, which as we have noted has an essential role in moving national production to the point of self-reliance, at least in a significant portion of the economy. This would require agreements with countries that do not care about sanctions, through establishing accounts in local currencies, and agreements in currencies other than the dollar and euro.

Another way through which goods arriving in Syria could be traced, is linked with the shipping process itself, especially transporting oil the halt in the inflow of which had the greatest effect on the economy. The importance of the shipping process lies in its connection with the insurance companies, which are linked with the global financial and banking system that is subject to Western, especially American oversight and control. Bypassing this issue requires Syrian insurance companies and ships. One of our suggestions was that the government buys ships that work independently of the international system, to transport goods and oil from countries ready to deal with Syria.

Why are Syria and Syrians still prey of sanctions?

The options presented here and in other articles are still for the most part applicable, despite the catastrophic situation the Syrian economy has reached over the last ten years. In fact, all the measures proposed at the time have turned from being one of the choices to an existential necessity.

With the new international situation and the beginning of growth of exchanges among countries, some which the US considered blindly affiliated with its economic system and strongly linked with the dollar, we find them today signing trade agreements in other currencies. In other words, we see a decline of the dollar and its system as the basis for all international transactions, which opens the door to taking further steps that greatly cut down the dependence of any country’s economy on the dollar, particularly the countries subject to harsh American and Western sanctions, as is the case in Syria.

The possibility of mitigating the effects of sanctions lies not only in the economic alternatives and policies that prioritize national economy, national production, the national market, and the Syria consumer, but also in the political will, and achieving this requires a radical change.

The influential elite, which is benefiting from the continuation of the crisis in all its aspects and controlling all parts of the state, has made it very clear that it is not willing to play any positive role, and people no longer expect from it except more calamities.

In short, overcoming the existing economic collapse is possible, but the path towards it is no longer economic or financial, but has become primarily political. This makes implementing the comprehensive political solution through UNSC Resolution 2254, i.e., starting a radical change of the existing structure and system, the essential and only tool for resolving the economic crises and getting around the sanctions.

References:

Following are some previous articles published by Kassioun and touched on the issue of sanctions since the beginning of the crisis:

Following Sanctions on Syrian Oil, Let’s Nationalize the Oil Companies‼ (in Arabic) – 7 September 2011

The Voices Demanding Re-Nationalizing Syrian Oil are Rising, Instead of Exporting it as Crude Oil under Threat of Sanctions; Let’s Invest in our Oil Nationally (in Arabic) – 13 September 2011

Economic Openness has Put National Products to Early Retirement‼ Sanctions are the Last Chance to Bring Back National Production; Will We Exploit Them Well?! (in Arabic) – 20 December 2011

How Will Syria Get Over the Current Economic Sanctions Dilemma?! (in Arabic) – 20 December 2011

Economic Sanctions: Opportunity vs. Structural Crisis (in Arabic) – 7 September 2012

Government’s Mentality Obstructs Confronting Crises… A Study of the Effects of Sanctions and Coming up with Alternatives is a Necessity Ignored by the Consecutive Governments and Their Ministries! (in Arabic) – 7 September 2012

An Eye for an Eye.. (in Arabic) – 15 February 2013

Importing Sugar: 51% Inflated Costs; Have 69 Million Euros Been Wasted for That? (in Arabic) – 13 March 2015

$13 Billion or Less, Enough to Grow the GDP! (in Arabic) – 7 September 2016

Political “Fruits” of Economic Sanctions (in Arabic) – 20 January 2018