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Syria: The sanctions effect

The Assad government is feeling the pinch, but will it bring down the regime?

style="font-family: arial,helvetica,sans-serif;">Critical to the declining fortunes of Syria’s economy, say most analysts, has been the imposition of an escalating series of U.S. and European sanctions against regime officials and businessmen supporting them, as well as an embargo on the import of Syrian crude oil.

With bilateral trade already heavily sanctioned under the 2004 Bush administration Syria Accountability Act, President Barack Obama has widened U.S. trade and travel sanctions and asset freezes to include Assad, his inner circle and dozens of leading Syrian businessmen and entities close to the regime.

The EU has followed suit, imposing sanctions against 50 people and nine entities in Syria and, after much deliberation, followed the U.S. in banning the import of Syrian crude oil which in 2010 accounted for some $4.6 billion in earnings for the regime, according to the European Commission.

The ban means major European oil firms in Syria such as Total, Royal Dutch Shell and Gulfsands, cannot expand their existing operations, but the diplomat said many firms had already reduced extraction. Shell had, in late September, stopped production in Syria altogether, according to the New York Times.

Syria produces about 400,000 barrels of oil a day, formerly exporting up to 90 percent of about 150,000 barrels per day mostly to the Netherlands, Italy, France and Spain.

While small on a global scale, analysts and activists say the exports bring in millions of dollars a day to Assad's government, accounting for perhaps 30 percent of its income.

With Maersk and other tankers no longer sailing from the Syrian coast to European ports, the Assad government was forced to turn east to find new buyers in Asia for its heavy crude, facing the prospect of increased shipping costs and forced sales at discounted rates, as customers looked to take advantage of the political situation to get a cheap deal. 

With the regime no longer able to deal in dollars due to U.S. sanctions and with MasterCard and Visa no longer working in Syria, businessmen in Damascus reported a palpable sense of growing isolation.

“It feels really restricted here now,” said the Syrian businessman. “I can’t use any of my international cards and I can hardly leave Damascus. It might be all psychological, but it impacts the way you view the Syrian economy. Some of my biggest clients just don’t travel here anymore.”

Security forces on retainer

Diplomats, businessmen and analysts agree that the last to feel any of the economic pain in Syria will be the security forces on whose brutal suppression of pro-democracy protests the Assad regime has relied to maintain its grip on power. 

Plainclothes security forces now receive daily cash bonuses to keep them motivated as they kill and torture protesters, they said.

Shabiha, the ultra-loyal pro-Assad thugs who opposition activists estimate number in the tens of thousands, are reported to earn the most, receiving daily bonuses between $30 and $100 for each operation. They can earn up to $5,000 a month, according to opposition figure Habib Saleh who has studied the shabiha, a staggering sum in a country where the average salary is $200.

With such financial incentives, few see Assad’s plainclothes security forces crumbling any time soon, even as the economy continues to hurt ordinary people.

“In the coming three months investor confidence will weaken further,” said Khaled. “But normal people are patient. They say we have a goal we want to reach and we have already paid a price in blood. We don’t have a problem paying for it now in money.”

The fear, said a Western diplomat, is that while the opposition remains divided and without a clear political platform, the regime will be able to convince most Syrians that the pain in their pockets is the fault of foreign powers, and that only the Assad system can deliver stability amid the chaos.

“If the government does an effective propaganda on making it all about external interference, it’s no given that the economy will be the thing to bring down the regime,” said the diplomat. 

“If there is no credible opposition alternative, people will chose to believe the regime and hunker down and weather the storm.”