Analysis

Assad Bets on the Wealthy to Bounce Syria Back From Economic Collapse

Since the beginning of the coronavirus crisis, the country has lost more than $775 million a month, or about $26 million a day, and Russia is waiting for payment

A photo of Dr. Zvi Bar'el.
Zvi Bar'el
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Assad speaks in Damascus, Syria, November 9, 2019.
Assad speaks in Damascus, Syria, November 9, 2019.Credit: AP
A photo of Dr. Zvi Bar'el.
Zvi Bar'el

After months of near-complete lockdown, life in Syria is gradually returning to “normal.”

The authorities have permitted some movement between districts, public transportation has resumed in large cities, the textile firms that nearly went bankrupt have received work permits, and an estimated two and a half million civil servants have largely returned to work.

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Bibi swears in his colossal coalition and readies for a courtroom showdown Credit: Haaretz

Ali Kanaan, head of the Department of Banking and Insurance at Damascus University, estimates that the country lost more than $775 million a month during the coronavirus period, or about $26 million a day.

The Syrian Research Institute predicts that with the current restrictions that are expected to last through June, the Syrian economy may go bankrupt due to revenue losses from the barely functioning tax collection system.

Government aid distributed to the neediest citizens, beginning in March, costs the government about $78 million a month and far from suffices for even the most basic of needs. The average wage is $38 a month, and the extra six dollars is significant, but estimates show that the average household needs $334 to subsist, leaving a massive gap between wages and basic needs.

In normal times, before the pandemic, many public and private sector workers supplemented their wages by moonlighting. These opportunities have disappeared as the restrictions put in place to curb the spread of the virus sent 80 percent of the population below the poverty line.

While the coronavirus crisis raged on, the Rami Makhlouf affair erupted. A cousin of President Bashar Assad, Makhlouf turned in an instant from a pillar of the Syrian economy into public enemy number one. Makhlouf, who amassed his billions during the two decades Bashar has been in power, owns the Syriatel cell phone company. He’s also one of the country’s largest oil and consumer goods importers and owner of dozens of subsidiaries in industry, commerce, and tourism.

Makhlouf was ordered to pay three billion dollars to the Syrian government – funds actually intended for Russia as part of Moscow’s “collection” campaign which aims to rescue Assad by extending his hold on the Syrian economy while repelling Iranian influence.

Makhlouf, who says he does not have the funds, began publishing video clips on social media claiming that his property has been impounded and complaining about the Assad family hurting his businesses.

A man watches the Facebook video of Rami Makhlouf on his mobile in Damascus, on May 11, 2020.
A man watches the Facebook video of Rami Makhlouf on his mobile in Damascus, on May 11, 2020.Credit: AFP

Assad's economic security belt

The Assad family had long favored wealthy business people while pressuring them to hand over some of their capital to finance the regime. One of them, whose name has recently resurfaced in the headlines, is Samer Foz. Foz earned his fortune by taking over the wheat and oil trade in Kurdish areas and by controlling Islamic banks in Syria, through which sanctions on the country could be bypassed. Foz is not the liaison between the regime and the enclaves in Kurdish repel hands for wheat purchase. Syria published an international tender for the purchase of 200 tons of wheat which appears to be destined for Russia.

The economic security belt Assad has built also finances some of the army’s operations and contributes to the new welfare programs announced by the regime a few days ago. These plans are aimed at calming the storm surrounding the Makhlouf affair and its exposure of the regime’s corruption.

At the start of the week, the regime permitted private firms to import fertilizer, a product that has been controlled solely by the government, reduced customs taxes by about half on animal feed and seeds, and raised the quota on agricultural machinery imports from 1,000 to 5,000, which may be sold to farmers for loans on comfortable terms. At the same time the regime has ordered the establishment of popular markets where basic goods may be sold at wholesale prices, and even at a 15% discount, bypassing retail markups. Another order aims to encourage local production by listing 67 products whose manufacturers would win substantial benefits for making them locally instead of relying on imports.

Students from bereaved families and military personnel will also enjoy some benefits. Universities and colleges have been ordered to provide full scholarships for tuition, housing, and transportation for two percent of students, those who fall in these categories, even if they earn failing grades.

The costs of these orders to the state coffers are unknown and the criteria for the benefits are not set in stone. Based on past experience eligible people will have to tip officials and inspectors and navigate a complex web of mediators to receive any of the benefits provided under the law. Even the newly opened import channels for the private sector do not ensure that the government will abandon the system of charging additional fees that have lined the pockets of many people close to the regime, as well as contributed to a dizzying rise in prices and the Syrian lira’s nosedive to an unprecedented 1,500 to the dollar.

The Syrian finance minister had just one thing to say to citizens reading or hearing about the ring of wealth surrounding the president: “The citizens make enough money – if only they knew how to manage it.” The comment sparked such a storm on social media that the minister was forced to deny ever saying it. But the average Syrian citizen has already exhausted their toolbox of methods to maneuver around poverty, unemployment, the coronavirus, and the sweltering heat as the absence of any economic horizon extends before them.

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