US economic sanctions on Syria may impact on the population

The Central Bank of Syria (BCS) has been one of the targets of the latest round of US sanctions under the Caesar Act, measures that some experts are wary of because they could worsen the already deep economic crisis and shortages of commodities in the Arab country.

Washington has imposed six rounds of unilateral sanctions on individuals, companies and entities related to Bachar al-Assad's government since the Caesar Act came into force last summer. The Act is named after the Syrian military police photographer who defected with images of 11,000 dead detainees.

In the latest round, at the end of December the Treasury Department included the BCS on its List of Specially Designated Nationals and Blocked Persons, which entails the blocking of property in the US or in US hands, as well as a ban on dealing with these interests.

The new punishment, considered the harshest since the enactment of the legislation, is not very different from those of previous years against the institution, already sanctioned with regard to the issuance of foreign currency or the carrying out of credit and financial transactions.

"Since the beginning of the crisis, several sanctions have been imposed on the Central Bank to limit the state's ability to use its funds and resources in foreign currency to guarantee basic needs such as oil, food and medicine, even though these materials are excluded from the sanctions", former BCS Governor Adib Mayale told Efe.

Syria is suffering from a serious shortage of basic products such as wheat and fuel, often attributed to the collapse in the value of the local currency, which is sold on the black market at more than twice the official price, and to the sanctions that have reduced the import capacity of this country that has been at war for ten years.

Mayale acknowledges that the sanctions have brought "serious difficulties" to the Central Bank itself and the banking sector in general, especially when it comes to initiating documentary credits or issuing and receiving guarantees from other international entities.

"This led to a weakening of the banks' capacity to carry out foreign trade and commercial transactions, which added to the great difficulties of transport in Syria and the high cost of insurance for the goods sent," Mayale explains.

In short, supplies to Syria have suffered, he says.

He also warns that in general all the sanctions have contributed to worsening the macroeconomic indicators of the Arab country: less growth, more public debt, imbalances in the balance of payments and more inflation.

"This issue has been made worse by the negative psychological impact of the enactment of the Caesar Law, which in its entirety contributed to the rise in the exchange rate of the Syrian lira", the former governor stated about its sharp devaluation against the dollar.

The World Bank has not provided updated data since before the outbreak of the conflict in 2011, while the UN Economic and Social Commission for Western Asia warned in a report in 2014 that the country's Gross Domestic Product (GDP) halved in the first three years of the war alone.

According to the UN commission, the Central Bank's foreign exchange reserves fell from $14.4 billion in 2011 to $3.5 billion in 2013 due to efforts to keep the value of the lira between 150 and 160 units for one US dollar.

Today, the official exchange rate stands at just over 1,200 lira to the dollar and, on the black market, is around 3,000.

In this respect, the economist and researcher at the London School of Economics Zaki Mahshi agrees that private banks could also be affected by the sanctions and most of the entities operating in the country could be "frozen".

He is also concerned that Damascus will become more dependent on its main allies, Moscow and Tehran, increasing the country's debts and the consequent concessions, in addition to the repercussions on the population's access to basic products of the impossibility of importing and the inevitable devaluation of the local currency.

"The Central Bank is the artery of the country's economy; no nation will be able to support the Syrian authorities in US dollars, which means further devaluation of the lira", he told Efe Mahshi.

Recently, the UN rapporteur on the negative impact of unilateral coercive measures on human rights, Alena Douhan, warned that the implementation of the Caesar Law could "worsen the existing humanitarian crisis" in Syria and prevent the population from rebuilding "basic" infrastructure.

 In her opinion, the US sanctions against the BCS as "suspected of money laundering" make it difficult to process international aid and the import of humanitarian material, and the legislation protecting the rights of Syrians to health or access to housing "kicks in".

"The US government should not put obstacles in the way of rebuilding hospitals because the lack of medical care threatens the very right to live of the entire population," the UN rapporteur concluded.