US ‘Caesar Act’ sanctions could devastate Syria’s flatlining economy
15 Jun 2020

Its currency has plunged by 70% since April, more than half its people face food scarcity, and hopes of rebuilding a country shattered by war continue to ebb.

Syria seems barely able to absorb new shocks, but new US sanctions that take effect next week, could devastate what is left of its flatlining economy and amplify the gravest regional decline in decades.

Known as the Caesar Act, the US legislation is a centrepiece of efforts by the anti-Assad opposition to deliver justice to the perpetrators of war crimes committed throughout the country’s nine-year conflict. But on the eve of its implementation, the new law is being interpreted as a catch-all for a broader push that aims to crush two of the regime’s main backers, Iran and Hezbollah.

Five months before the US presidential election, efforts to curb Iran remain the dominant regional focus of Iran hawks in the Trump administration, who believe their policy of “maximum pressure” is fatally undermining Tehran and its networks, the most prominent of which – Hezbollah – holds a whip hand in the Lebanese government.

But a string of crises partly fuelled by US strategy are adding to the burden of millions across the region: Lebanon is facing full-blown economic implosion and rousing civil unrest; Iraq, meanwhile is combating low oil prices and crumbling revenues elsewhere.

“In their rush to get Bashar and Khamenei, the US are forgetting who their friends are,” said one Lebanese minister. “Their ideological drive leaves them numb to the suffering of real people.”

The Caesar bill was named after the pseudonym of a military photographer who smuggled 55,000 images out of Syria, showing torture in Assad’s prisons. Unlike earlier US and EU sanctions it targets the regime’s backers outside of Syria; in banking, business and politics, expanding a remit to neighbouring capitals, the Gulf states and Europe, which have maintained economic links to Damascus. From 17 June, institutions, businesses or officials that finance the government of Bashar al-Assad could be subject to travel bans, denied access to capital, and face other measures including arrest.

Ibrahim Olabi, a British barrister who founded the Syrian Legal Development Programme, an organisation that works on sanctions, said that even among some of the law’s proponents there are growing concerns that a “whatever it takes” approach could overshadow the intent of the law. He said earlier US and European Union sanctions had a more limited mandate.

“The Caesar sanctions definitely have the potential to be a bigger deal because the US is using them to deter countries from doing business with Syria,” said Olabi. “The US has recognised that Syria is a proxy arena for all the elements they’re targeting.

“Using the human rights abuses that were committed there as the vehicle helps give the US additional legal leverage for Caesar. Instead of Iranian and Hezbollah actors looking like they are being targeted on political grounds, they now could be targeted on the basis that they are supporting the unprecedented human rights abuses in Syria.”

As the Syrian economy has unravelled since March, so too has Lebanon; both countries’ currencies have plunged in parallel, and prices of essential goods are now beyond the reach of many. In Syria, protests against the imploding economy have been held this week in regime strongholds such as Latakia – a rarity throughout the war. And on Thursday, Assad fired the country’s prime minister, Imad Khamis, as pressure continues to grow from an increasingly desperate and vocal public.

The ramifications of Caesar are rippling through Beirut, where traders retain lucrative ties to Syrian officials that are barely keeping Lebanese state revenues ticking over.

“This is a disaster for the [Lebanese] government, said one Lebanese banker. “They will sanction Lebanese traders and banks. Our currency will plunge as far as theirs. One of the few places we can trade is Damascus. If that’s shut down, we’re doomed.”

Lebanon’s currency collapse appears to have factored in the upcoming Caesar bill and Beirut’s economic crisis is likely to have sent Syria’s economy into free fall. The parallel plunges are being used by some US officials to claim that both governments are co-dependent – and therefore warrant the same approach.

Over the weekend, the US special envoy for Syria, James Jeffrey claimed that the crumbling Syrian currency was partly due to US actions.

“The Syrian pound’s collapse proves that Russia and Iran are no longer able to float the Assad regime while the regime itself is no longer able to manage an effective economic policy, or launder money in Lebanese banks” Jeffrey said.

Over the past month, wheat and fuel – subsidised from the fast dwindling reserves of Lebanon’s central bank – have kept the Syrian economy on life support, to the chagrin of some Lebanese leaders. Smuggling lines from Iraq, meanwhile, have maintained a supply of food into most parts of regime-held Syria, where soaring prices have led to few buyers.

By Martin Chulov, The Guardian, 12 June 2020

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