At the end of 2018, $1 was equal to 500 SYP. In March 2011, at the beginning of the war, the dollar was trading at 47 SYP. Eight long years of war have left Syria bleeding and drained. In the past three years, the government in Damascus has retaken many areas that were once held by the opposition, but a the economy is on its knees.
The sharp fall of the Syrian pound can be explained by two factors. First, there has been a decline in foreign exchange reserves. "The Syrian Central Bank is not intervening in the stabilization of the currency, so people are panicking. The reasons are very opaque, but we need the remaining reserves. People who are buying dollars believe that there aren’t enough reserves to intervene," Karim *, a former financier who lives in Aleppo, told OLJ by WhatsApp.
The plunge could also be connected to a strong demand for dollars in Lebanon, where Syrian importers prefer to use the banking system for their transactions, according to the online economic site The Syria Report.
The second reason for the historic plummet is connected to a recent American clamp down on the Syrian economy, which was already being subjected to international sanctions. "Between $3 and $7 million were transferred every day by Syrian expatriates through exchange offices in Lebanon and in the Gulf countries. Two weeks ago, the Americans lobbied to ban these transactions," the Damascus businessman said.
For example, it is not officially possible for Syrians living in Lebanon to transfer dollars to parts of Syria under government control because the money is converted into Syrian pounds when it reaches Syria. Still US dollars are able to enter opposition held areas with little problem along informal smuggling networks. "Well off Syrians send their dollars to Damascus (from Lebanon, for example) within two hours by land,” a Western source told OLJ.
At a press conference in Istanbul on Sept. 8, Joel Rayburn, the US State Department’s special envoy for Syria, reiterated that the US will maintain its sanctions against the Syrian regime and its financial backers.
The impact of the depreciation of the Syrian pound is being strongly felt among people in the country, where purchasing power has been extremely affected.
"The working class is suffering the most from the currency drop. A few days ago, I bought 12 bottles of a soft drink brand that is not always available on the market. I felt that the shopkeeper got worried because he will have to buy his merchandise at a higher price,” Karim said. “Retailers are complaining from the decline in purchasing power. The situation is extremely sad, but at least there is no more shelling.”
Aleppo is Syria’s second largest city and was once the backbone of the country’s economy. It was brought back under regime control in 2016, but is still struggling to recover from years of destruction. "The entrepreneurs have not come back yet. The state has just removed the rubble and has launched one or two main projects. But the city remains the same way it was in 2016," Karim continued.
There is fear that there will be more inflation. Meanwhile, wages are stagnant and there are shortages of many items. In April, there were protests in cities across the country due to a lack of fuel and frustration at the economic situation.
There is some speculation that the government is planning to crackdown on people regarded as war profiteers and spearheads of corruption in response to the discontent. In the past two weeks rumors have emerged about a quarrel between the government and important families in the Syrian business community. Triumphant on the military front, after having retaken key territory from the rebels, with the help of Russia and Iran, Syrian president Bashar al-Assad “now feels strong enough militarily and politically... to take back control of the economical field, which he had previously entrusted to businessmen close to the regime,” an economist in Damascus told OLJ.
A political source in Damascus confirmed that there was a clampdown on three business partners at the end of August: Rami Makhluf, Hussam el-Katerji and Mohammad Hamcho. There are dozens of other businessmen, who have been able to operate with impunity due to protection from senior Syrian officials, who could also be on the regime’s radar, according to the economist. In other words, there is the potential for a "Syrian Ritz-Carlton", the economist said, referring to purges initiated in Saudi Arabia by Crown Prince Mohammad bin Salman in 2017.
The President’s Office allegedly ordered a series of measures targeting the assets of several companies owned by Rami Makhluf, including Syriatel, on the pretext of a “fight against corruption”.
The State has likely taken over Syria’s duty free shops, "an enormous engine for picking up currencies”, which Makhluf had controlled since 2010, according to a trader who was also contacted by l’OLJ.
Makhluf reportedly re-sold (to Kuwaiti investors) all of his share in Ramak, the company that runs the duty free shops at various border crossings and the international airports in Damascus and Aleppo. From the beginning of the crackdown in 2011, Makhluf let go––or at least appeared to let go––of all of his business interests in Syria.
The ostentatious lifestyles of some businessmen, and their offspring, who are known to have enjoyed indulgences, the string-pulling of power, and who got richer during the war, was not welcomed. Photos of their lavish lifestyles that Makhluf’s sons, Mohammad and Ali, published on their Instagram accounts have not gone over well in a country that is suffering from austerity and poverty.
"Makhluf and Assad are like Hafez and Rifaat. Hafez used to keep a low profile and was humble while Rifaat was the ‘nouveau riche,’” Karim said.
Known for being the wealthiest man in Syria, Makhluf, with his cousin’s blessing, who was also the country’s President, took advantage of the liberalization of the Syria’s economy.
"By taking action against the most prominent tycoons as he is preparing to win the war, Bashar is sending a message to Syrian businessmen who have been filling their pockets and getting richer over the past eight years," a source close to the regime told OLJ. The State clearly hopes to regain control and replenish its treasuries by putting pressure on all people who "took advantage of this war to enrich themselves and operate outside of the legal framework," the source said.
*This name has been changed.
(This article was originally published in French in L'Orient-Le Jour on the 10th of September)
The Syrian pound is now at its lowest level since the war in the country began in 2011, sinking to a rate of 683 SYP to the dollar on the black market this week. On Sunday, the dollar was close to 700 SYP. “Very soon we are going to reach 700 SYP to the dollar,” a businessman in Damascus, who requested anonymity, told L’Orient-Le Jour (OLJ) by phone.
At the end of 2018, $1 was equal to...