Assad’s Cash Problem: Will Syria’s Dwindling Reserves Bring Down the Regime?

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Narciso Contreras / APA

A Free Syrian Army fighter offers evening prayers beside a damaged poster of Syria’s President Bashar Assad during heavy clashes with government forces in Aleppo, Syria, Dec. 8, 2012.

With more than 40,000 people killed in Syria’s devastating war, and about three million people driven from their homes, Western and Arab leaders are grappling with one question: How and when does all this end? The answer, say some, might lie not in the horrific bloodshed but in a simpler factor: money. Economists say President Bashar Assad’s regime has effectively gone broke, and is running out of ways to raise revenues and keep most of its soldiers properly fed and paid. “The economy is the basis of everything,” says Samir Seifan, a prominent Syrian economist who fled last year. He spoke by phone from Dubai. “Without services, boots, money, you cannot do anything. If the government cannot finance the army, they [soldiers] will simply go away.”

That tipping point, in which the government faces all-out financial collapse, seems to be drawing near—between three to six months from now, according to the calculations of Seifan and others who have examined Syria’s finances. Already, Assad has abandoned about 40% of the country’s territory to rebel forces, withdrawing his troops from the ground while his jets continue aerial bombing, apparently because the army is too thinly stretched to defend both rural areas and the government-held pockets of Damascus and Syria’s most populous city, Aleppo. And while Assad appears still to have considerable resources in Damascus, the economic indicators suggest his country is in free-fall, and that he has little way to generate fresh cash—at least not without appeals to allies.

(PHOTOS: From The Front Lines of Syria)

The government’s official foreign reserves have dwindled from about $20 billion before the conflict erupted in early 2011, to between $2 and $4 billion now, according to estimates by the Institute of International Finance Inc. (IIF), a global banking association in Washington, whose members have branches in Damascus. Syrian opposition economists calculate Assad’s remaining reserves to be even lower, at about $1 billion in cash. “Nobody is paying taxes. There is no fuel, and the electricity runs just a few hours a day,” Abrahim Miro, a Syrian economist based in the Netherlands, who advises the opposition Syrian National Coalition, told TIME last week in Morocco, where rebel leaders met Western and Arab foreign ministers. “Everybody feels the government is going to fall,” Miro says.

It may seem strange that Syria’s government is still standing at all. Since last year international sanctions have halted its sales of oil and gas, which are crucial exports for Syria, and blocked its international banking transactions. The regime has been operating for months on outside help from Iran and Russia, in much the same way as the rebel economy operates on donated cash, largely from Qatar and Saudi Arabia; the billions in assistance to Syria from Moscow is in the form of loans, rather than gifts, meaning that Assad’s successors could ultimately be saddled with huge wartime debts to Russia. “There is some liquidity coming into the system that is keeping the country afloat for a while, but it is not sustainable,” says Garbis Iradian, Syria expert at the IIF. “Within a few months, if there is no solution the economy could force the regime to collapse,” he said by phone this week.

To gauge how bad Syria’s finances are, look at the figures: The Syrian pound has roughly halved in value, from 46 to the dollar in early 2011 to about 90 to the dollar now. In 2010, Syria was debt-free, and its economy grew about 3.5% that year. The economy shrank in 2012 by about 20%, in addition to the 3.5% drop last year, according to Iradian. That drop is not as severe as occurred during the civil wars in Bosnia and Lebanon, whose economies plummeted about 50% in two years, he says. But more and more of Assad’s pot of cash is being gobbled up by larger government subsidies for fuel, food and other basics, which now account for about 16.3% of GDP. Those are essential to keeping inflation in check and to stave off public anger, as Syrians struggle to survive through the turmoil. “The regime has been keen not to allow the exchange rate to jump, because it would create price increases, and the anger on the street would be higher,” says Seifan, the Syrian economist. “But there is no investment, no letters of credit to import from outside. The regime is using its reserve in very small quantities.”

Despite help from Gulf countries, Syria’s rebels, too, say they face a severe cash crisis, as the war drags on longer than expected, and as entire neighborhoods are razed. In Morocco last week, an opposition spokesman Yasser Tabbara told TIME, “It will cost about $500 million a month for us to administer freed areas, just to keep things afloat.” So far, that money has yet to be found. This week, the U.N. appealed to governments for $1.5 billion to help Syrians through the bitter winter, warning that millions face growing hunger, as food stocks dwindle in the war zones.

But it is the Syrian leader who faces total collapse in the face of bankruptcy. So dire are Assad’s finances, in fact, that in recent months Russia flew eight plane-loads of Syrian banknotes, printed in Russia, to Damascus, in a kind of rescue package estimated to weigh about 240 tons, according to flight records obtained by ProPublica, a U.S.-based non-profit investigative journalism organization. That cash, says Seifan, has helped to save Assad from total bankruptcy, and the Syrian leader has been cautious to use it slowly, fearing that another shipment might be a long time coming, and that pouring new money into the teetering economy could spark raging inflation.

Of course, it is impossible to know what Assad must be thinking, as the rebels inch ever closer to his palace doors. The Syrian leader said in a Russia Today television interview in November that he would “die in Syria,” and rejected all suggestion that he might voluntarily surrender power.

Still, as Assad faces impending bankruptcy, Seifan and Iradian believe that the end must seem increasingly real to him. And two startling statements over the past week signal a sense among his closest allies that they think his days in power are numbered. Last Friday Russia’s Deputy Foreign Minister Mikhail Bogdanov told the Kremlin that “an opposition victory cannot be excluded,” and that Assad will “progressively lose control over an increasing part of the territory.” And on Monday Syria’s own Vice President Farouk al-Sharaa, was quoted in the Lebanese newspaper al-Akhbar saying that a “historic settlement” was needed to save Syria as a country, rather than saving “an individual or a regime.”

Now the question is: Will Assad’s allies Iran and Russia finally feel compelled to ditch their support for him? Russia’s spokesman insisted last week that it still stands by Assad, explaining Bogdanov’s comments by saying, “Russia stands for dialogue and against foreign interference.” But Assad’s close friend Iran, which Seifan believes has given more than $10 billion in wartime aid—some of it in desperately needed petroleum supplies is itself struggling to keep the help going. “Iran itself is not able to support Assad a lot,” Seifan says. “It is under sanctions, and the economic situation for Iran’s government is deteriorating.” That makes the outlook for Assad seem even grimmer.

(MORE: Russia and Its Syrian Debacle)

19 comments
LujackSkylark
LujackSkylark

Assad keeps blaming Israel for all his problems. Assad will be confined to his kingdom of Damascus one day as the rebels win victories isolating him. Assad will then do something stupid against Israel and Damascus will be destroyed (Isaiah 17:1) in one night. (Isaiah 17:14)

jtchun777
jtchun777

The first justice is the right to live. Every normal religion advocates this. Any intentional killing except for natural law such as self-defense is not allowed by any God. Anyone who destroys this justice is a betrayer of their own God and a betrayer of mankind. His helpers are the same. Justifying killing by the name of God or doctrine is just hiding their own deep selfishness. Too many innocent people were dead, even beautiful children. Very sad. As for normal men, they don't want to live if they themselves cause this tragedy. Retire spontaneously. Stop helping killers, and Rebels must declare to treat their opponents according to internationally fair legal procedure, not by Libya case. (Walt, concernedness itself is a light over darkness, which brings empathy and becomes power of changing the world into better one. Cheer up.)

mrxexon
mrxexon

The New World Order's first line of control is financial. They literally own international banking and no country can survive for long without their approval.

Assad wasn't too bad until he was pushed into a corner and forced to act out of desperation. And like Libya, there ARE foreign elements hacking away at the status quo. Because the NWO is very busy reshaping the entire Middle East to their specifications.

And you know, Israel is at the heart of this...

Jerusalem is destined to the the capitol of the world under the NWO. Which really only diverts attention away from those in Europe who are behind it all. But I see you. And, I'm not alone.


x

eetom
eetom

Every birthday celebrated means there is one year less to live.  Similarly every bullet that leaves a gun means some money has disappeared in smoke.  Every shell that is fired against your enemy means you have set some of your money on fire. 

Actually soldiers, whether pro-regime or rebellious, do not fight with bullets in their rifles.  They fight with food in their stomachs.

GaryRMcCray
GaryRMcCray

It does not seem to me that Syrians can possibly live with Assad as their leader after this, even if he should overcome the rebellion (unlikely) he will almost certainly be assassinated within a year.

And good riddance.

He is also approaching genocide for the citizens of his own country and even his International alliance with Russia is in tatters.

He is a Pariah now, he has no future.

j.villain1
j.villain1

Putin has already throw Assad under the bus.

Truth
Truth

This is the same kind of wishful drivel that preceded the Israeli war against Hizbollah (will this bring about the demise of Hizbollah), the invasion of Iraq (will Iraqi Shias face off against Iranian Shias), the war against Libya (a free Libya will be an indispensable ally), the siege of Gaza (Hamas will not be able to rule pragmatically; they only know how to fight) blah blah blah.Get a grip Walt and take your blinkers off. You're too comfortable in Paris.

YetiHunter
YetiHunter

Shiny side out mrxexon - or you'll fry the tiny fragments of your brain that remain

Sean_C2
Sean_C2

@mrxexon This message brought to you by the tinfoil hat brigade.

Sibir_Russia
Sibir_Russia

@GaryRMcCray  

You simply must proceed from realities. Bashar al-Assad is the legitimate President of a sovereign country, the duties of which include the protection of its citizens both on external, and on internal enemies. It is the duty of every President - Barack Obama and Vladimir Putin is no exception. There is no difference who will be the next President, in Syria, the main thing that it was the choice of the Syrians. From an interview with Bashar al-Assad clear that he does not care about his seat and ready to give up his position of responsibility of another candidate, if he wins in a nationwide election. Russia is doing everything possible to ensure that such elections took place with the participation of all the parties, of course except the militants. Militants of the Al-Nusrah Frontshould not participate in the negotiations, as well as other terrorist cells of Al-Qaida.

FSA should separate themselves from foreign fighters and together with the army Bashar al-Assad to defendMotherland - destroying the locusts, which wave after wave penetrates into Syria. This will be a major step towards national reconciliation. The United States should stop supporting theterrorists and not to divide terrorists into good and moderate. The United States must adhere to agreements. Treaties must be respected.

 

fookalah
fookalah

@GaryRMcCray  you need to take those narrow minded glasses off and look at the fsa who has destroyed syria in its attempts to implement sharia law in syria.

this war is not about freedom it is soley about enslavement by religious fruitcakes, and the US is sponsoring the genocide of minorities in syria 

Sibir_Russia
Sibir_Russia

For those who do not know or have forgotten.
Kofi Annan peace plan for Syria
The text of the six-point plan:

(1) commit to work with the Envoy in an inclusive Syrian-led political process to address the legitimate
aspirations and concerns of the Syrian people, and, to this end, commit to appoint an empowered interlocutor when invited to do so by the Envoy;

(2) commit to stop the fighting and achieve urgently an effective United Nations supervised cessation of armed violence in all its forms by all parties to protect civilians and stabilise the country. To this end, the Syrian government should immediately
cease troop movements towards, and end the use of heavy weapons in, population centres, and begin pullback of military concentrations in and around population centres. As these actions are being taken on the ground, the Syrian government
should work with the Envoy to bring about a sustained cessation of armed violence in all its forms by all parties with an effective United Nations supervision mechanism. Similar commitments would be sought by the Envoy from
the opposition and all relevant elements to stop the fighting and work with him to bring about a sustained cessation of armed violence in all its forms by all parties with an effective United Nations supervision mechanism;

(3) ensure timely provision of humanitarian assistance to all areas affected by the fighting, and to this
end, as immediate steps, to accept and implement a daily two hour humanitarian pause and to coordinate exact time and modalities of the daily pause through an efficient mechanism, including at local level;

(4) intensify the pace and scale of release of arbitrarily detained persons, including especially vulnerable categories of persons, and persons involved in peaceful political activities, provide without delay through appropriate channels a list of all
places in which such persons are being detained, immediately begin organizing access to such locations and through appropriate channels respond promptly to all written requests for information, access or release regarding such persons;

(5) ensure freedom of movement throughout the country for journalists and a non-discriminatory visa
policy for them;

(6) respect freedom of association and the right to demonstrate peacefully as legally guaranteed.


THE PRINCIPLE OF NON-INTERFERENCE IN THE INTERNAL AFFAIRS OF STATES
http://www.un.org/documents/ga/res/36/a36r103.htm

Sibir_Russia
Sibir_Russia

@j.villain1  

Russia does not support the regime of Bashar al-Assad from the very beginning of the conflict. We protect international law. The principle of non-interference in the sovereign Affairs of other States. Russia calls on the Syrian side of the dialogue. We are negotiating with both the government of Syria, and with all of the elements of the Syrian opposition. A constructive opposition is often visits Moscow. Our position remains unchanged. We adhere to the UN Charter, resolutions, Jeneva communique (which also bears the signature of the USA). We supported the peace mission Kofi Annan and his plan of 6 points. Just as we support the peace mission Lakhdar Brahimi. Russia and China, as countries having the right of veto in the UN agreed to adhere to the strict observance of the norms of international law and not allow it to violations of other countries. You need to understand the main thing. The country reached a consensus in Geneva. According to the arrangements the Syrians themselves should decide their fate, and external members must put pressure on all the parties to lead peace negotiations.I remind that the plan of k. Annan was approved by resolution No. 2042 of the UN Security Council

 

Sean_C2
Sean_C2

@Truth It's wishful drivel to note that Syria is going bankrupt?