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1/ Lebanon’s turmoil is spilling over into Syria is ways that are acutely felt but only partly understood. Syria’s economy relies massively on the Lebanese market: As the latter breaks down, Syria faces an escalating crisis for which no one seems prepared.
2/ Lebanon’s liquidity crisis has already hit Syria hard. Heavily sanctioned and starved for dollars, Syria needs Lebanon as a conduit for foreign currency: via remittances sent by wire, cash carried across the border, or capital stashed in Lebanese banks.
3/ That lifeline is now strained on multiple fronts: Lebanese banks and ATMs have largely ceased giving dollars, many transfer stations have shut down, and employers are cutting salaries (of Syrians among others).
4/ This helps fuel the dizzying depreciation of the Syrian pound, which lost over 15% of its value against the dollar over the last month. With the Syrian pound plunging, some shop owners have closed down to wait out the tumult.
5/ Scarcity will gradually affect not just dollars, but goods. As Lebanon braces for shortages—including in such vital goods as fuel, flour, and medicine—exports (and large-scale smuggling) to Syria will inevitably slow.
6/ Syria was already isolated and suffocating: Trade with Iraq, Turkey, and Jordan remains strained, and Syria’s own seaports—weighed down by sanctions, red tape, and corruption—do little to ease the pressure.
7/ That is also why Lebanon became so important in the first place, as the most viable outlet for Syrian businesses of all sizes to park capital and execute contracts—typically through Lebanese partners, to evade the sweeping effects of sanctions.
8/ As this last window closes, the consequences are more ominous still given the onset of winter. Seasonal power cuts are kicking in across Syria and rumblings of fuel shortages are on the rise, stirred by memories of last year’s brutal winter.
9/ Such a crisis has far-reaching implications. Beyond deepening Syrians’ misery in the near-term, an economic crunch—prompting fresh migration and capital flight—will push any prospect of recovery farther over the horizon.
10/ Most disturbing is the lack of any vision to stave off collapse. The Lebanese and Syrian regimes are focused on their own immediate survival, further plundering their economies. Meanwhile, Western governments remain largely in denial as to the unwanted effects of sanctions.
11/ Governments keen to forestall catastrophe must put this emergency center stage. Discussions of how to mitigate the unwanted side-effects of sanctions have been glacially slow. They must now catch up with the accelerating pace of Syria’s economic deterioration.
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