x Abu Dhabi, UAEThursday 27 July 2017

Sanctions in Syria can open the door to regime change

The sanctions on Bashar Al Assad's regime are starting to bite, but it is possible for him to stay in power if they are not enforced strictly.

When the US imposed economic sanctions on Damascus in April, the news went almost unnoticed in Syria because the two countries had hardly any trade relations. But the European and Arab sanctions, approved more recently, will not only have a huge impact but will also open the doors for more scenarios to bring down the Syrian regime.

The EU sanctions, which started in October, have already begun to leave a negative effect on the Syrian economy. The biggest impact comes from the sanctions imposed on Syrian oil exports, 95 per cent of which used to go to the European market.

Before the crisis, Syria's oil production was around 350,000 barrels per day. After the EU decision to stop buying Syrian oil, output has been reduced by 25 per cent, according to the Syrian oil ministry. This was the first slap for the regime of the Syrian president, Bashar Al Assad. But it won't be the last one.

The Syrian government has found it hard to find alternative markets. Oil sales make up roughly a third of Syria's $16 billion (Dh58.7 billion) annual budget. And this picture is growing bleaker. The Syrian government exported just 600,000 barrels in the first six weeks after the sanctions - via an Iranian company.

And yet, depriving Syria of oil sales does not mean it will remove the armoured vehicles from the streets.

Syria was exporting only a third of its production, but the importance of the exported oil was to obtain foreign exchange needed by the government to finance imports, including weapons, and to fund its military campaign against the protesters.

Also, the potential effect of the European sanctions has been undermined by the fact that European companies gave with one hand what they took away by the other.

Before the sanctions were signed, Italy's government postponed the European ban on Syrian oil until the completion of its deal with the Syrians - which would provide the Syrian regime with at least $1 billion (Dh3.67 billion). The Europeans then announced a decision to stop buying Syrian oil but the decision did not include banning their companies from producing oil in Syria.

European companies investing in Syria have a vital role in the production of oil. Royal Dutch Shell is the largest foreign player in oil in Syria, with $6 billion of investments in the country. The French company Total produces about 40,000 barrels of oil per day and the British company Gulf Sands Petroleum produces roughly 5,000 barrels per day.

On Friday, Royal Dutch Shell announced it will shut down all oil operations in Syria to comply with EU sanctions. But the other two European companies are still working in the country.

Oil production is a complex process and requires continuous follow-up by experts, which local teams lack. So allowing companies to keep producing means continuing to provide the Syrian side with the means to generate income, as long as the Syrian regime finds customers.

Last week, the Arab League approved economic sanctions on Syria to pressure Damascus to end its deadly suppression of the eight-month-old uprising. A few days later, the regime has already started to sound desperate.

When the sanctions take effect fully, the Syrian government will lose a large portion of revenues that come through fees and taxes as a result of the cessation of foreign trade and the disruption of oil production, which means paralysis of the state treasury (its income from taxes and fees amounts to 60 per cent).

And in case the government fails in finding customers for the oil, the situation for the Syrian economy will become catastrophic.

The question now is this: could the collapse of the Syrian economy mean the collapse of the regime, or a least a change in regime tactics? Not necessarily.

Economic collapse as a result of sanctions has occurred for similar regimes, particularly Iraq and North Korea. In the Iraq scenario, Saddam Hussein continued to rule for 12 years. In North Korea, Kim Jong-il's regime is still holding onto the reins decades later.

Even Syria is no stranger to navigating around sanctions. Indeed, the regime in Damascus faced earlier sanctions in 1986 but found several options to defeat them, mainly through the Soviet Union.

Today, the regime has more friends than ever, including Iran, Russia, China and India, as well as Iraq, which takes 50 per cent of those exports that go to Arab countries.

Finally there is Lebanon, which has always been a shadow of the Syrian economy, through which money-laundering operations of the Syrian regime were carried out.

Nonetheless, economic sanctions can lead to economic collapse, which in theory can create a climate for revolts against regimes. Such scenarios are more likely if a revolution is already in place, as it is in Syria.

If economic hardship is felt across a wide spectrum of the Syrian community - shortages of diesel, for instance - the base of the revolution could expand. And if the economic situation continues to deteriorate, this might lead to the emergence of alliances between army officers and merchants and open the scene for various scenarios, not least of which is a coup.

But this outcome is only possible if all sides, oil majors and major economies, enforce the sanctions as they are being written. Only time will tell if that comes to pass.

 

Muhammad Ali is a Syrian political analyst and activist based in Istanbul