Iran is stepping in to help Syria stabilize the value of its currency, which has been dropping sharply since U.S. President Barack Obama decided to start giving weapons to the anti-government rebels.
Iran’s intervention was announced this week by Syria’s central bank, which said it would draw on a billion-dollar line of credit set up by Tehran to stabilize the Syrian pound.
The Syrian rebels have been fighting to oust Assad for the past two years in a civil war that has taken more than 93,000 lives. The White House decided to begin providing weapons to the rebels last week after it concluded the Syrian military had used chemical weapons against its opponents.
The Syrian pound has been in what the bankers call a “managed decline” for the last two years, falling from 47 pounds to the U.S. dollar at the start of the protests against President Bashar al-Assad in March 2011, to 100 pounds at the end of last year.
For the last few weeks it had been trading on the black markets at around 147 pounds to the dollar. But last weekend, after President Obama announced the change in U.S. policy toward the rebels, black market trading put the pounds’ unofficial rate at 250 to the dollar, according to Beirut bankers.
U.S. dollars hard to find
Exchange dealers in Damascus, the Syrian capital, said the U.S. currency was hard to get and was trading wildly, but was settling in at around 200 pounds to the dollar even though the official rate was just under 100 to the dollar.
Dubbing the currency panic as “unreal and illusionary,” the central bank governor, Adeeb Mayaleh, blamed speculators for record-level drops.
On Syrian television Tuesday, Mayaleh said new accords signed between Iran and the Assad government would help fund needed imports. He said the currency speculators were “intimidating people and exploiting people.”
With demands for foreign currency mounting from Syrian banks, the government had activated the credit line Iran extended in January to fund “a big part of the market needs” at acceptable prices, Mayaleh said. Under current regulations Syrian banks are allowed to sell foreign currencies to individual customers up to value of $1,333 per month.
Syrian Prime Minister Wael al-Halki
said the government would continue to work on stabilizing the currency to counter what he called “the media and economic war.” The Assad government insists it has large foreign currency reserves.
Mazen, a former salesman who goes back and forth between and Lebanon and Syria, told VOA that his neighbors in the Damascus suburb of Jobar were gripped by panic over the depreciation of the pound, worrying that their lifetime savings would disappear.
“They were desperately hunting for dealers to exchange with but the prices were fluctuating madly,” Mazen said.
According to Reuters news agency, currency dealers in Damascus have complained that central bank chief Mayaleh had failed to meet his previous promises about stabilizing the currency amid talk of Assad’s ally Iran having deposited $2 billion in the Syrian central bank.
The dealers say a 100 million euro cash injection for banks failed to help, as the requirements for taking up the money were so burdensome only a fraction of it was used.
Some surprised currency has not collapsed
The fact that the Syrian currency has not already collapsed has surprised some analysts, who thought it would go into free fall as Iraq’s did in the wake of the U.S. invasion. Aid and loan facilities from Iran and Russia may have made the difference.
Iran also has helped out on the battlefield in the past two months. In addition to supplying weapons and trainers on the ground, Tehran was key to getting thousands of Lebanon-based Hezbollah guerrillas fighting on the government side against the rebels.
Soldiers loyal to the regime and civilians holding the Syrian national flag stand near boxes containing aid from the Syrian army in Qusair, June 5, 2013.
The seasoned Hezbollah fighters were especially effective two weeks ago in capturing the strategic town of Qusair that had been in rebel hands for the past year.
But as the currency turmoil this past week demonstrated, the economic challenges also threaten Assad’s hold on power, and the Syrian government is being forced to rely ever more heavily on Iran and Russia.
Syrian officials refuse to put a figure on the fall in the gross domestic product (GDP) since the civil war started 27 months ago. But in March, the former deputy prime minister for economic affairs
, Abdullah Dardari, now with the United Nations, estimated the nation’s GDP had shrunk by just over a third in the last two years.
and Trade Minister Hayan Suleiman told Lebanon’s Daily Star
in March that “the Syrian economy has managed to be self-sufficient despite all the problems imposed on us.” He said the country was “shifting to the East for our goods, food and production needs,” citing Russia as a key country.
And talking to Syrian state media earlier this year, Qadri Jamil, the current deputy prime minister for economic affairs, said, “the West has been surprised by the continuation of Syria’s economic wheel. The wheel here in Syria has slowed ... but it has not stopped completely.”
Betting on the economic collapse of the Assad government would be a waste of time, he said, because “we have friends ... who are supporting us ...”
How long this can continue isn’t clear.
Syria has lost an estimated $12 billion in foreign investment. Thanks in part to sanctions and oil fields captured by rebels, oil production has fallen by at least half and maybe more. And tourism, which had provided 11 percent of Syria’s GDP, has disappeared.