Geopolitics

Ten Years Of War And One Of COVID, Syria Facing Economic Abyss

The economic crisis in neighboring Lebanon, coupled with COVID-19 travel restrictions, are causing the already war-ravished nation to drown in even greater misery.

Children ride in the Yarmouk Camp area, south of the capital Damascus
Children ride in the Yarmouk Camp area, south of the capital Damascus
Laura-Mai Gaveriaux

SYRIA-LEBANON BORDER — Near a checkpoint on the border between Syria and Lebanon, 50-year-old Joelle says that conditions are simply "unbearable." A member of a Christian family originally from the city of Homs, she has spent the past 30 years in Masnaa, in the Lebanese Beqaa Governorate. In all that time, things have never been this bad, she explains.

For many Syrian residents, the 375 km-long border between Syria and Lebanon has always been an ecosystem where they earned their income. Back and forth trips between the two countries were common. But today, 10 years since the war that ravaged Syria began, the area is now mainly an observation post for all the upheavals that these two interlinked economies are experiencing — even if movements of goods and people have never been fully interrupted.

In recent months, the confluence of crises has increased poverty in Syria to an unprecedented level and has brought Lebanon's economy closer to the point of no return. One symptom of this tragedy: smuggling activities are surging in these traditionally porous border areas, and crime has never fared better.

As Samir Aita, president of the Arab Economists Circle, explains: "Syria is on the brink of a massive humanitarian catastrophe."

On top of the war came travel restrictions, starting last March, to contain the spread of COVID-19. That's had the unintended consequence of preventing new currency from entering the country.

The situation has worsened with the collapse of Lebanon's financial system. Billions of dollars belonging to the country's wealthiest sectors are now locked in bank vaults. This could be somewhere in the range of $30 to $40 billion, Aita estimates.

The cap on withdrawals and transfers by Lebanese banks is draining the circuit of currency exchanges both in the black market and imports — legal and illegal — especially with Turkey. According to Ankara's official statistics, these represent an average of $1.5 billion annually, at a constant level since the start of the conflict.

The scarcity of currency has another fundamentally destructive effect: Essential goods are being diverted and stored, for speculative purposes. This includes flour, which is a huge problem when bread has become the primary food commodity — if not the only one — in some governorates.

Petty corruption is flourishing more than ever

"Petty corruption is flourishing more than ever," Ali, a student living in Damascus, explains via an encrypted messaging app. "This is the first time that I have witnessed shortages of bread here in the capital. But on the other hand, if you have enough money to pay three times the subsidized rate and if you know the right person in the administration, then you can find whatever you want."

Talal, a 30-year-old living in Latakia, on the coast, explains that now he can only eat one meal every two days. "I'm a public servant, so I have some form of security. But even with my salary, I can no longer afford basic food, because prices have doubled. So with my wife, to feed our children, we take turns for dinner."

The World Food Program had already spoken out about that situation last spring, estimating that the average shopping basket had increased by more than 105% over the previous 12 months. "There's a real risk of famine, in the true sense of the word, because the Syrian government entered the health crisis with already empty state coffers," says Samir Aita.

A recent decision by the Syrian authorities to nearly double the price of subsidized gasoline has worsened the shortages on the Lebanese side of the border areas — shortages these regions had already been facing every day since March.

"Distributors now prefer to inject what gasoline they have into the smuggling market," says Hassan, a freight truck driver from Aleppo, who hires people every morning for less than $3 a day. "In Masnaa, 20 liters of gasoline are sold for 26,500 Lebanese pounds about $3 at the current black market rate, while in Syria it sells for 125,000 Lebanese pounds."

As a result, the Lebanese government regularly cuts off the fuel supply to the Beqaa Governorate, creating a vicious circle. Along the road, many gas stations are closed.

In a Syrian refugees' camp camp in Lebanon's Beqaa valley — Photo: Marwan Naamani/dpa via ZUMA Press

Unsurprisingly, black market networks have been the big winners of the crisis. Stuck at the borders or sometimes in the no man's land between the two checkpoints, several hundred people resort every month to the services of smugglers to get across the border, paying them sums that sometimes represent up to a year's salary for some families.

This was the case for Christine, Joelle's daughter, who left this summer with her aunt to renew her identity papers in Damascus for her university re-registration. The two women were barred from reentering the region by the Syrian army and were unable to turn back (Lebanon has regularly banned any entry of Syrians on its territory, because of COVID-19).

In the end, they had to pay 2 million Lebanese pounds (close to 400 euros) to return to Masnaa clandestinely, even if the household's sole income, which comes from the mother's housekeeping jobs, represents at most 400 pounds a month. Since then, without a valid residence permit, Christine has hardly dared leave her house, for fear of controls. Even worse is that she's now unable to work. Indebted by this unsuccessful trip, the family hasn't been able to pay its rent since July.

The workers with petty jobs who used to bring fresh cash to the Syrian side face the same problem and many have decided to stay on the Lebanese side, while waiting for the borders to officially reopen. That horizon is uncertain to say the least, as the pandemic breaks new records around the world.

In Damascus, officials point at the effects of U.S. sanctions included in the Caesar Act, which came into force last June. They accuse the West of starving civilians. The regime's supporters in Russia or in Europe have been quick to echo that rhetoric. But Samir Aita says the actual impact is minimal, that the Caesar Act — approved by the U.S. Congress to give the White House some weight in possible negotiations regarding reconstruction, among other things — is "eminently political."

Banks hold currency reserves that are equivalent to three months of imports.

While Syria's predatory regime bears most of the responsibility for the hardships of its citizens, one of the keys to improving their daily lives is in Lebanon. The values of the two currencies always evolve in parallel, as each devaluation of the Lebanese pound has been followed by a fall of the Syrian pound. But banks hold currency reserves that are equivalent, at most, to three months of imports, between $2 and 3 billion.

Lebanon is backed into a corner, and the Oct. 22 appointment of Saad Hariri as prime minister for the fourth time cannot be viewed as a sign that the political crisis that has shaken the country since the uprisings of 2019 will be resolved anytime soon. Hariri's ability to form a government is more than uncertain, especially without the support of Shiite parties and in a context of popular mistrust, as his return comes just a year after the people pushed him to resign.

"Right now the situation in Lebanon is worse than in Greece in 2009," says Samir Aita. "If Lebanon falls, Syria will become worse than hell on earth," worries Talal. Things will deteriorate even more, a staggering prospect given what the country has already suffered during 10 years of civil war.

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New Delhi, India: Fumigation Against Dengue Fever In New Delhi

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 வணக்கம்*

Welcome to Thursday, where America's top general reacts to China's test of a hypersonic weapon system, Russia is forced to reimpose lockdown measures and Venice's historic gondola race is hit by a doping scandal. French daily Les Echos also offers a cautionary tale of fraud in the crypto economy.

[*Vaṇakkam, Tamil - India, Sri Lanka, Singapore]

🌎  7 THINGS TO KNOW RIGHT NOW

Top U.S. general says Chinese weapon nearly a "Sputnik moment": China recently conducted a "very concerning" test of a hypersonic weapon system as part of its push to expand space and military technologies, Gen. Mark Milley, the U.S. Chairman of the Joint Chiefs of Staff, told Bloomberg News. America's top military officer said that this was akin to the Soviet Union's stunning launch of the world's first satellite, Sputnik, 1957, which sparked the Cold War space race. Milley also called the test of the weapon "a very significant technological event" that is just one element of China's military capabilities.

Brexit: France seizes British trawler: A British trawler has been seized by France while fishing in French waters without a license, amid escalating conflict over post-Brexit fishing rights. France's Minister for Europe said it will adopt a zero-tolerance attitude towards Britain and block access to virtually all of its boats until it awards licenses to French fishermen.

COVID update: Russia confirmed a new record of coronavirus deaths, forcing officials to reimpose some lockdown measures, including a nationwide workplace shutdown in the first week of November. Germany also saw its numbers spike, with more than 28,000 new infections yesterday, adding to worries about restrictions this winter there and elsewhere in Europe. Singapore, meanwhile, reported the biggest surge in the city-state since the coronavirus pandemic began. Positive news on the vaccine front, as U.S. pharmaceutical giant Merck granted royalty-free license for a COVID-19 antiviral pill to help protect people in the developing world.

Iran nuclear talks to resume: Iran's top nuclear negotiator said multilateral talks in Vienna with world powers about its nuclear development program will resume before the end of November. The announcement comes after the U.S. warned efforts to revive the deal were in "critical phase."

First U.S. passport with "X" gender marker: The U.S. State Department has issued its first American passport with an "X" gender marker. It is designed to give nonbinary, intersex and gender-nonconforming people a marker other than male or female on their travel document. Several other countries, including Canada, Argentina and Nepal, already offer the same option.

China limits construction of super skyscrapers: China has restricted smaller cities in the country from building extremely tall skyscrapers, as part of a larger bid to crack down on wasteful vanity projects by local governments. Earlier this year the country issued a ban on "ugly architecture."

Doping scandal hits Venice's gondola race: For the first time in the history of the Venice Historical Regatta, a participant has tested positive to marijuana in a doping test: Gondolier Renato Busetto, who finished the race in second place, will be suspended for 13 months.

🗞️  FRONT PAGE

"End of the ice age," titles German-language Luxembourgish daily Luxemburger Wort, writing about how the ice melting in the Arctic opens up new economic opportunities with a new passage for countries like Russia and China but with potentially devastating effects for the environment. The issue of the Arctic is one of the topics that will be discussed at the COP26 Climate Change Conference which kicks off in Glasgow on Sunday.


#️⃣  BY THE NUMBERS

$87 billion

A new United Nations report found that extreme weather events such as tropical cyclones, floods and droughts have caused India an average annual loss of about $87 billion in 2020. India is among the countries which suffered the most from weather hazards this year along with China and Japan.

📰  STORY OF THE DAY

Air Next: How a crypto scam collapsed on a single spelling mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy from Laurence Boisseau in Paris-based daily Les Echos.

📲 The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system. Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation.

📝 On Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. Challenged by one of his employees on Telegram, the CEO admitted that "many documents provided were false", that "an error cost the life of this project."

⚠️ What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond". Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.


➡️ Read more on Worldcrunch.com


📣 VERBATIM

"A weapon was handed to Mr. Baldwin. The weapon is functional, and fired a live round."

— Following the Oct. 21 on-set shooting death of cinematographer Halyna Hutchins, Sante Fe County Sheriff Adan Mendoza told a press conference that the "facts are clear" about the final moments before Hutchins was shot. The investigation continues to determine what led up to that moment, and any possible criminal responsibility related to how the "prop" gun that actor Alec Baldwin fired was loaded.

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

Share with us your favorite gondola memories or worst crypto scams — and let us know what the news looks like from your corner of the world! info@worldcrunch.com

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