Following the Turkish government’s announcement that it was imposing sanctions on the regime of Bashar al-Assad, the White House issued a statement praising Turkey’s “leadership.” Although allowing for nine months, and 4,000 dead Syrians, to pass before finally taking concrete punitive action does not exactly qualify as leadership, Ankara’s decision is still better late than never.
The Syrian regime has dismissed the impact of the economic measures taken against it, most recently by the Arab League, with Turkey’s participation. “Warnings and sanctions will not work with us,” Foreign Minister Walid Mouallem defiantly declared on Monday. Regime officials have openly stated that as long as Syria continues to have the support of Iran, Iraq and Lebanon, it will continue to have enough breathing room to get by.
The Assad regime’s bluster, however, is misleading. The unrest in Syria has already brought tourism and the broader services sector, which forms 55 percent of the economy, to a halt, dealing it its biggest blow. Sanctions by the European Union targeting the energy sector, which accounts for around 40 percent of all of Syria’s exports and one third of governmental revenue, followed. The sanctions of the Arab League and Turkey will significantly weaken Damascus, even if Syrian trade continues with Iraq and Lebanon.
The significance of Turkish sanctions varies. Turkey’s trade relation with Syria was already lopsided in favor of Turkish exports, which had steadily risen since 2003 to reach around $1.6 billion last year. However, all this changed after the outbreak of the uprising, with trade decreasing dramatically. The drop in Turkish exports, then, will ironically tilt the balance of trade and save Damascus desperately needed hard currency, which would have otherwise gone to Ankara.
Unsurprisingly, Turkish merchants and businessmen in border towns and provinces feel that it is they who are getting the rougher deal. Similarly, the Turkish transport sector, which carried goods to Syria and, through it, to the Arab world, has also been hit hard, forcing Turkey to look for alternative routes, especially via Iraq. It is partially for these kinds of reasons that Ankara had long hesitated before finally adopting sanctions. By the time it did, the Syrian market had become effectively moribund anyway, Turkish investments were practically frozen, and Turkish banks had stopped issuing letters of credit.
However, the importance of Turkey's sanctions lies in cutting Assad’s ability to connect to the world’s financial network through a third party. Ankara is suspending all ties to the Central Bank of Syria, freezing any Syrian government assets in Turkey and suspending any credit deals as well as all new dealings with the Commercial Bank of Syria. With Arab countries also closing their doors in the face of Assad, he must rely on Iran, Iraq and Lebanon.
But Iran is in a similar position, due to international sanctions. Disconnected from world financial networks, Tehran is desperate for hard currency and often offers countries like China barter deals for its oil.
For its part, Iraq, although awash with petro-dollars, lacks a sophisticated banking sector behind which Syria can hide. If Iraq plans to come to Syria's rescue with foreign currency, it will have to do so using suitcases. This might be good enough for Assad and his immediate circle, but it would not be able to keep the Syrian economy afloat.
As for Lebanon, its vibrant banking sector is already under international scrutiny for fear that Iran could use it to circumvent its sanctions. Syria too will find it hard to use the closely monitored Lebanese banks as a third party for its financial operations.
What remains for Syria are its exports to Iraq and Lebanon, which account for around 40 percent of Syria's $13 billion annual exports. While too little to keep the Syrian economy going, these exports are not exclusively Syrian manufacture and include transit trade. As Syrian transit trade drops to a minimum, the Syrians will be left with exporting food, textiles and other staple products as their only source of income.
A key element of the Arab League sanctions on the regime will be the compliance of the United Arab Emirates, where Assad and his entourage presumably keep their money, and where his family has reportedly recently purchased $60 million worth of property. The UAE have yet to freeze Syrian assets. It's possible they are either holding out hope for a last-minute compromise, or they are giving the Assads time to move out their money to another, as of yet unknown destination.
The reluctance of Turkey and the UAE, to say nothing of Iraq and Jordan, puts in perspective the White House’s praise of these regional actors’ supposed leadership.
The Obama administration’s continued desire to look for others to lead on Syria will run against the vulnerabilities and hesitance of these states. The US will need to press these allies hard to ensure the noose is tight around Assad’s neck. There is no substitute to Washington’s leadership.
Hussain Abdul-Hussain is the Washington Bureau Chief of Kuwaiti newspaper Al-Rai. Tony Badran is a research fellow at the Foundation for Defense of Democracies. He tweets @AcrossTheBay.