Rita Daou, AFP
Last updated: 5 December, 2011

Sanctions-hit Syria eyes Lebanon and Iraq corridors

As Syria staggers under unprecedented Arab and global sanctions, Lebanon and Iraq are poised to provide economic corridors for their crisis-hit neighbour without explicitly breaching the restrictions, experts say.

“Lebanon and Iraq could turn into Syria’s lungs, as it were, allowing it to breathe under the sanctions,” said Lahcen Achy, economic analyst at the Carnegie Middle East Centre.

The Arab League last week approved sweeping sanctions against the government of Bashar al-Assad over its brutal crackdown on a popular revolt, now in its ninth month.

The move marked the first time the 22-state bloc enforced punitive measures of such magnitude on one of its own members. The sanctions include an immediate ban on transactions with Damascus and a suspension of flights to Arab states.

Turkey, poised to be an increasingly influential player as the crisis in Syria deepens, followed suite by banning dealings with the Assad government and central bank.

The United States and European Union too have tightened their sanctions on the regime.

For Syria’s economy, which suffered rampant unemployment rates and stagnation long before the current unrest, neighbouring countries could well prove the only lifeline, but they will have to tread carefully to avoid sparking the ire of the international community.

“Syrian merchants and businessmen can for example deposit money in Lebanese banks either directly or via Lebanese citizens,” Achy said.

“Any clear breach of the sanctions however will only bring more pressure and headaches to Lebanon.”

Should flights to Damascus be halted under the sanctions, Lebanese and Iraqi airports could also see increased business as passengers opt to land there before driving to Syria.

“The Syrian economy was in crisis even before the sanctions which will still have an impact, but not one that cannot be circumvented,” said Mohammed Shamseddine of the Beirut-based research centre Information International.

“All goods that are barred from entering Syria will arrive in Lebanon and could be transferred to Syria,” Shamseddine told AFP.

“Lebanon could become Syria’s economic backyard through which goods flow in and out of the country.”

Lebanese Economy Minister Nicolas Nahas last week confirmed to AFP that the Hezbollah-dominated government would be implementing the sanctions. The country’s foreign minister however has said the opposite.

In another sign that Lebanon is distancing its economic sector from that of its neighbour, central bank governor Riad Salameh recently denied Syria’s government or national bank had any assets in the Lebanese institution.

Several high-level banking officials have also told AFP they are taking extra precaution in allowing Syrians to open saving or checking accounts, turning away several clients and tightening the monitoring of transactions.

But experts doubt the Syria sanctions will signal any real benefit for the Lebanese economy.

“The private sector, and especially the banking sector, has taken extra precautionary measures irrespective of what the government has decided or will decide,” said one Lebanon-based banker, requesting his name be concealed.

“There is this rosy picture that Lebanon will benefit from the sanctions which is highly unlikely,” he said.

“There are some individuals who might benefit, but not the economy overall. This is the sort of thing that is going to keep investor sentiment low… given the uncertainty of the situation.”

One things experts do expect is a boom in cross-border smuggling, which will “benefit certain groups or individuals but not Lebanon as a state”, according to Achy.

Another major stumbling block preventing the Lebanese economy from reaping any real gains after the Syria sanctions is the country’s own political woes.

“If the situation in Lebanon were stable and the government strong enough, the local economy could stand to benefit enormously from the current situation in Syria, just like Syria and Turkey did when Iraq was slapped with sanctions,” said Shamseddine.

“Lebanon will suffer not because of the sanctions targeting Syria, but because of… a rift between local political parties over the Syria crisis.”