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How does the Assad regime create and benefit from the deteriorating living conditions in Syria?

The Assad regime has effectively exploited the fuel shortage to deepen its own pockets under the guise of alleviating the crisis.

24 September 2020

AMMAN — As the cost-of-living crisis worsens in Syrian regime-held territories—especially with shortages of gasoline, bread and other basic goods meant to be provided through the government-subsidized “smart card” system—a black market for the same commodities, alongside the private sector, seems to be prospering. 

The government continually announces new measures and mechanisms to support Syrians, more than 80 percent of whom suffer from poverty. However, it seems that these very measures and mechanisms are but a means of strengthening the “free market” (of unsubsidized goods) and opening the door to illicit profits for influential people with ties to the Assad regime. 

Gasoline crisis

Since early September, Syria has been experiencing a severe gasoline shortage, leading to long lines of cars waiting for hours to reach gas stations. This has led to a partial paralysis of the public transportation sector, and the owners of taxis and public buses to raise the fare individually. 

According to three sources in the provinces of Damascus, Suweida and Daraa who spoke to Syria Direct, the current gasoline shortage is the most severe crisis they have experienced since 2011. 

While the cost of one liter of gasoline through the smart card is 50 Syrian pounds (SYP), $0.11 according to the exchange rate of SYP 2,230 to the dollar, the black market price jumped from SYP 500 before the crisis to SYP 1,000-2,000 ($0.44-$0.89), depending on the region. 

The Syrian government began to sell gasoline to private cars in Damascus through the smart card on January 10, 2019, following a severe fuel shortage that hit the country. Under this mechanism, the quantities reaching fuel stations were reserved for sale through the smart card only, and in limited amounts according to the ration of the cardholder. 

As a result of the war, “Syria’s fuel production has decreased because most of the oil fields are outside of Damascus’ control,” Syrian economic researcher Karam Shaar told Syria Direct

Although “consumption has also gone down since the economy is growing at a slower rate, alongside the decrease in population, the decrease in production was larger than that in consumption, such that Syria became an importer of gasoline,” Shaar added, estimating that the amount imported by regime-controlled areas is “around 70,000 barrels a day, with the vast majority coming from Iran.” 

As “there is no evidence indicating a decrease in the arrival rate of Iranian oil tankers to Syria,” Shaar suggested that the current crisis could be the result of “maintenance operations in the Banyas refinery.” 

He noted that “although it is a technical and regular issue, it reveals the capacity of the administration, which was supposed to provide a sufficient amount [of fuel] before the maintenance operations. Or, the matter is related to the regime’s inability to support these commodities as it should, [and it will resort] consequently to removing support for them soon.” 

The Syrian Minister of Oil, Bassam Taama, attributed the fuel crisis to “the American blockade,” as well as the halting of “the Banyas refinery for maintenance.”

However, according to the three provincial sources, gasoline is available on the black market in large quantities, including at some stations that sell it illegally at the black market’s rate. 

How does gasoline reach the black market?

In addition to the ongoing oil smuggling from the Syrian Democratic Forces (SDF)-controlled territory in the northeastern regions to the regime-held areas and the rampant corruption in state institutions, Ali al-Khatib, the Director of Consumer Protection at the Ministry of Internal Trade and Consumer Protection, has acknowledged the existence of many types of violations through which subsidized gasoline is sold on the black market. For example, the government official revealed that a gas station worker could fill a car with 30 liters rather than 40 liters so that the difference could be sold at the unsubsidized price. 

This was confirmed by Abu Mahmoud, a taxi driver from the northern countryside of Daraa province. “Gas station owners buy smart cards from the people who want to sell their allowances for a pittance, taking advantage of people’s weariness of waiting in the long lines,” he told Syria Direct. “Then, the owners of these stations sell the gasoline at the black market price.” 

Abu Mahmoud, who has been forced to buy gasoline from “black market stalls” for SYP 1,400 per liter, pointed out another problem, that “the gasoline could be adulterated or contain many impurities.” 

But a gas station owner in southern Syria’s city of Suweida justified the illegal practice by the miniscule profit from selling fuel by the official, subsidized price. “The value of the profits from one gasoline truck is estimated at around SYP 25,000 [$12],” the owner explained, through a journalist in the city who spoke to Syria Direct on the condition of anonymity.

Bread crisis

As with gasoline, the shortage of bread is one of the defining features of the government-held regions, although it varies from one province to another. This crisis has been worsening for months and has driven the government to take up many measures, the latest of which, implemented this past Saturday, is the distribution of bread through the smart card, rationed according to the number of members in a given family. One bundle of bread (eight loaves) is the daily portion for a family of one or two individuals, two bundles for a family of three or four, three bundles for a family of five or six, and four bundles for families with more than seven members. 

To Shaar, it is unlikely that the reason for the bread shortage could be a “lack of flour” since “it has only been around a month since the last wheat crop. And the government announced that it bought approximately 800,000 tons of wheat from inside Syria, an amount that is sufficient to cover the consumption in the regime areas for at least six months.”

The main engine of the crisis, Shaar said, is likely to be “the decline in energy sources, such as electricity and diesel [mazot], needed to run the bakeries, in addition to the economic feasibility of producing bread that is decreasing in many bakeries because the government requires the owners to produce a bundle [of bread] at a specific price and sell it through the [smart] card, while production costs and wages rise daily.”

Facing this reality, many bakeries have been forced to close, Shaar added, while “some bakery owners who are prepared to take the risk have sold flour on the black market.” The result is the creation and continuation of bread shortages.

‘Import liberalization’

Syrian regime officials pin most, if not all, of the successive crises that Syria is suffering from—especially in terms of the availability of basic commodities—on international sanctions imposed on Damascus as a result of its bloody repression of Syrians. But in the view of Joseph Daher, a researcher in political economics at the University of Lausanne in Switzerland, there are “many different and interconnected reasons” that play a role in the shortage or absence of basic goods and materials, especially in state-run institutions. 

In addition to the “international sanctions,” Daher pointed to “the control of some traders and people close to the regime over importing basic goods and materials.” This, he told Syria Direct, contributes to the availability of these goods on the black market at the expense of their availability in state-run institutions selling them at the subsidized price.” 

Shaar, for his part, believes “the administrative and economic solutions followed in regime areas [to confront shortages] are prosthetic solutions that do not address the root of the problem, buried in the corruption inherent to state institutions.” He compared the Syrian economy to “a leaky waterskin—whenever you patch it in one place, the water leaks out somewhere else.” 

Additionally, the Syrian government has recently relied more heavily upon a policy of “import liberalization” by allowing traders and manufacturers close to the regime to import basic goods and materials and provide them to the market, as a result of the state’s inability to meet this responsibility, according to Daher. This policy, however, “is not new,” Daher added, “it began in the mid-1980s as a result of the financial crisis in Syria at the time, which prompted Hafez al-Assad to draw in the traders and Syrian bourgeoisie class and grant them import powers.” He emphasized that “the war was not a break with the regime’s [economic] policies before 2011.”

Nonetheless, the “import liberalization” policy is not a solution to Syria’s situation, in Daher’s opinion, “because the traders think of their interests” and “the regime and the traders close to it exploit the current crises to deepen these alternative policies in order to enhance their influence and business.” 

Further, the “import liberalization” policy deprives productive Syrian sectors of their role in improving the economy. That has prompted the Aleppo Chamber of Commerce to request that the government “completely stop funding imports from the Central Bank,” because this process “has increased corrupt people’s exploitation of price differences and money smuggling, and has not realized any fairness in pricing among members of the same profession or contributed to lower prices.”

The future of crises

“State capitalism,” which was adopted in Syria during the 1960s and 1970s—one main aspect of which was to limit the import of basic goods to state institutions— could be “a good solution to the Syrian crises,” according to Daher. But “it has become difficult to implement [now], as the state is corrupt and governs [according to] the interest of a certain class and certain individuals who exploit the public sector for their benefit.” This is what makes the near future for Syrians in Damascus-controlled areas “not good, especially for the poor classes,” Daher said. 

This view was supported by Shaar, who believes that “remittances and international aid will remain the primary source of support for civilians and the regime alike for the foreseeable future, so long as no political solutions crystallize that allow for reconstruction.” 

This report was originally published in Arabic and translated into English by Mateo Nelson.

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