Syria Comment: “When is the Financial Crisis Coming?” by Ehsani

I will be traveling to the Middle East for a week and will be unable to post or moderate. Joshua.

Ehsani Writes:

The Syrian economy will soon suffer from what I will call a “financial crisis”. This will occur as credit write offs mount. The banking system will soon be hit with a wave of defaults at both the corporate and retail levels. The former will come about as the larger companies decide not to pay the banks. Most of the credit that they have been offered comes in the shape of overdrafts, bills discounting and letters of credit. Banks are exposed to this and their exposure exceeds that at the retail level (car loans for example). Some of the banks are already fearing that a number of businessmen will default and leave the country. Another very important thing to watch is the possibility that some state banks will default on payments to the private banking system. I am led to believe that this has already happened and that no one dares make the information more public. For now, they are treating the default as a “delayed payment” and so on. The private bank involved is of course starting to think it is a default. The Central Bank has been approached. No one can speculate if it will be liable or not as it may open the floodgates for other public banks. As you know, I have always highlighted the fiscal pressures on the government. The number of state employees and subsidies are simply unsustainable. The government will not be able to raise enough revenues to pay for such liabilities. They cannot borrow from the domestic or external sectors to bridge this gap. The only thing they may do is print more money. This will lead to inflation and loss of purchasing power as the Syrian Pound loses value.

How long will it take for the above financial crisis and/or fiscal crisis to show up publicly?

My sources continue to say that the answers is “Months”. They have been saying this of course for months. My own prediction is that it will take another year or two before things truly unfold. One thing to remember always is that Syrians are poor and more importantly are used to living well below global standards. The country has been through economic hardship many times over its recent modern past. It will take a lot of further pain to cause many to revolt in massive numbers.

Assessing the Risks of Military Intervention
Posted on Syria National Council website. Discourages US military intervention
Thursday, 05 January 2012
Assessing the Risks of Military Intervention

Executive Summary
Syria’s stability and its role in regional security politics have become steadily more uncertain since early 2011. The country has now experienced eight months of popular protests. Despite a lack of political cohesion or unity of purpose among the country’s opposition forces, rural areas and smaller cities continue to experience increasingly armed unrest. Meanwhile, the regime’s crackdown on dissent has shown little to no sign of abating as the country’s Alawite-led praetorian security forces attempt to restore order and quash unrest.

The chorus of international pressure on Syria has steadily increased. The US and EU have bolstered unilateral sanctions regimes, turned to the UN to deepen international pressure and have openly called for President Bashar Al-Asad to step aside. Turkey, until recently one of the regime’s closest allies, has been one of Syria’s most vocal critics. Lastly, the conservative Gulf monarchies, which continue to have reservations about regional popular unrest, have nonetheless pushed ahead with Arab League efforts to further isolate Syria.

On the one hand, local and expatriate Syrian forces opposed to the regime are backed by the West, and key Arab and Sunni states such as Saudi Arabia and Turkey. On the other hand, the Al-Asad regime enjoys the support of its key regional ally Iran, support from Hezbollah in Lebanon, and strong international backing from Russia and China – countries that could play counter-revolutionary roles during what is increasingly looking like a “long winter of Arab discontent.”

A number of countries – including US NATO allies such as France and Turkey – increasingly entertain the prospect of creating a “humanitarian corridor” in Syria, potentially along the border with Turkey, to provide relief to both the Syrian population and dissident groups opposed to the Asad regime. These calls are echoed by Syrian opposition forces both in and outside Syria, including the so-called Free Syrian Army (FSA) and the Istanbul-based Syrian National Council (SNC).

These calls do not address the real world challenges of creating such a “humanitarian corridor”: joint and combined military operations to suppress Syria’s air defense network, the need to neutralize the country’s air force, eliminating Syria’s asymmetric deterrence by containing unconventional threats from long range missiles (potentially armed with chemical or biological agents) and instability along the Golan Heights. They also do not address the risk of eventually having to engage loyal Syrian ground forces (including large concentrations of Alawites) that see few prospects in a post-Asad Syria.

Some consider military intervention in Syria to be a potential next step in shifting the regional balance in favor of the US and its allies. There is little question that sustained military operations in Libya would have been impossible without American logistics, targeting, command and control and sheer military capacity. In the case of Syria, military intervention is similarly unlikely to succeed without US involvement. However, military intervention, in the Middle East, let alone near the epicenter of the Arab-Israeli conflict, always involves serious risks and the impact of the law of unintended consequences.

There now is only limited support in the US, Europe, and the Arab world for direct intervention in Syria. However, the same could also have been said in the lead-up to operations in Libya. There are also reasons why the US might directly (or indirectly) take the lead in such efforts. The withdrawal of US troops from Iraq has left many questions about the future role and influence of the US, especially in the context of strategic competition with Iran. Instability in Syria presents Washington with the opportunity to undermine Iran’s regional posture, weaken or change the leadership of one of its key regional allies and potentially to downgrade the Islamic Republic’s role in the Arab-Israeli conflict through Hezbollah.

Syria is not Libya. While the later may be geographically much larger, it is a mostly empty country with a small population and very limited military capacity. In contrast, Syria’s population is more than three times larger than Libya, has almost 30 times the latter’s population density and a much larger and far more capable military overall. All of these factors complicate any calculus on military intervention in Syria, whether in terms of the level of potential military opposition, or with regards to the risk of high civilian casualties.

Opposition forces in Syria do not control territory, nor do they currently have military resources at their disposal to mount more than hit-and-run attacks. Most attacks by the FSA, while potentially coordinated, seem to have limited tactical or strategic depth and have yet to present a serious challenge to units loyal to the regime. While Libya’s opposition forces were divided, Syria’s are far more so, with little unity or agreement on the use of violence as a means to an end, and discord about the potential role of foreign intervention. The bulk of the security forces remain largely loyal as decades of over-recruiting from mainly rural minority groups bares fruit in terms of a strong corporatist military culture.

As the US and its allies weigh options for their next-steps in their Syria policies, they need to consider a number of key military and political factors that shape the prospects for any form of direct intervention:

• Syria’s military forces have many qualitative limitations, particularly in terms of modern weapons, combat readiness, and recent combat experience. They are, however, very large and months of protests, and concern over a potential Israeli strike on Iran, have made them more alert. They would need to acquire more modern and capable systems, such as major surface-to-air missiles (SAMs) and a new sensor and C4I network to defeat a major US-led air operation, but it would take a far more advanced operation than was the case in Libya, and Syria’s leverage over Hezbollah, and Syrian long range missiles, air and coastal defense systems, and chemical and biological stockpiles present another kind of challenge.
• Despite defections and desertions, Syria’s praetorian military units may have little choice but to rally around the Asad regime. Given their limited prospects in a post-Asad Syria, heavily Alawite elite units with sizeable numbers of loyal Sunnis will likely perceive no alternatives to defending the regime in the event of wider intervention.
• Armed opponents of the regime, such as the Free Syrian Army, are an important development. However, their size, structural limitations, their predominantly Sunni character and as-of-yet limited command and control and offensive capabilities mean that the FSA has limited prospects in the short term for presenting a meaningful counterweight or alternative to the Syrian military. It is far more likely that the group’s insurgency will be used as a platform by the Asad regime to weaken an already divided Syrian opposition.
• Syria’s internal divisions are not new. However the Asad regime has managed to escalate Sunni-Alawite tension to the point that it has taken a life of its own and could be difficult to bring under control by any of the country’ political forces. This presents the risk that any escalation in Syria’s instability is likely to be sectarian, with real prospects for deepening divisions and broadening communal segregation. A divided Syria, once an unlikely worst case scenario for Syrians, grows increasingly probable as a result.
• Given Syria’s relatively high population density and the close proximity of civilian and military centers, it is unlikely that airstrikes in or near major urban centers – even with advanced targeting – will result in fewer casualties than the number of Syrians the Asad regime is thought to have killed so far.
• The Asad regime may react by pursing strategies that risk deeper regional destabilization as a means of deterring its regional and international opponents. It could also undertake desperate efforts to secure the future of the Alawite community. Syria’s potential responses – which include turning to regional proxies and its BCW-capable ballistic missile holdings – range in scale but all have potentially catastrophic consequences for Syria and the region. They also vary considerably based on what triggers Syrian escalation.
• In the event of further escalation in Syria, there is no certainty that regional spillover effects can be contained. Lebanon, Jordan and Iraq are susceptible to instability, as are Israel and Turkey. The scale of Sunni-Shi’a regional acrimony, the stalled Arab-Israeli peace process and uncertainty about future political forces warrant a degree of caution.
• The prospect of direct escalation in Syria may trigger kneejerk reactions from both Iran and its Lebanese ally Hezbollah. This includes deflecting attention from Syria and heightening the costs of intervention by escalating tensions with Israel. Should intervention take place, there is little to prevent Iran and its allies in Lebanon and Iraq from undertaking potentially destabilizing action in Syria not unlike the cycle of violence in Iraq in the wake of the US invasion.
• Russia has emerged as a key player in balancing against further intervention in Syria. It is likely that Moscow will opt to heighten the stakes further through military posturing in the Mediterranean and “game-changing” military aid to Syria to deter the US and its allies from further escalating in Syria and raising the prospect of Libya-style intervention in the Levant. Other members of the so-called “BRICS” countries, crucially China, can also be expected to bandwagon with Russia at least at the level of the UN Security Council.

It could be argued that even without further escalation, a year of Syrian instability has been a critical setback not only to the Asad regime, but also to Iran and Hezbollah. Syria’s future will be governed largely by uncertainty and prolonged malaise. Given the range of risks, the US and its allies should consider carefully the potential costs and unintended consequences of further intervention in Syria.

تقرير إنساني من حمص: البحث عن الخبز والمازوت..فيديو في المشافي السرية
Syria Politic
Thursday, January 05, 2012

Arab League seeks UN help in Syria

Those who fear change in Syria
by Stephen Starr on Jan 5, 2012 • 12:00 pm

Three Reasons the Syrian National Council has rejected unification with the National Coordinating Body for Democracy.- al-Jazeerah video in Arabic
Samir Nashar (SNC) – Michel Kilo – Abdal Aziz al-Khaiyr (NCB) debate

1. They refuse to hold dialog with Assad because he has killed Syrians
2. They want foreign intervention to stop the killing.
3. The SNC supports the Free Syrian Army; whereas, the NCB does not

The case against military intervention in Syria
Marwa Daoudy – a lecturer at the Middle East Centre, St Antony’s College, the University of Oxford.

In keeping to its spirit and independence, the Syrian Revolution would remain just, powerful and legitimate….. foreign military intervention should, under all circumstances, be ruled out; domestically, resistance to the regime should also remain unarmed…..

The regime is still in control of the army and the security forces, despite a few thousand defections to the Free Syrian Army. To deter future dissent, tortured bodies have been found or returned to families. The regime’s increasing violence is also leading to the collapse of institutions and public authority. Declining incomes from oil sales and the public sector, and a freeze on trade with Turkey and the European Union are impacting on the population rather than the regime…..

The risk of civil war is looming. Syrians are now killing each other in isolated incidents on the basis of their uniforms, alleged loyalties and religious affiliations….. If the country was forced to accept an externally imposed no-fly zone or safe haven, the parts of the population that have so far kept away from the struggle would side with the regime in a surge of national pride and solidarity…..

Syrian Media Awaken Despite Clampdown
2012-01-05
By Alice Fordham

Jan. 5 (Washington Post) — BEIRUT — In the wake of a nine-month uprising, Syrian authorities are exerting ever-tighter control over the media, routinely censoring and detaining reporters, bloggers and photojournalists. But in spite of the risks, a flurry of new outlets has emerged to tell stories banned by the government of President Bashar al-Assad.

The magazines and journals — mostly produced outside the country and published online — offer an alternative to established newspapers and news channels in Syria…

MEMRI: U.S. Assistant Secretary of State for Near Eastern Affairs Jeffrey Feltman Calls for U.S. to Take Heed of Public Opinion, 2012-01-06

In a December 31, 2011 article titled “Embracing the New Year’s Opportunities for Change,” which appeared in the English edition of the London-based daily Al-Hayat, U.S. Assistant Secretary of State for Near Eastern Affairs Jeffrey Feltman praised …