The Syrian revolution has raged for nearly two and half years, resulting in excess of 100,000 deaths and the immense destruction of the country’s infrastructure. An uprising spurred by discontent with an authoritarian system, the country’s political institutions have now been exposed as extensions of the ruling family, with little or no authority of their own. Mass defections and the need for a shorter and reactive method of decision-making have caused the center of the regime to coalesce around three main pillars.
The intricate institutional and community-based linkages fostered by Hafez al-Assad have allowed his son to capitalize on the fears of the secular middle class and minority groups. The ruling family and its neo-patrimonial network have attempted to ensure the loyalty of these societal groups through a public relations campaign aimed at exploiting the involvement of radical Islamists among the opposition and to denounce the uprising as a foreign conspiracy.
The heavy lifting in this increasingly sectarian war has been carried out by elite military units with long and purposed linkages to the ruling family. The Republican Guard and Fourth Armored Division, staffed by Alawites and other minorities, view the uprising in existential terms.
Alongside these coercive apparatuses, loyal security forces within the Alawite-dominated Air Force Intelligence, and to a greater degree, Political Security, have maintained a state of fear in regime-held areas. All of these regime components view Bashar al-Assad as crucial to the stability, functioning, and secular nature of the state.
Owing to state propaganda, the lack of an alternative narrative and the increasing Islamization of the opposition, this belief has trickled down to the regime’s societal foundation. A Sunni middle class who has benefitted from the regime’s economic system, and views increasing Islamic rhetoric as the rallying cry of the lower classes, has stayed on the side of Alawites and other minorities.
While the current struggle in Syria is now seen by regime supporters and coercive apparatuses as an existential battle for survival, it is also being fought in the economic realm. To continue this cross-sectarian support and societal links necessary to bolster these relationships, the regime must act as a functioning state.
For the civilian population under regime control this includes subsidised food, the export and import of goods, and commodities and loans to private business, among others. This is of particular importance given the fact that the Assad regime continues to portray itself as the legitimate government of Syria – one which transcends confessional divisions.
The state must also provide its military, security services and proxies with the proper monetary support to both defend the regime’s heartland and take the fight to encroaching rebel groups. These groups need both the weaponry and ammunition required for combat. Salaries must be paid, oil needs to be supplied for war machinery, proxy forces require training, and medical and food supplies need to be brought to troops on the front line.
Since the capture of Raqqa Governorate by rebel forces in March, which has denied the state access to oil and agricultural proceeds, this has been increasingly difficult to achieve.
Cross-societal support and the efficiency of these loyal units now heavily rely on the stability of the Syrian Pound. Funding coercive apparatuses and maintaining societal support requires keeping the currency stable and in this fiscally constrained situation of war as well as preventing hyperinflation.
Syria’s Deputy Prime Minister for Economy, Qadri Jamil, has been charged with ensuring the stability and faith in the Syrian pound. Part economist, part international diplomat, Jamil is attempting to wean Syrian society and state transactions away from the US dollar and the Euro. He estimates that at the end of 2012 Syria saw inflation hit 120%. Observers now estimate that inflation is in the low 200s.
Domestically, Jamil is working to ensure that the Syrian Pound remains the currency of choice for polities under regime control. His policies include raising wages for state employees, tightening price controls on subsidized goods, cracking down on black market currency trading and ceasing government trading in US dollars and Euros.
In July of this year speculation drove the Syrian pound’s value down to 300 to the U.S. dollar. Under Jamil’s leadership, the government pumped millions of U.S. dollars into the economy to stabilize the pound, which remains in the low 100s.
On August 4th, a presidential decree banned the use of foreign currency as part of Jamil’s policy. Heavy fines and prison terms as long as 10 years are now the punishment associated with the use of foreign currencies. It is imperative that the regime stall or stop hyperinflation to slow the decline in production and maintain a robust monetary supply.
With the regime reliant on its Russian, Iranian, and Chinese backers, Jamil has sought to create a line between the Syrian Pound and these countries’ respective currencies, given the lack of access to foreign reserves. Of these backers, Iran has emerged as the guarantor of the regime’s fiscal stability.
The latest support from Tehran has come in the form of a credit line of $3.6 billion, slated for oil and medicine. This comes after the Islamic Republic provided a $7 billion credit line to the Central Bank of Syria to help with imports and stabilize the Syrian Pound. In return Iran has been rewarded with future concessions for the extraction of offshore natural gas and the ability to invest in a conceived post-war economy.
This economic support allows the state to partially make up for the capture of Raqqa Governorate and the vast sum of oil and agricultural proceeds. Coupled with Jamil’s attempts to bolster foreign currency reserves to defend the Syrian Pound, the state has economically positioned itself for a long, drawn-out conflict.
Alexander Corbeil is a senior Middle East analyst with The Atlantic Council of Canada and blogger for the Foreign Policy Association. He writes on the politics of the Levant, with a specific focus on the conflict in Syria and its effects on neighboring Lebanon. You can follow him @alex_corbeil.