How Syria’s War Economy Propels the Conflict
Lina Sinjab, July 2017
The dynamics of Syria's war economy mean that any deal on the international table might be hard to implement locally. The conflict has given rise to warlords on both sides of the conflict, who benefit personally from the status quo and provide important sources of funding to their backers. It is hard to see how they will give up the benefits they have acquired. Indeed, almost every detail in the war is being squeezed for profit.
This is especially the case on the regime side, as many of the militiamen once known as ‘Shabiha’, who later became ‘popular committees’, then National Defence Forces, have turned into warlords. In doing so, they have capitalized on the authority they were given by the regime and as well as their possession of weapons to gain advantages and privileges.
Most of these warlords come from poor minority sects and had been in the low income range before the conflict. Their involvement in the war turned them into a class of nouveau riche, with many going from earning £S10,000 (Syrian pounds) a month (worth $200 before the war) to earning nearly £S2 million a month (nearly $4,000 in today’s rates). They appear to have no qualms about displaying signs of their newfound wealth; in Damascus, such individuals can be seen driving fancy cars and sitting in expensive cafes, indicating the rise of a new socioeconomic class in Syria.
Their rapid wealth comes not from the top down but from the bottom up –the product of having been given the green light by the regime to earn whatever they can get however they can get it in return for loyalty. As such, they impose fines on people in areas they control. They also demand high ransoms that vary from a few thousand US dollars to hundreds of thousands for businessmen they kidnap in areas under government control. The money is said to be shared up the command chain: the higher the rank, the bigger the cut.
The war economy is also generating money for the regime through the handling of detainees. There are set fees these days for judges, lawyers and dealers who give families news about their detained children or help get these people out of detention centres or of the chain of prisons or get charges of terrorism dropped. It has become known that it is easier to get out of prison if one took up arms against the government than if one protested peacefully. Some of the peaceful activists spend months in prison and their families pay thousands of dollars to get them out. In prison, if a detainee has money, they may be spared torture; if not, their fate is often unknown.
The regime continues to receive financial aid from Iran to help it stay in power, but it is also making local deals to agree to send food or material to besieged areas. Douma, for example, gets its food supplies in exchange for exporting its dairy products to regime-held areas. The main broker there is Al Manfoush, known to be the king of dairy, while the main broker on the regime side is George Hasswani, who is also said to be the oil middleman between ISIS and the regime.
The regime is additionally profiteering from cash transfers and currency exchanges. It is taxing the transfer of cash in US dollars, whether sent directly from Syrians living abroad to their families inside or through brokers that help get money into besieged areas. The middlemen who get the foreign currencies into besieged areas get a cut of the deals.
In government-controlled areas, any transaction that is sent from abroad in US dollars is only paid in local currency with the exchange rate set by the government. All employees, including those in the private sector and local UN staff, are only allowed to earn their salaries in Syrian pounds. All these exchanges allow the government to get more cash in hard currencies.
Sieges are another money-making method for the regime. The exchange rate in besieged areas is tighter than in government-controlled areas. The dollar exchange rate in Damascus is around £S500 per incoming dollar while it is £S430 in besieged eastern Ghouta. The fees to send money to besieged areas also increase the longer the sieges last. In besieged Ghouta, while the fee was 3% for any transfer in 2016, it jumped to reach 22% in February this year when the siege was tightened. (It is now at 10%.)
There are also the tunnels that are dug to smuggle people and goods in and out of besieged areas in which everything has a price. The cost of smuggling a family out of Ghouta reached $6,000 at one point, all paid to government militias or fighters and sometimes shared with rebels who are in charge of their end of the tunnel.
Syria is additionally witnessing the rise of a number of businessmen who have monopolies over different lines of business, whether food, oil, imports or local sales. Checkpoint personnel have control over everything that crosses their point, such as personal belongings, production material or even aid convoys. One of the checkpoints near eastern Ghouta is known as the ‘million pound checkpoint’, which generates £S1 million a day in fees and smuggling goods, or people, in and out.
The profits to be made from reconstruction, of course, will provide even more opportunities for enrichment. It is already said that some names close to the regime have been given promises of particular projects, some of which have already started in areas around Damascus.