A kind of black swan event is emerging over Syria and Lebanon, two countries whose economies are linked and whose futures have often been entwined. A massive economic crisis in Syria, in part due to US sanctions, is causing the Syrian pound to tumble. Stores are closed, food is expensive. Meanwhile in Lebanon major protests are growing, after six months of increasing unrest.
These two countries, both on Israel’s northern border, are experiencing unique challenges at this moment in mid-June 2020. There are reports Syria has sought to increase border controls against smuggling along the Lebanese border. Syria once occupied parts of Lebanon from the 1970s to 2005. The two countries were also linked during the French mandate period after the First World War, and during the Ottoman period. More recently Hezbollah sent fighters from Lebanon into Syria in 2012 and Hezbollah now plays a major role in both countries, alongside its Iranian handlers.
Lebanon is now trying to inject dollars into its market because its currency is declining. Across the border there are protests in southern Syria and the Syrian regime doesn’t control large swaths of the country. Russia, tied up at home with problems, can’t ride to the rescue. There are predictions that the Assad regime is in trouble. It has been in trouble before. Money changers apparently ran out of US dollars on June 9. Some rumors say that Hezbollah has profited off the crises and will try to use the ruination of the Lebanese middle class and economy to its benefit.
According to reports the Lebanese pound has lost 60% of its value since last October. Dollars were being traded for up to 4,500 Lebanese Pounds before they ran out. The Syrian Pound has also been in free fall. Back in 2015 you could get 219 Syrian Pounds for a dollar. This week the Syrian currency fell to 3,500 to the dollar. It began the year closer to 700 to the dollar. This has devastated Syrians who already were mostly living in poverty. The Syrian regime is under pressure from the US “Caesar Act” which is supposed to sanction it, as well as other troubles. Recently the regime went after longtime financer and businessman Rami Makhlouf. The regime says there has been tax evasion.
In the end it’s not clear what will save Syria or Lebanon. Russia or Iran can’t ride to the rescue. China doesn’t want to invest in such unstable economies. The US is still supporting the Lebanese Armed Forces. But protests in Lebanon are growing. Iran’s press is reporting that Lebanese protesters are not authentic and don’t represent popular demands. Iran is worried that the protests will pressure their stranglehold over Lebanon. They know that Iran can’t save Lebanon from its problems and that Hezbollah doesn’t want to try to rule Lebanon when it can continue to siphon off state assets while pretending to be on the sidelines.
A rare black swan event may be bringing ruination to Syria and Lebanon, after years of war that already destroyed most of Syria. This could have larger ramifications for regional powers such as Iran and Turkey. It could cause instability and also cause Russia to be concerned or even fuel tensions with Israel.