AP News

Syria's wealthy businesses feel civil war squeeze


CAIRO (AP) — Syria's wealthy, long cultivated by President Bashar Assad as a support for his regime, are seeing their businesses pummeled by the bloody civil war. Factories have been burned down or damaged in fighting. International sanctions restrict their finances. Some warn that their companies are in danger of going under, worsening the country's buckling economy.

Assad may not have lost the backing of Syria's business elite, but some are losing faith. Many of those who can have fled abroad, hoping to ride out the turmoil, which is now in its 19th month and is only getting worse as rebels and regime forces tear apart the country in their fight for power.

Several businessmen interviewed by The Associated Press say resentment is growing against Assad over the crisis — but they also aren't throwing their lot in with the rebellion. They are hunkering down, trying to salvage their companies.

One young businessman said his family factory in the suburbs of Damascus was damaged Wednesday, with windows blown out and part of the ceiling was destroyed when warplanes hit rebels in a neighboring building. Its several hundred employees had to hide in the basement until fighting eased enough that they could be bused out to safety.

"I feel that they are both just as bad as each other," he said of the rebels and the government. "I could have died today because they (the rebels) were across the street from us and they (the planes) could have bombed us."

Syria's economy has been heavily hurt by the conflict, which activists say has left more than 30,000 dead. Inflation has risen to at least 36 percent. The currency has dropped around 50 percent, now trading at 75 pounds to the dollar on the black market, according to the factory owner. The government estimates economic losses at $34 billion — almost half the gross domestic product — though the opposition puts the losses at nearly three times that amount. Fuel shortages have become widespread as the regime burns through hard currency to import diesel and oil at the same time that it finances the war effort.

Though the economic blow has been hard, "we are not at the stage that the rug has been pulled from under the regime," said Anthony Skinner, head of Middle East and North African division at Maplecroft political risk consultancy.

Assad has so far been able to keep his head above water with financial support from top ally Iran, he noted.

"The question is whether this is sustainable in the longer term and I don't think it is," Skinner said. "What Assad is counting on at present is a bare-bones economy that is able to fuel his armed forces."

The businessmen interviewed by AP spoke on condition they remain anonymous and that some identifying details of their industries not be specified for fear of repercussions for talking about the situation in Syria.

They all come from the country's Sunni Muslim elite, which Assad ensured prospered as he carried out free market reforms over the past decade. The reforms transformed the long isolated nation, bringing in foreign businesses and chains and greater consumer goods, though it also sharply increased the gap between rich and poor. While the rebellion has largely been fueled by the Sunni majority, the elite have stuck by Assad for most of the conflict.

The businessmen say they are caught in the middle — both of the fighting and of Western sanctions they say hurt them more than the regime itself. The civil war has made it difficult to distribute goods since roads are cut off, warehouses have been shut down and 24-hour operations have been slashed to eight hours in places where it is too risky for employees to travel at night. Numerous factories have had to close or reduce production. A pharmaceutical company in Aleppo was also recently burned down in the city's fighting, said a businessman with close ties to the owners.

The owner of a plastics factory said his wife and children fled to London three months ago when the worst fighting yet hit the capital Damascus. Initially, he stayed behind but eventually followed them to London.

He knows others who have left and now have little access to their local accounts and are unable to operate their businesses. That has fueled resentment of Assad, he said. Still, there is also a fear of what may happen to Syria if his regime collapses.

"We feel this is a war by proxy," he said, referring to the influence of Shiite Iran, Russia and China backing Assad and Sunni Gulf states, France and the United States behind the opposition.

If businesses fail, he warned, the new unemployed could further fuel the conflict. Already, 12 of his employees quit to work as "security" for the government.

"I know what that means. They are Shabiha," he said, referring to the pro-Assad gunmen used in fighting against rebels and accused of killings of civilians. He said he paid the employees $200 a month, but the government pays Shabiha at least $300. "If I stop paying salaries to 400 people they will make a choice," he said.

A physician who is among 14 owners of a hospital in Syria said only seven of his partners remain in the country. He is now in London while his wife and child are in California. He says most of his friends have also gone abroad.

"Nobody is happy. I am seeking opportunities around the world. I'm homeless now with no hospital, no income," he said.

The civil war means patients do not have the money to pay for needed surgeries and those traveling from outside Damascus are unable to reach the capital because roads are unsafe. Locally-made drugs are difficult to find due to shortages or distribution problems. Importing high-end machines and spare parts is difficult because even if selling the technology is not necessarily banned by sanctions, banks are reluctant to finance the purchases. He also cannot wire his money in Syria to the U.S., he said.

He makes clear his unhappiness with Assad. "By the first speech of his excellency I knew he was an idiot," he said, referring to an Assad speech to parliament after protests broke out last year in which he took a tough line against the dissent. "If this is his way of thinking, I knew things would get worse."

The United States and its European partners have stepped up sanctions already in place before the uprising began in March 2011.

Among the most damaging is the European Union's halt on importing Syrian crude oil, which has cost the country billions of dollars. The EU has also banned its member-states from exporting to Syria weapons, dual-use equipment, luxury goods such as vehicles and jewelry. It froze the assets of the Syrian central bank within the EU, as well as those of more than 50 other Syrian entities and more than 150 people.

It also bars EU banks from establishing new joint ventures or correspondent banking relationships with Syrian banks, and while "legitimate trade" can continue, it is under "strict conditions."

The U.S. has also frozen assets of the Syrian government and a list of people and entities linked to the regime. It has banned Syrian oil imports and bars U.S. citizens from investing in Syria and exporting any services or supplies to Syria. Arab nations, Turkey, the United Kingdom, Canada and Australia also have separate sets of restrictions for doing business with Syria.

The sanctions also have an indirect effect. European and other banks are reluctant to deal with Syrian businesses for fear of running afoul of sanctions. Transfers from Syrian banks — particularly in dollars — are difficult and sometimes impossible.

"Most of the banks we deal with say we do not want to do business in Syria," said the plastics factory owner. He said his company's cash flow is under strain. A customer in Italy, for example, could not send him a payment because the European bank banned the transfer.

The businessman whose factory was damaged Wednesday said a European bank also refused to back his purchase of spare parts from China. So he had to pull cash from his accounts in Lebanon and Turkey. Many have had to rely on relatives with foreign passports to open overseas accounts.

"People are either changing dollars into euros or putting it in bags smuggled across the border," he added. "It's just pushing people's buttons. No sanctions have ever hurt any government."


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