Bread shortages in Syria's regime-held areas suggest liquidity problems

Regime doubles bread prices as its allies signal little interest in helping

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Syrian regime-held areas have been experiencing increasing bread shortages in recent weeks, suggesting a breakdown in a supply chain dependent on Russia and farming regions under the control of Kurdish militia allied with the US.

The shortages, reported by loyalist media and confirmed by regional business sources, undermine the regime’s posture of defiance, as well as its assertions that it provides basic supplies, despite US sanctions that toughened considerably last year in the form of the Caesar Act.

The lack of bread supply in major cities is a sign of government liquidity problems, a Syrian business analyst and other sources – who wished not to be named – told The National. A financial meltdown in Lebanon – a major source of foreign currency for Syrian regime areas – has contributed to the drying-up of liquidity.

The same sources also pointed to reduced co-operation between the regime and the Kurdish militia running large wheat producing areas in the Euphrates river valley.

The government last month crossed a self-declared “red line" by doubling the price of subsidised bread, blaming “the difficult conditions and the oppressive siege imposed by the United States and its partners”, although the sanctions do not cover basic foods.

At a government bakery, some of which have had to erect metal fences due to massive queues, a 1.1 kilogram pack of subsidised bread now costs the equivalent of between $00.04 and $00.05, compared to $00.02 previously.

The Caesar Act: New US sanctions on Syria take effect

The Caesar Act: New US sanctions on Syria take effect

The collapse of the Syrian pound over the past two years has sunk the purchasing power of local salaries. Five cents, or 100 liras, for a loaf of subsidised, low-quality bread has become a sizeable sum, with average salaries in regime areas equivalent to $24 a month.

Wael Ali, a pro-regime blogger, said that although his family are entitled to four packs of bread every few days, registered on an electronic card, they received only two packs.

“The bread is such high quality that it becomes unfit for human consumption after a few hours,” Mr Ali said sarcastically.

Until illegal wells were dug to irrigate subsidised wheat and cotton depleted the water table in the 2000s, Syria was a major Middle Eastern commodities producer. The water crises forced the state to import wheat, mainly from Russia, which officials say has sent 75,000 tonnes out of 100,000 tonnes in humanitarian aid promised last year.

The regime lost control of wheat-growing parts of the country after 2011, but continued to buy it from the Kurdish People Protection Units (YPG) militia, which is supported by the US. A large commodities trader in Beirut – who also wished to remain anonymous – said the supply shrunk this year, with the YPG preferring to sell the wheat to northern Iraq.

“They want cash for the wheat and the regime does not seem to have it,” the trader said, predicting that the “wheat supply picture will get only worse".

Many traders dealing with Damascus also have bank accounts in Beirut that have been frozen after money transfers were banned last year, and the Lebanese authorities have been trying to contain the smuggling to Syria of flour subsidised for domestic consumption.

“Even if traders want to deal with Syria, they cannot open lines of credit because their bank accounts in Beirut have not been operational,” he said.

The trader said the regime’s wheat needs in the past few years have been running about 800,000 tonnes a year, equivalent to about a quarter of Syria’s wheat production before the water crisis in the mid-2000s hit farming. Last year, wheat production across Syria was 2.2 million tonnes, almost double that in 2018.

Jihad Yazigi, publisher of the Syria Report economics and business newsletter said that an arcane system of central planning and covert arrangements between the regime and the YPG, as well as unreliable official financial figures make it difficult to pinpoint the exact cause of the shortages.

“The picture is not clear,” Mr Yazigi said by phone from Paris. “The sanctions and the situation in Lebanon are a factor. The regime had issued several tenders this year but they have not been successful.”

Another Syrian businessman who had dealt with the authorities on wheat purchases said that despite potential social destabilisation from the bread shortages neither Iran, nor Russia seem to have stepped in to help in any major way.

“The government has a credit line from Iran to buy basic goods but that has been patchy,” he said.

“The Russians have lots of wheat but they want their own companies to make a profit. They have made it clear to the regime that they are not a charity.”