Syrian pound nosedive deepens as meltdown in Lebanon hits regime areas

Feud among inner circle, the coronavirus impact and new US penalties contribute to sharp currency falls

A poster of Bashar Al Assad in Damascus that reads "leader of the triumph". AFP

The Syrian pound crossed the 2,000-pound barrier to the dollar this week, regional business sources said, deepening a currency downfall tied to the financial crisis in Lebanon and the regional impact of the coronavirus.

The drop from 1,860 pounds to the dollar at the start of this week coincided with toughened US penalties related to potential business dealing with the regime of Syrian President Bashar Al Assad.

The sources said the new sanctions, which come into effect this month, have been factored into the black market, the benchmark of the Syrian pound exchange rate, since US President Donald Trump signed the Caesar Act as part of a new law in December.

The Syrian currency is trading at just a little above 2,000 pounds against the dollar, compared with 960 to the dollar in December last year and 633 pounds to the greenback when Lebanon slumped into a financial crisis in October-November 2019.

The data was compiled by the Syria Report, an economic and business newsletter.

The Caesar Act was prompted by photos that international human rights organisations say documented the killing of thousands of political prisoners in Mr Al Assad’s jails. The images, taken by a photographer who defected from his military and is codenamed Caesar, were made public in 2014.

The exchange rate was 1,305 to the dollar before a rift broke out last month between President Bashar Al Assad and his billionaire cousin, Rami Makhlouf, who is widely regarded as the moneyman of the Alawite-dominated inner circle.

Regional bankers partly attributed the feud to a liquidity squeeze on the regime linked to capital control imposed in Lebanon in November.

The controls were imposed to stop a run on Lebanon’s banks, preventing depositors from accessing their dollars and affecting liquid assets that Mr Makhlouf had parked in Lebanon through a network of frontmen on behalf of the inner circle, the bankers said.

Jihad Yazigi, editor of the Syria Report, told The National that Lebanon's financial troubles have been the main reason for dollars drying up in areas under the control of the regime, as well as declines in economic activity, that was already repressed due to the coronavirus.

“The pound’s falls over the last months have trailed the Lebanese pound. Remittances have also fallen because of Covid-19,” Mr Yazigi said.

He said that an atmosphere of resignation has been setting in across regime areas as it becomes clear that international reconstruction assistance was not forthcoming. Regime loyalists had hoped the Russian intervention in late 2015 would be followed by investment in reconstructing the war-torn country.

Syria's plummeting pound has also been affected by the currency crisis in Lebanon, where the Lebanese pound fell from 1,500 to the dollar in October to around 4,000 on Wednesday. The Hezbollah-aligned government started talks last month with the International Monetary Fund for an emergency rescue.

But the talks have done little to restore confidence in the Lebanese currency.

A Syrian businessman operating between the GCC and Damascus said the Syrian pound crossed the psychological 2,000 mark only after nothing emerged from Lebanon’s talks with the IMF to indicate that depositors could access their cash in the foreseeable future.

“The Syrians who put their money in Beirut were hoping for a quick fix, believing that the West thinks Lebanon is too important to fail,” the businessman said.