In the Lion's Den_ An Eyewitness Account of Washington's Battle With Syria - Andrew Tabler [109]
Signs that US sanctions were having an increased impact had been steadily growing. The Syrian economy had performed relatively well in recent years, posting an average annual economic growth rate of around 5 percent, which was fueled by high oil prices and increased investment from the Gulf. However, there were big problems. Oil production—proceeds from which account for a little less than a third of state revenues—had declined by 30 percent since 2005. And Syrian industry—accounting for 28 percent of the gross domestic product (GDP)—had contracted 15 percent as a result of its free-trade agreement with Turkey. A record three-year drought had also devastated the Syrian agricultural sector, which accounts for a quarter of Syrian economic output.
Following the global economic downturn, Syria’s economic situation worsened. The collapse in oil prices forced the state to revise its budget oil price downward to $51 for light crude and $42 for heavy, which resulted in an estimated record budget deficit of $4.8 billion, or roughly 10 percent of its GDP. Although the state usually makes up for budget shortfalls by slashing investment spending—a line item that accounted for 40 percent of its 2009 budget—this tactic was becoming increasingly difficult. Syrians born in the 1980s and early 1990s, when the country was among the top-twenty fastest-growing populations in the world, were flooding the job market. According to an interview in January 2009 with the Syrian deputy prime minister for economic affairs, Abdullah Dardari, Syria needed $14 billion of investment over the next two years to meet the 6 to 7 percent economic-growth targets required to create enough jobs for the expanding workforce.
The bad economic news explained Damascus’s demand that Washington drop its sanctions. In an interview with Reuters in February 2009, Dardari said that “to have normal relations between Syria and the United States, sanctions should be lifted…. This is going to be a very important part of any dialogue.” His statements echoed those of Sami Moubayed’s “Invitation to Abu Hussein” article.
These statements represented a reversal of the regime’s standard rhetoric on sanctions. When the Syria Accountability and Lebanese Sovereignty Restoration Act (SAA) was implemented in May 2004, analysts that I interviewed in Damascus bragged that the sanctions would have little effect due to historically small amounts of bilateral trade. At the time it made sense. Many Syria observers—including me—questioned the effectiveness of US sanctions, as spiraling food, commodity, and oil prices drove the dollar value (but not volume) of US-Syrian trade to all-time highs.
Slowly but surely, US sanctions on Damascus had an increasing impact. The SAA, which bans all US exports to Syria (except food and medicine), hit Syrian aviation particularly hard. State-owned Syrian Air could not obtain parts for its fleet of American-made Boeing jets nor purchase new aircraft from Europe’s Airbus, which also has substantial US content in its planes. The SAA also complicated Syrian oil and gas production by denying companies that operated in Syria the necessary US technology to reverse the diminishing output of Syrian crude. Indeed, in the summer of 2007, Damascus blamed electricity blackouts on the “knock-on effect” of US sanctions; companies specializing in major high-tech projects shunned operations in Syria for fear of running foul of US law. The only legal exceptions to the sanctions were export licenses for US goods for certain humanitarian purposes, such as to promote the exchange of information and to help maintain aviation safety.
At the same time, US actions targeting the state-owned Commercial Bank of Syria (CBS) exacerbated Damascus’s financial woes by making it more difficult to repatriate critical oil revenues. In March 2006, the US Treasury