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Syria and the financial crisis: prospects for reform?

Article Excerpt
Periodically since 2001, the Syrian regime of Bashar al-Asad has faced critical junctures that temporarily disrupt normal operations but eventually settle into a new equilibrium. The regime has weathered a series of tempests: the Damascus Spring and the subsequent crackdown on its participants; the assassination of Lebanese Prime Minister Rafiq Hariri; assassinations and alleged suicides of high-level regime officials; a breakdown in relations with Egypt and Saudi Arabia; the withdrawal from Lebanon; the tide of refugees from the war in Iraq; and, not least, the "low-hanging fruit" argument for regime change that circulated during the Bush administration. In contrast to these previous challenges, the global financial meltdown is shaping up to be less of a crisis for the Syrian regime and more of an opportunity. In a subtle shift of fortunes, we see the president's formerly beleaguered "technocrats" gaining support for stronger economic reforms, while regime "hardliners" are adopting increasingly liberal rhetoric. Ironically, the economic crisis may actually help marshal the political will necessary to undertake more significant economic reforms while also moderating some Baath party ideologues whose mantras of resistance and isolation seem outdated in an era of such extraordinary U.S. financial decline and the increasing power of regional blocs in the developing world.

Bashar's early days were marked by cabinet shakeups that seemed to indicate a reformist course. The president's 2001 appointments replaced nearly every economic official in the cabinet, including many ministers who had been there for decades. (1) But a subsequent series of reversals aimed at stifling the radical agenda reflected both the influence of old-guard regime profiteers, who feared the loss of personal economic spoils, and internal fears that a revitalized domestic opposition would destabilize the novice regime. International pressure followed a similar trajectory, with traditional allies such as France vesting significant political capital in the new president, only to be disappointed by the slow pace of reforms. France's cooperation with the United States in drafting UN Resolution 1559, demanding the withdrawal of foreign troops from Lebanon, signified the attitude of even Syria's most steadfast supporters: rhetoric and legislation are not enough if economic and political realities on the ground remain essentially unchanged.

The financial crisis, at least temporarily, seems to have forced the pendulum back in the direction of reform. Today the regime hardliners are increasingly indistinguishable in their rhetoric from Bashar's hand-picked reformists, and nearly all are speaking with one voice about economic policies that were previously off limits. But what makes this crisis different? Perhaps it is the U.S. origins of the crisis and the relative immunity of the Middle East. Those countries linked most closely to the Untied States--that is, Egypt and the member states of the Gulf Cooperation Council (GCC)--are suffering substantial losses from their exposure to global financial markets. However, the countries of the Levant and North Africa are not feeling the pinch quite so much. Their banks are not suffering from liquidity problems, and their real-estate markets were never so grossly inflated.

International condemnation of the U.S. model of unregulated capitalism has given countries like Syria a brief respite. The formerly isolated state is stepping into the leadership vacuum (along with Qatar and other regional actors) left by U.S. allies Egypt and Saudi Arabia, states that many believe to have failed in their diplomatic attempts to solve the region's biggest problems. This is why Damascus was able to open a stock exchange in March during the thick of global financial hysteria. All key players are convinced that economic change is necessary and long overdue, and Syria's leadership is finally feeling relief from the pressure of U.S.-enforced isolation. Instead of existential arguments over the stock exchange, current debates focus on how best to ensure the transparency and accountability that critics of the U.S. system said prevented investors from understanding the risks hidden in their portfolios. In this way, Damascus and other "closed" economies can both be vindicated in their criticism of capitalism and at the same time introduce its elements into their own economies.

THE REGIME'S CHANGING CHARACTER(S)

Mohammad al-Hussein, whose original addition to the cabinet and subsequent promotions were widely understood as a nod to Baath party ideologues, is probably the most conservative cabinet member with an economic portfolio. In late September, just as the financial crisis was blossoming into an economic pandemic, Hussein suggested in the government paper Al-Thawra that Syria was among the least affected...