Syrian War Profiteers Gun for Frozen Funds

A man walks with a hammer after fixing plastic covers on tents in the snow-covered makeshift refugee camp of Terbol near the Bekaa Valley town of Zahleh in eastern Lebanon on December 11, 2013. (Photo: AFP / STR).

By: Ziad Ghosn

Published Thursday, December 12, 2013

The issue of Syria’s funds that were frozen abroad has returned to the local spotlight. The Syrian government now seeks to take advantage of a loophole in the sanctions to finance the import of foodstuffs – drawing the ire of merchants profiteering from the crisis.

Damascus – Early on, Syria transferred the bulk of its foreign currency reserves invested abroad and shipped it on airplanes back to the country, to deposit them in the banks of its allies.

However, that “vigilance” did not completely forestall efforts to freeze some Syrian financial assets, under resolutions issued by certain countries from late-2011 onwards. No estimates or data was released on the size of these frozen funds and their distribution across the world.

Now, with the dramatic rise in the import of foodstuffs to meet local demand, and in light of the sharp decline in domestic production and the government’s desire to hold on to what is left of its foreign currency reserves, an official decision has been made: to take advantage of some of the provisions stated in most of the resolutions freezing Syrian assets abroad. Specifically, these resolutions do not oppose moving the funds in question to finance Syrian imports of foodstuffs and basic commodities.

But this has whetted the appetite of major importers, who have risen to infamy during the crisis. One prominent economist told Al-Akhbar: “Because of the repercussions of the crisis, the decline in trade, and the prospect of lucrative trade with the public sector in this period, it is natural to see this kind of clamoring to take advantage of the frozen funds.”

According to informed sources, it is estimated that the total amount of Syrian funds frozen abroad at the beginning of the crisis stands at around $2 billion. These assets are spread across several countries, and include some $700 million in one country. The sources said that the government had previously discussed the possibility of carrying out a trade-off between the frozen funds and Syria’s debts (i.e. the funds would be set off against debts in the settlement of accounts) held by some Arab and international organizations and institutions. Instead, the Syrian government has elected to wait and explore whether there is a chance to restore these funds.

Irrespective of the estimated size of these funds, the ambiguity with which the government has dealt with the issue of financing foodstuff imports has drawn the ire of many merchants and importers. The latter claim that the government is displaying favoritism toward some of them, in regards to providing information about the countries where the funds are located, or by excluding them from the process altogether without any justification, legal or otherwise.

The ambiguity in the government’s dealings, according to one banker, is also reflected in the profits reaped by some merchants, which are linked to the terms and conditions of the latter’s contracts with government institutions, and also to the exchange rate at which the dollar or the euro is sold to them, not to mention the commission the merchants receive, whether directly or as a result of favorable differences in the exchange rate.

Drawing a comparison to the notorious oil-for-food program between the United Nations and Iraq prior to the US-led invasion, Syrians are now talking about “food-for-frozen funds,” in what amounts to a bitter mockery of their country’s economic state, as a result of systematic exploitation by war profiteers but also the absence of sound economic governance.

This article is an edited translation from the Arabic Edition.

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