Syria Feature: The Sanctions Close In (MacFarquhar)

Neil MacFarquhar writes for the New York Times:

The walls are suddenly closing in around enterprising young Syrians who bought into the idea of a modernized economy promised by President Bashar al-Assad ---  their simplest money transfers are blocked, and their credit cards are useless outside Syria as the growing list of international sanctions darkens their financial future.

The owner of a handicrafts business who this week tried to transfer $450 to the Lebanese bank account of one of her suppliers found the transaction rejected because it originated in Syria. She had to hand-deliver the cash instead. Then a client, an investor for whom she is designing furniture for a new Abu Dhabi hotel, asked her to export whatever was completed immediately, lest the entire shipment get stuck.

“This is not the solution” to end the crisis in Syria, said the woman, pulling her fashionable black wool coat tighter against the sudden winter chill hitting this superficially calm but beleaguered capital. “This is a way to make us starve to punish the president.”

Nearly nine months after a sustained popular uprising erupted against the Assad government, Syria finds itself increasingly isolated, with even onetime allies condemning its use of lethal force. Turkey, the Arab League, the European Union and the United States have all imposed economic sanctions.

The measures are already biting, in ways evident to a reporter during a brief, rare visit allowed by the government, which was seeking to draw attention to its claim that the Arab League sanctions in particular amounted to an “economic war” against Syria.

The crucial question for Mr. Assad, the international community and the tens of thousands who rose up against the government, is whether such financial pain will induce the leadership to halt the violent suppression of antigovernment protests.

The sanctions are already unraveling the most significant change of Mr. Assad’s tenure: linking Syria to the global economy, allowing private banks and opening economic opportunity for young people in nation where about three-quarters of the population is under the age of 35.

Optimists think the pressure could work, largely because the biggest tycoons are close to the president, especially his cousin, Rami Makhlouf, and some dozen sons of his father’s closest allies. (Mr. Makhlouf gobbled up so many state enterprises put up for sale that Syrians wryly dubbed the privatization process “Ramification.”)

Pessimists worry that the government, including the scions of the old guard, will let the economy sink further to cling to power.

“Up until the last minute, I did not believe the Arab League would take such a decision,” said Mohammed Ghassan al-Qallaa, the president of the Damascus Chamber of Commerce, his office filled with Assad paraphernalia, including a small gold bust of Mr. Assad’s father, former President Hafez al-Assad. “It was like a poke in the eye.”

Good statistics remain a rarity here. But trade and investment activity is already off by 50 percent, financial analysts in Damascus said, and estimates on how much the economy will shrink this year range from 12 to 20 percent. The higher estimates kick in if sanctions — like a flight ban still being debated by the Arab League — are toughened.

Layoffs are rampant, with unemployment estimated to have risen to 22 percent. The tourism sector, which amassed about $6 billion in 2010, a boom year, has been decimated.

Hotel managers report occupancy rates of 15 percent or lower, if they will divulge them at all, and numerous restaurants have gone broke. Financial analysts said the luxury Four Seasons chain tried to close its once-booming Damascus hotel, an effort rejected by the government, which owns an estimated 50 percent share.

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