Buying Shares Of The Syrian Dream
by Jonathan Schanzer
March 30, 2009
Syria launched its first stock exchange, the Damascus Securities Exchange, earlier this month after years of delay. The DSE is the regime's latest step to rehabilitate its authoritarian image and perhaps liberalize its moribund economy.
The DSE is a sad spectacle. It will be open a mere two days each week and only six companies can be traded (Banque Bemo Saudi Franci; Bank of Syria and Overseas; United Group for Publishing, Advertising and Marketing; Arab Bank-Syria; Alahlia Company for Transport; and Bank Audi-Syria). A whopping four other companies have applied to be listed.
The timing of the DSE's opening was also rather awful. Arab stock markets have been hammered in the global sell-off; they collapsed by more than 50 percent last year and rank among the worst performers in the world today.
It comes as no surprise, then, that Syrian Finance Minister Muhammad al-Hussein announced Syria is also having a "very difficult year." Drought, falling oil exports and losses by state-owned industries are exacerbating the global recession in Syria. According to the CIA fact book, Syria's public debt is 41% of its gross domestic product, and the inflation rate could be as high as 15%.
The regime has further been pinched by US economic sanctions, in place since 1979, due to Syrian support to international terrorist organizations. So, if the financials don't scare away Western investors, the fact that Damascus is an active supporter of Hamas, Hizbullah, PFLP, Iraqi insurgent groups and other elements of the terrorist underworld might give pause.
If the financial meltdown of 2008-2009 has taught the world anything, it is that transparency and trust are of paramount importance to investors. Yet, this is lost on Sen. John Kerry (D-Massachusetts). Kerry recently called for "[l]oosening certain sanctions" against Syria because the stock market and other token measures of liberalization could "actually benefit US businesses."
In truth, the current Syrian investment offerings represent too much risk and too little reward for US investors. But all may not be lost. What if the Syrians could securitize some of their illicit initiatives? Think of the possibilities.
Shares of the Lebanon Occupation: While Bank of Syria is having a rough year, the Syrians are making a marvelous profit by bilking Lebanon. The Syrian army was forced out of Lebanon in 2005 for its involvement in the assassination of former prime minister Rafik Hariri, so profit may be down a bit. But according to previous reports, Syria made at least $10 billion per year from the occupation of Lebanon, or 47% of Syria's GDP. According to Syria-Lebanon analyst Gary Gambill, $3 billion of that comes from "about 1.2 million untaxed and unregulated Syrian workers." If the UN fails to indict the Syrian regime in the Hariri tribunal, or if pro-Syrian elements gain in Lebanon's June elections, shares of such a stock could skyrocket.
Shares of the WMD Program: According to a conservative estimate from the Center for Strategic and International Studies, Syria has spent about $1.8 billion on weapons of mass destruction with the ultimate aim of annihilating Israel. Securitizing such an operation could be lucrative. True, shares would have tanked last year after the Israelis bombed a North Korean-built nuclear facility. But the Israelis still believe that Syria pumps more than $1 billion per year into its ballistic missile program. In other words, shares of this stock could have tremendous growth potential, barring occasional market corrections administered by the IAF.
Shares of the Iranian Terror Finance Apparatus: Treasury Undersecretary Stuart Levey calls Iran "the central banker of terrorism." Syria, in turn, is Iran's brokerage firm. Indeed, Iran relies upon Syria to deliver loads of weapons and cash to Hizbullah in Lebanon. Analysts have long estimated that Iran provides at least $100 million per year to Hizbullah, not to mention thousands of rockets and other weapons. The broker fees have added up, making Syria a lucrative logistical hub. Shares could drop if the mullahs divest, or "unclench their fist," but the odds of this are slim.
Lack the stomach for these fictional securities? In truth, they are no different than the other investments on the DSE. In an attempt to sell shares of its business sector without first undergoing drastic reform, Damascus has securitized terrorism and rogue behavior. Investors beware.
The writer, a former US Treasury intelligence analyst, is deputy executive director of the Jewish Policy Center and author of Hamas vs. Fatah: The Struggle for Palestine (Palgrave Macmillan 2008).
Related Topics: Syria | Jonathan Schanzer
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