Tag: Syria

Troubled Currencies Project Update: Syria, Iran, and Egypt

Syria Since August 26,  when U.S. Secretary of State John Kerry began laying the groundwork for military intervention in Syria, the Syrian pound (SYP) has taken a beating on the black market. Indeed, the SYP has lost 24.07 percent of its value against the U.S. dollar (USD) in the two days since Kerry’s announcement. Currently, the exchange rate sits at 270 SYP/USD, yielding an implied annual inflation rate of 291.88 percent. In countries with troubled currencies, there is no better measure of economic expectations than the black-market exchange rate. The recent deterioration in the SYP/USD exchange rate clearly indicates that Syrians are anticipating Western military intervention in the near term. 

IranThe initial weeks of the Rouhani presidency have seen renewed economic confidence, as reflected by the Iranian rial’s (IRR) black-market exchange rate. The new central bank governor, Valiollah Seif, has stated that his primary concerns are to rein in inflation and boost economic stability. Over the past few weeks, the rial has strengthened on the black-market, and inflation has moderated somewhat. That said, recent international saber-rattling over Syria clearly has spooked the Iranian public. In the two days since Secretary Kerry first made his case for intervention in Syria, the value of the Iranian rial has dropped 4.74 percent on the black market, to 32,700 IRR/USD. This yields an implied annual inflation rate of 52.10 percent, up from 44.89 percent, prior to Kerry’s announcement.

EgyptSince the fall of the Morsi government, public confidence and support for the military regime has boosted the value of the Egyptian pound (EGP). Prior to the military takeover, the black-market exchange rate sat at 7.6 EGP/USD. Since Morsi’s ouster, the pound has appreciated by 7.34 percent, to 7.08 EGP/USD. This yields a current implied annual inflation rate of 18.62 percent, down from 27.85 percent in the final days of the Morsi government. In recent weeks, the Central Bank has been auctioning off up to $40 million in foreign exchange, three times per week. This rather modest sum has adequately met the demand for foreign exchange at rates close to the official exchange rate of 6.99 EGP/USD.

 

For more information on troubled currencies in these countries and others, see The Troubled Currencies Project.

Resisting the Calls for Action in Syria

After months of hand-wringing, the Obama administration appears poised to intervene militarily in Syria. Yesterday, Secretary of State John Kerry cited clear evidence of chemical weapons use by forces loyal to Syrian President Bashar al-Assad, and pledged that the United States would hold Assad accountable for a “moral obscenity.” Others have chimed in this morning in agreement. The editorial writers at USA Today declare that Assad’s action “demands” a “precise strike” in response.

As I explain in an “opposing view”:

The desire to “do something” in Syria is understandable. The gut-wrenching images of the dead, including the young, have rocketed around the world. To casual observers, it seems obvious that a country as rich and militarily powerful as the United States must be able to stop the violence.

But the truth is that not even the United States can solve Syria’s problems.

The American public remains strongly opposed to military intervention of any type, and the people’s representatives in Congress generally reflect these sentiments. Unfortunately, presidents can, and usually do, ignore the public’s wishes. President Obama, following the example of his predecessors, has undertaken numerous military operations without securing congressional approval, and he has done so even in the face of clear and bipartisan opposition. (Libya, for example).

A few on Capitol Hill will occasionally complain, as some did yesterday, but a groundswell among members of Congress to affirm their constitutional responsibilities is unlikely, and certainly won’t happen quickly enough to halt what appears to be imminent military action.

But the strongest reason why President Obama should ignore the voices calling for military action is because such intervention is unlikely to achieve anything constructive, and may well do great harm. While the president has the ability to launch air attacks, he is unable to affect the political realities on the ground in Syria that have sustained a brutal and bloody civil war for nearly two and a half years.

Learning to Leave Bad Enough Alone: Washington’s Clumsy Meddling in Fragile Countries

U.S. officials too often succumb to the temptation to try to impose order and justice in unstable or misgoverned societies around the world. The temptation is understandable. It is hard to learn about—much less watch on the nightly news—brutality, bloodshed, and gross injustice and not want to do something about it. Some foreign policy intellectuals, including the new U.S. ambassador to the United Nations, Samantha Power, have become strident lobbyists for the notion of a “responsibility to protect” vulnerable populations.

But it is a temptation that wise policy makers should avoid. U.S. meddling has frequently caused already bad situations to deteriorate further—especially when Washington has based its humanitarian interventions on the false premise that the subject of our attentions is, or at least ought to be, a coherent nation state. As I point out in an article over at The National Interest, U.S. administrations have made that blunder in Bosnia, Iraq, Libya, and other places.

In many parts of the world, the Western concept of a nation state is quite weak, and the concepts of democracy and individual rights are even less developed. The primary loyalty of an inhabitant is likely to be to a clan, tribe, ethnic group or religion. U.S. officials appear to have difficulty grasping that point, and as a result, the United States barges into fragile societies, disrupting what modest order may exist. Washington’s military interventions flail about, shattering delicate political and social connections and disrupting domestic balances of power.

An especially naive and pernicious U.S. habit has been to try to midwife a strong national government in client states when the real power and cohesion lies at the local or subregional level. Thus, Washington still insists on keeping the chronically dysfunctional pretend country of Bosnia intact and on international life support more than 17 years after imposing the Dayton peace accords that ended the fighting there. Similarly, the United States harbored the illusion that Hamid Karzai could run a strong, pro-Western, democratic Afghan central government from Kabul, and even Karzai’s ineptitude and extensive misdeeds have not entirely dispelled that notion. In both cases, the national cohesion, underlying democratic values, and strong civil societies needed for such a scheme to work are woefully lacking.

One would hope that U.S. officials would be sobered by those bruising experiences, but there is little evidence of that. Even now, the Obama administration continues to flirt with intervening in Syria. That would be a huge mistake. Syria’s ethno-religious divisions make those of Bosnia, Afghanistan, Iraq, and Libya look mild by comparison. Bashar al-Assad is undoubtedly a thuggish ruler, and the humanitarian situation in Syria is tragic. But a U.S.-led intervention could cause Syria’s fragile political and ethnic tapestry to unravel entirely, and that might make the current situation far worse. The Obama administration needs to exercise great care and restraint.

Will Congress Block Military Aid to the Syrian Rebels?

Other news has pushed Syria out of the headlines in the past two weeks, but some members of Congress have spent the time preparing for a showdown with the Obama administration over its decision to arm rebels in Syria. 

Late last month, a bipartisan group led by Rep. Chris Gibson (R-NY) put forward legislation (H.R. 2494) that would block military aid to Syria pending authorization by a joint congressional resolution. The legislation would allow non-lethal assistance to continue to flow, but would require the administration to report every 90 days on what groups are receiving the aid, and the character of the aid being provided. Similar legislation (S. 1201) was introduced in the Senate by two Democrats (Tom Udall, NM; and Chris Murphy, CT) and two Republicans (Rand Paul, KY; and Mike Lee, UT).

Last week, Gibson and bill co-sponsor Peter Welch (D-VT) appeared on C-Span to discuss the legislative initiative. More information can be found here.

The effort seems like a long shot given the steady erosion of the U.S. Congress’s control over the war powers. This regression was reflected most recently by the Obama administration’s decision to wage “kinetic military action” against Libya under a UN Security Council Resolution, and in the face of strong congressional opposition. On the other hand, the American people remain overwhelmingly opposed to deeper U.S. involvement in the Syrian civil war, and a mere 11 percent support arming the rebels, according to an NBC News/Wall Street Journal poll. In this case, at least, the people’s elected representatives are at least doing their jobs in representing their constituents’ views.  

As to the substance of the legislation, one can sympathize with the premise behind it without agreeing with co-sponsor Michele Bachmann (R-MN) that the Syrian rebels are “enemies” of the United States who could “defeat us and our way of life” (though a few might aspire to such grandiose aims). On policy grounds, limited military intervention in Syria is unlikely to turn the tide in favor of our prefered group (one that is presumably secular, pro-U.S., and capable of governing Syria), which means that arming the rebels is likely to extend the conflict and drag the United States more deeply into another civil war in the region. As Rep. Mike Nolan (D-MN) noted, “This matter, however tragic and sad, will not be resolved by the US’s involvement or intervention and will only invite resentment from both sides, as has been proven time and time again. We must get over the false notion that the enemy of our enemy is our friend.”

Another reason why the legislation is attracting bipartisan support has to do with the separation of powers, and a nascent movement within the Congress to reclaim at least some of its constitutional authority. We saw a glimmer of this opposition in the spring of 2011. The floor debate ultimately failed to halt U.S. military intervention in Libya, but at least we had such a debate. We need one with respect to arming the Syrian rebels.

Gibson, the author of legislation that would revise the War Powers Act, appears to be motivated primarily by those aims. A retired U.S. Army Colonel who served four tours in Iraq, Gibson earned a PhD in government from Cornell and later published a book on civil-military relations. He spoke on the subject in late 2011 at a Cato Capitol Hill Briefing.

In introducing the Syrian legislation, Gibson explained:

As I have long-maintained, the decision to engage overseas must be made with the utmost caution and with a full understanding of the dynamics. Most importantly, the American people, through their Congressional Representatives, must be part of this decision process….This bipartisan legislation will ensure we can maintain our diplomatic and humanitarian efforts to support the Syrian people without getting drawn into another engagement. Moving forward, it is vital that Congress be a part of this debate and provide authorization prior to any hostile action or escalation of our involvement. 

As I said, this is a long-shot effort given the extent to which power has shifted to the executive branch, and given that many of Gibson’s colleagues (both Republicans and Democrats) seem so willing to ignore their sacred oath to uphold the Constitution. But it is gratifying to see at least some members of Congress taking their responsibilities seriously. 

Value of the Syrian Pound Hits an All-Time Low

As I have documented previously, the economic devastation and international sanctions that have accompanied Syria’s civil war have wreaked havoc on the country’s currency, the Syrian pound (SYP). In a desperate, wrong-headed attempt to save its troubled currency, the Assad regime has imposed harsh penalties for currency trading on the black-market. This strategy proved wildly unsuccessful when it was utilized by the Iran in October of 2012.

Indeed, as was the case in Iran, attempts to suppress currency exchange have sparked a panic – a run on the Syrian pound. As of 10 July 2013, the value of the Syrian pound on the black market has hit an all time low, with the current black-market exchange rate now sitting at 295.00 SYP/USD.

As the accompanying chart shows, this has sent the implied monthly inflation rate in Syria skyrocketing.

Yes, Syria’s implied monthly inflation rate is now 91.9%. This means that Syria has exceeded the threshold for hyperinflation (an inflation rate of 50% per month).  Only time will tell if this run on the Syrian pound will continue. But, for the time being, we can be sure that the Syrian pound will remain a troubled currency.

I have established a page to track current black-market exchange-rate and implied inflation data for the Syrian pound, as well as for troubled currencies in Iran, Argentina, North Korea, and Venezuela. For more, see: The Troubled Currencies Project.

Syria’s Annual Inflation Hits 200%

In an attempt to beat Western sanctions and halt the fall in the Syrian pound, the Assad regime – with the help of Iran, Russia, and China – has begun conducting all of its business in rials, roubles, and renminbi. This decision supplements other existing arrangements between Syria and its allies that are keeping the Syrian economy on life-support. These include transfers of $500 million per month in oil and an unlimited credit line with Tehran for food and oil-product imports.

According to Kadri Jamil, Syria’s prime minister for the economy, this life support is necessary because Syria’s devastated economy is the target of an elaborate plot, hatched by the U.S. and Britain, to “sink the Syrian pound.”

So, what about the sinking pound? As the accompanying chart shows, the Syrian pound has lost 66.2% of its value in the last twelve months.

The rout of the Syrian pound has been widely reported in the press.  But, Syria’s inflation problems that have accompanied the collapse of the pound have gone largely unreported.  That’s because, beyond the occasional bits of anecdotal evidence, there has been nothing to report by way of reliable economic data.

To fill that void, I employ standard techniques to estimate Syrian’s current inflation. Currently, Syria is experiencing an annual inflation rate of 200% (see the accompanying chart).

Indeed, Syria is experiencing a monthly inflation rate of 34%. To facilitate the monitoring of the quickly deteriorating situation in Syria, I am creating a resource which will allow readers to view up-to-date data on the Syrian pound and the country’s inflation problems. Soon, black-market exchange-rate data and ­inflation estimates for countries with troubled currencies like Syria will be made available via the “Troubled Currencies Project” – a joint Cato Institute-Johns Hopkins collaboration under my direction. In consequence, the days of Syria’s plunging pound and raging inflation being covered in a shroud of secrecy are soon coming to an end.

Only Wusses Go to War Without Cause

President Barack Obama has been evidently reluctant to go to war in Syria, but has started down the long and winding road by deciding to provide weapons to the insurgents. Why he is risking involvement in another conflict in another Muslim nation is hard to fathom.

However, the president did act only after former president Bill Clinton warned that Obama could end up looking like a “total wuss” and “a total fool” if the latter did not drag America into war. If there is anyone who should not be giving war-related advice, it is Bill Clinton.

His “splendid little war” in Kosovo left a mess in its wake, including ethnic cleansing by America’s putative allies. Indeed, he always had a curious view of the purpose of war. He once expressed his frustration that he likely would not be considered a great president without prosecuting a major conflict. 

Moreover, why is Clinton of all people accusing another president of looking like a “total wuss” and “a total fool” for hesitating to go to war? After all, as I relate in the American Spectator, he engaged in all manner of personal maneuvering to avoid being drafted to fight in Vietnam. 

That’s fine by me. It was a stupid war in which tens of thousands of fine Americans died as a result of dumb decisions by foolish Washington policymakers. But it is striking how reluctant he was personally to go to war.  Why, some people might consider him to have been a “wuss.”

As I pointed out:

Intervening in Syria is a serious mistake.  The U.S. has no interest at stake that warrants entanglement in another Middle Eastern civil war.  President Ronald Reagan learned that lesson three decades ago and responded appropriately, by getting out fast.

It’s bad enough if President Obama made his decision because he genuinely believes that the U.S. needs to fight another war in another Muslim nation.  It’s far worse if the president acted to ensure that he doesn’t look like a wuss and a fool.  For there’s no bigger wuss and fool than someone who allows Bill Clinton to manipulate him into going to war.

Read the rest here.