Syria and the Embattled Pound

by Jamie Lee-Brown

Yet another front has opened up in the Syrian War. The conflict’s latest casualty — the Syrian Pound — is creating a division in the rebel-held north around Aleppo. The din of opposition voices calling for the adoption of the Turkish Lira in place of the embattled Pound is growing increasingly audible. The Syrian Pound remains the main means of exchange in the northern region, but its instability has driven traders and locals to convert their savings into comparatively stable US dollars. The Pound’s value has plummeted 80% against the US dollar since 2011, following the outbreak of civil war, and the economic imperative of salvaging monetary wealth is now being compounded by arguments of a different sort.

Osama Taljo, the head of Aleppo’s opposition-held City Council, highlighted the issue in an interview with the Financial Times: “[A]ll these [payments] are received in dollars and then transferred to Syrian pounds. In other words, I’m giving the regime dollars.” A widespread switch to an alternative currency would ultimately push the Pound into obscurity, deprive the Assad regime of foreign currency reserves and lower transactional costs with Turkey, the north’s main trading partner.

Syria’s opposition forces are not the only regional faction leveraging the power of currency to weaken its opponents. In 2014, the so-called “Islamic State” (IS) first announced that it would be minting its own currency in a bid to disentangle itself from the regional economy and to underscore its aspirations for independence. In a 2015 video denouncing the “dark rise of bank notes, born out of the satanic conception of banks,” they made reference to Caliph Abd al Malik ibn Marwan, who was credited with the introduction of the golden “dinar” in the year 696/7. IS’s so-called reintroduction of the dinar is likely to have a predominantly symbolic effect, extending little further beyond being a nominal mark of statehood.

The use of gold would tie the buying power of the dinar to commodity prices out of IS’s control and as David L. Phillips, a former adviser at the United Nations and the State Department, now at Columbia University’s Institute for the Study of Human Rights, asserted in a 2014 New York Times interview: “[I]t’s like blood diamonds, no credible financial institution is going to take this.” This alone would stymie any efforts to use the proto-currency for international trade. Thus, IS’s plan to deliver a “second blow to the US and its capitalist financial system of enslavement” is all but predetermined to ring hollow.

Currencies have long been considered a useful tool with which to wage war. “Operation Bernhard” was Nazi Germany’s infamous attempt to destabilize Britain’s wartime economy by flooding the country with counterfeit banknotes. In addition to further worsening inflation, the illicit introduction of currency on a large scale would have undermined confidence in what was then a truly global currency, vital to the Allies’ war effort.

In the rebel-held north of Syria, the desire to shift away from the government-controlled Pound is growing. Employees of the Islamic Court in Aleppo are receiving their wages in Turkish Lira in the hope that it will expedite the collapse of the Syrian economy. In July 2015, Al-Monitor reported having attended an economic seminar held by the “Committee for Replacing the Currency in Aleppo” and in August 2015, the Committee started work with opposition groups to begin pricing essential items in Lira.

Memories of Iraqi soldiers shedding uniforms and weapons as they fled from IS in 2014 is a reminder of what economic disruption can give rise to when it results in unpaid salaries and the disruption of supplies. To boycott the Syrian Pound could be the right thing for Aleppo, formerly Syria’s financial capital. What is not so clear to some in the region, is that the Turkish Lira is a suitable substitute.  There have been allegations that Turkish authorities have been behind the move with a view to solidifying influence in the region, and while the Turkish Lira is a predictable currency vis-à-vis the Pound, it too suffers from fluctuations of its own.

In his interview with the Financial Times, however, Taljo described the US dollar as an impractical alternative due to the unworkability of sourcing denominations below one dollar. This would be crucial for the swathes of Syrians living at a subsistence level — a problem which opting for the Lira would likely avoid. Also of potential concern is the localized nature of the proposed currency swap. If Aleppo were to set such a precedent and do away with the Pound, thought would need to be given as to how this might impact upon coordination and financing between the opposition groups in Aleppo and those elsewhere in Syria.

The ideological differences and practical hurdles that a currency switch would engender are perhaps of most importance. When Syria’s opposition groups come to reassess their marriages of convenience with one another in the face of a future power-sharing agreement, the added complexity of a multi-currency system and its geopolitical ramifications might be a further cost that fu

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