Will Iranian War Ships Traveling through the Suez Canal Provoke War or Peace?

Recent news that Iran will send two warships through the Suez canal to dock in Syria has set off alarm bells for Israel and the US. Defense Minister Ehud Barak walked back comments by Foreign Minister Lieberman that Israel would possibly consider a military strike against the ships.

From the moment the Egyptian people began to move against Mubarak, Iran looked for a way to capitalize on the fall of Israel’s primary Arab partner. Warships through the Suez canal would demonstrate how the balance of power was tilting in the region. There is nothing illegal about sending warships through the Suez canal. Lots of countries do it.

Iranian officials have insisted the request is in line with international regulations. They said the two vessels are headed to Syria for training. On Thursday, the two Iranian naval vessels submitted a request to transit the Suez Canal, Egypt’s Foreign Ministry said.

Ahmed al-Manakhly, a senior Suez Canal official, told AP that international agreements regulate the traffic through the canal. He said that only in the case of war with Egypt may vessels be denied transit through the waterway. Al-Manakhly noted that Iran and Egypt are not at war, and said the final decision on whether to grant the vessels’ passage lies with the Defense Ministry.

Iranian warships have not been able to pass through Egypt’s Suez Canal since the 1979 Islamic Revolution, Iranian state TV reported Saturday.

“This is awkward — at a minimum,” said David Schenker, of the Washington Institute for Near East Policy. “It’s destabilizing. It raises tension, particularly in this time of transition in Egypt,” Schenker said. “This is typical of Syrian-Iranian opportunism.”

Why does this change things? One obvious reason is that Iranian warships could carry weapons to Syria, Lebanon or even Hizbullah.

Israel has been successful in blocking Syria from upgrading its military capability. The US and Europe stop merchant ships headed for Syria that may carry weapons from Iran or North Korea. How can they do this? They claim it is legal within the framework of the UN embargo on Iran meant to block its nuclear program. According to the US, ships traveling from Iran can be stopped and searched for arms.

For several months in 2009, Cyprus held the Russian-owned, Cypriot-flagged Monchegorsk off the southern port of Limassol. The U.S. and other European members of the council said the shipment violated Security Council resolutions and was, according to Haaretz, “traveling to Syria from Iran with weapons destined for Lebanon’s Hezbollah militia or the Palestinian group Hamas, which controls the Gaza Strip.” U.S. and U.K. envoys said the weapons shipment violated the UN arms embargo on Iran. Iran said it did not.

Syria’s ambassador to the UN at the time argued that:

“Raising the issue of this shipment is part of an orchestrated campaign to exert pressure on us to get political concessions,” Ja’afari said in the interview. “We are saying that the Security Council has had all kinds of indications of Israeli violations of international law and has never held them accountable. It is a double standard. … Ja’Afari said Syria and other Arab nations have the right to obtain weapons to defend against “Israeli invasions and aggressions.” ”

If Iran were able to send war ships to Syria, Britain and the US would have to think twice before stopping them; although, they could be easily sunk by Israeli planes.

The US guarantees Israel’s QME or Qualitative Military Edge.  In 2008, this longstanding policy was written into law and has since become the cornerstone of the U.S.-Israeli security relationship. It is defined as a guarantee to ensure:

“Israel’s ability to counter and defeat any military threat from any state, coalition of states, or non-state actors, while itself sustaining minimal casualties or damage.”

By guaranteeing Israel’s military hegemony in the region, the US has opened the way for Israel to expand its borders over the land it conquered in 1967, rather than trade it for peace. That is why Israel ‘deeply appreciates’ the U.S. veto on UN resolution condemning settlements of yesterday. As America’s ambassador to the UN, Susan E. Rice, said after her veto of the UN resolution:

“The United States has not characterized settlement activity as illegal since, 1980. And – but what we do believe firmly and have reiterated forcefully, including today, is that continued settlement activity is not legitimate.”

Realists argue that only by bringing the balance of power in the region back into equilibrium will peace be encouraged. This logic suggests that if Iran is able upgrade Syrian and Palestinian arms, peace may become more likely. Only by creating a balance of power in the region will Israel compromise rather than expand.

[End analysis]

Egypt is no longer committed to an alliance with Israel against Iran – Haaretz Daily Newspaper | Israel News – Aluf Benn

A year and a half ago, an Israel Navy submarine crossed the Suez Canal on its way from Haifa to the Red Sea, where it conducted an exercise, and back. The unusual voyage reflected the growing strategic cooperation between Israel and Egypt, which aimed a menacing message at Iran. The submarine’s crossing of the waterway demonstrated how quickly Israel could deploy its deterrent near Iran’s shores, with the tacit support of Egypt.

Once more, the canal is being used to deliver a message of deterrence – but this time the direction is reversed. Egypt is allowing Iranian warships to cross the canal, on their way to Syrian ports. Israel was publicly critical of the passage – arguing that it is a provocative move – but Egypt ignored the pressures and granted the Iranian navy permission to pass, symbolizing the change to the regional balance of power following the fall of President Hosni Mubarak.

Egypt is signaling that it is no longer committed to its strategic alliance with Israel against Iran, and that Cairo is now willing to do business with Tehran. This is precisely what Turkey has done in recent years under Prime Minister Recep Tayyip Erdogan.

Since the uprising against Mubarak, the cold peace between Egypt and Israel has cooled even further. The delivery of natural gas to Israel, which was cut off after a terrorist attack on a station in northern Sinai, has still not been resumed.

Sheikh Yusuf al-Qaradawi returned to Cairo after decades in exile and addressed a million strong crowd in Tahrir Square on Friday, calling for the liberation of the Al-Aqsa Mosque and the upcoming victory against Israel. In the past, the sheikh had expressed support for suicide attacks against Israelis and two years ago described the Holocaust as “God’s punishment of the Jews.”

The appearance of the Islamist firebrand in the square has returned hatred for Israel to the center of the public debate over Egypt’s future. Until now, the argument was that the revolution concerned domestic matters, not Egypt’s relations with the United States or Israel. The Muslim Brotherhood has also been trying to send messages of moderation to the West, but this is hardly comforting.

There is growing concern in Israel that Egypt will become a hostile front, adding to the feeling of international isolation which has only intensified since Benjamin Netanyahu became prime minister. The recent vote at the UN Security Council over the Palestinian resolution to label the settlements as illegal only increased this sense of isolation. With 14 states supporting this measure, Israel needed an American veto to foil it.

The Palestinians may have lost that vote, but the issue demonstrated which side in the conflict enjoys widespread international recognition.

Bolstered with Congressional support, Netanyahu forced U.S. President Barack Obama into the veto – which he had avoided using to date. The Americans argued that internationalization of the conflict cannot replace direct negotiations, and that forced decisions will only result in parties taking up more extreme positions.

It is not yet clear what Obama will try to get from Netanyahu in return: a plan for the establishment of a Palestinian state in the territories, or acceptance of an American peace plan. The U.S. president will argue that Washington needs to bolster its credibility in the Arab world and that Israel must contribute its lot to ensure that the new regimes in the area are friendly.

‘Clinton threatened to cancel aid to PA’ – Israel News, Ynetnews – In order to stop the PA from proposing the UN resolution declaring settlements illegal.

From Matt Duss

In terms of Israel’s security, the Wall Street Journal reported that “U.S. military aid to Israel increased markedly” in 2010, an effort that stems from policy directives the White House gave the Pentagon early in Obama’s presidency to “deepen and expand the quantity and intensity of cooperation to the fullest extent.” Speaking at the Brookings Institution in July, Assistant Secretary of State for Political-Military Affairs Andrew Shapiro described in detail how the Obama administration is “preserving Israel’s qualitative military edge through an unprecedented increase in U.S. security assistance, stepped up security consultations, support for Israel’s new Iron Dome defensive system, and other initiatives.” President Obama raised the amount of U.S. military aid to Israel, making it the single largest expense in the 2010 foreign aid budget. He also authorized $205 million to enable Israel to complete the Iron Dome. Obama has significantly increased the level of strategic dialogue and the depth of intelligence coordination between the U.S. and Israel, particularly regarding Iran, a key Israeli security concern. According to one Israeli official, that coordination is now “even better than under President Bush.”

Since then, we’ve learned that, thanks to that intense coordination, outgoing Mossad chief Meir Dagan was able to report that Iran’s nuclear program had been set back several years.

As former Congressman Robert Wexler stated on a panel at Herzliya, the U.S. “has bent over backwards, during President Bush and even more so under President Obama, in attempts to secure Israeli security interests”:

When the Turkish government uninvited Israel to a joint military exercise campaign, what did Obama do? He withdrew the United States from the exercise, then what did he do? He brought the largest presence of US military personnel, they showed up to your [Israeli] ports, and we stayed for weeks, and then what did we do? We developed a coordinated anti-missile strategy with one purpose: to protect the Israeli people.

We have offered security package after security package after security package… We continue to engage on security issues and are not acknowledged for doing so.

Syria to EU: tackle Israel, not Egypt for Middle East peace
ANDREW RETTMAN, 17.02.2011

EUOBSERVER / BRUSSELS – The EU should take firm action against Israeli settlement-building and human rights abuses instead of playing politics in Egypt if it wants to calm tension in the Middle East, Syria’s ambassador to the Union has said.

Speaking to EU observer in Brussels on Wednesday (16 February), Mohamad Ayman Soussan said the main danger of conflict in the region comes from the Arab-Israeli problem not the revolution in Egypt or Tunisia.

“Our European friends have a responsibility here, because Europe is the principal economic partner of Israel. They have all the means at their disposal to make Israel reconsider its position vis-a-vis international law. Europe must assume this responsibility if it ever intends to take its rightful place in the international order,” he explained.

“Where in Europe do you see such a level of brutality against demonstrators? Where do you see roads that can be used only by one kind of people? Israel practices apartheid and the EU assists this everyday through its ongoing relations.”

Wikileaks: Origin: Embassy Manama
Classification: CONFIDENTIAL
SUBJECT: LEBANON TRIBUNAL: BAHRAIN SUPPORTIVE; NO FINANCIAL COMMITMENT

1. (C) Pol/Econ Chief met with MFA Undersecretary Abdulaziz bin Mubarak Al-Khalifa on February 7 to review the Secretary’s note verbale and talking points A-G (reftel). SIPDIS Al-Khalifa expressed strong support for the tribunal and Bahrain’s commitment to working cooperatively to promote peace and stability in Lebanon, but said that limited resources meant that the GOB would likely not be able to contribute financially. Al-Khalifa said that the GOB would continue its public and private support of PM Siniora’s government, and agreed that obstacles to the presidential election must be removed. He added that it would be “absolutely unacceptable” for Hizballah to enter the government. Al-Khalifa said that “the time has come to talk publicly about Syria’s uncooperative stance,” and that he believed the Arab states would send a strong message to Syria at the Damascus Summit. He hinted that King Hamad would no attend..”

From the Lede – New York Times Blog

According to the blog Syria News Wire, a demonstration in Damascus, the Syrian capital, on Thursday, caught on video posted on YouTube, was not part of a wave of antigovernment unrest sweeping the Arab world.

The blog, which is written from Damascus and London, explains the video this way:

An unprecedented scene in Syria this morning as an estimated 1500 people took to the streets in a spontaneous protest.

They were angry that the son of a shop owner had been allegedly beaten by a traffic police officer. So they went on to the streets at Hariqa, just south of Souq Al-Hamidiyah in Damascus. From the video, it seems as if the protest spread down to the western end of Medhat Pasha.

They chant “the Syrian people will not be humiliated”, interspersed with, “shame, shame” and “with our soul, with our blood, we sacrifice for you Bashar”. That’s a very Syrian way of saying they were furious at the police, not the president. Also, note there was no chanting of “the people want the fall of the regime” (the words used in Tunisia and Egypt, and now in Yemen and Bahrain).

At the start of the video, almost every person in is holding up a mobile phone. With mobile phone video cameras plus Twitter and blogs to distribute the footage, public servants face a degree of accountability that they have never faced before.

In a surreal moment, the Minister of the Interior arrives and asks the crowd why they are demonstrating. He has now promised an investigation.

Another Syrian blogger, a student in Aleppo who writes on Twitter as Seleucid, called the video of the protest “proof that the Syrians can do it as much as anybody, they just don’t want to.”

This video and commentary from the Syrian blogosphere comes just three days after a teenage blogger, brought into court chained and blindfolded, was sentenced to five years in jail by a court in Syria. As Reuters reported, the blogger, “Tal al-Molouhi, a high school student who has been under arrest since 2009 and is now 19, had written articles saying she yearned for a role in shaping the future of Syria and supporting the Palestinian cause. Lawyers said the judge gave no evidence or details as to why she had been charged.”

Letter From Herzliya, Neocon Woodstock
Matthew Duss
February 14, 2011

…As a result of the revolution in Egypt, a key theme that emerged at the conference was hostility to Arab democracy and the assumption that it would bring only chaos and danger for Israel—a mantra that also exposed a division between Israeli neoconservatives and some of their American comrades. “In the Arab world, there is no room for democracy,” Israeli Major General Amos Gilead told a nodding audience. “This is the truth. We prefer stability.” Former Israeli Ambassador to the US Zalman Shoval scoffed that George W. Bush’s freedom agenda’s “principle accomplishment seems to be the victory of Hamas in Gaza.” Boaz Ganor, the executive director of the IDC’s International Institute for Counter-Terrorism, warned, “When these people [Arabs] vote, they are voting for what Coca-Cola calls the real thing and that is fundamentalism.” Shmuel Bar, Director of Studies at the IDC’s Institute of Policy and Strategy, declared that the US had “become an agent of revolutionary change in the Middle East, at the expense of stability.”

In opening remarks to a late-addition panel on “Stability vs. Democracy,” progressive analyst Brian Katulis—one of a handful of non-conservatives invited to participate in the conference—declared the panel’s title false choice. Calling America’s “continuing addiction to dictators” part of “a cold war hangover,” Katulis stressed the regional trends driving events in Egypt—massive unemployment, millions of disillusioned youth—and suggested that Israel and the United States would be wise to anticipate them. “There’s a delusion that we can prevent these trends,” said Katulis. “And we’ll probably hear some of these delusions on this panel.”

As if to immediately make Katulis’s point for him, Martin Kramer of Israel’s conservative Shalem Center began by mocking the Obama administration’s repeated assertions that the regional “status quo is unsustainable,” suggesting that it should be taken as the administration’s motto. “In Israel, we are for the status quo,” Kramer said. “Not only do we believe the status quo is sustainable, we think it’s the job of the US to sustain it.”

Responding to Kramer’s remark afterward, Israeli analyst Meir Javedanfar said, “The first stage after a divorce or death is denial. This is followed by anger, then bargaining, depression and acceptance.” Kramer “is still in the denial stage. His statement shows that he still has not realized that the relationship with Egypt is over.”

But however much in denial, Kramer’s and Bar’s comments get at something real among conservative Israeli foreign policy elite: a sense that America, under both Bush and Obama, has failed to apply its power correctly in the region. This inability to achieve certain goals has consequently led to a perception of American decline (never mind that the refusal of allies like Netanyahu to honor American requests contributes to that perception). Many also voiced concerns that Obama’s treatment of Mubarak would cause other US client states to question America’s commitments.

“Obama is perceived, in a moment of truth, to have abandoned an ally,” said Brig. Gen. Michael Herzog, now a senior fellow at the Jewish People Policy Institute. “It’s unfair, but that’s the perception.” Herzog also doesn’t characterize Israeli views on democracy as harshly as some others. “Many, if not most, Israelis would lean at this point towards stability” rather than democracy, Herzog said, “not because they don’t want to see democracy around them—they do—but because they are highly skeptical whether the upheaval in Egypt will lead to real democracy in the foreseeable future.” And many Israelis are deeply concerned over potential negative developments in the meantime….

MONTAGNARD writes

Here is Noble Energy’s presentation to analysts and investors showing estimated reserves in the Cyprus A, Leviathan, Tamar and Dalit fields off of Israel and Lebanon, as projected by 3D seismic studies.

The area with good prospects (yellow) would fall on both sides of a line stretching west from Ras Naqura, which should be the line marking the territorial waters of Lebanon and Palestine (Israel). Noble has only drilled Tamar and Dalit (red).

Other studies have projected more hydrocarbon reserves on the north side of the line than to the south. Noble can drill directional and horizontal wells and tap the northern resources and claim that it is from the Tamar and Dalit wells.

You can read it here:

Latest Economic Headlines from Syria Report

Syrian American bilateral trade rose more than 50 percent in 2010 on the back of an increase in the global prices of food commodities and oil products.

Economy: CPI Rises 6.3 Percent in Syria as Food Prices Post 2-Digit Increase

Syria’s government bonds: Captive Markets
Feb 17th 2011 | DAMASCUS | from PRINT EDITION

TRYING to flog sovereign debt three days after the fall of a neighbouring president appears audacious. But the Syrian government’s offering of three billion Syrian pounds ($63.9m) of six-month bills and three-year bonds on February 14th—following a trial run in December, the first in decades—was less risky than it looked. Nine banks bought, and the auction was oversubscribed.

The sale reflects the relative stability of Syria’s government. But it has more to do with the scarce choices available to domestic banks, the only permitted bidders. Fourteen private banks, all of which are subsidiaries of Arab banks, have opened since Syria’s centrally planned economy started to creak open in 2000. But they suffer from limited currency convertibility and a lack of investment opportunities. Undeveloped credit scoring and a lack of transparency hamper their ability to issue retail loans. Surplus liquidity currently sits interest-free in Syria’s central bank.

That gives the government plenty of scope to drive down its borrowing costs. Private banks groan about yields below the rate of inflation: the six-month bills yielded 1% and the three-year bonds just over 2.7%. “The government is in effect asking private banks to lend it money at a subsidised rate,” moans one banker. “But we have no other option.”

More sales will follow: this year’s projected bond issuance is 30 billion Syrian pounds. Syria’s government has long been urged by the IMF to issue bonds to finance its budget deficit—funded until now by internal borrowing. The deficit is modest, predicted at 5.8% of GDP this year, thanks to a rise in the price of oil. But Syria’s oil reserves are diminishing, and plans to do away with subsidies may be diluted as the government keeps a wary eye on regional unrest. The country is also looking to invest billions of dollars in infrastructure projects.

What the government does not want, however, is to rely on foreign creditors for its borrowing. Syria is not planning to issue international bonds. A preoccupation with sovereignty and problems with transparency contribute to that, says Abdulkader Husrieh, a local financial analyst. And complain though they might, domestic banks can be counted upon to lap up the debt.

Syrian Wheat, Barley Production Drops on Crop Disease, Weather
By Lina Ibrahim and Nayla Razzouk – Feb 16, 2011

Syrian wheat, barley and cotton production fell in 2010 because of a crop disease and adverse weather, according to the Ministry of Agriculture.

Wheat output dropped 17 percent from the prior year to 3.08 million metric tons as the fungal disease known as yellow rust hit the crop, the ministry said in a statement. The government had estimated production at 4.5 million tons, it said.

The ministry asked farmers to plant wheat instead of more typical winter crops such as barley as a result of a drought affecting domestic production of the staple grain, Al-Baath newspaper reported last month.

Barley production declined 20 percent to 680,000 tons, the ministry said. Adverse weather meant that output amounted to 43 percent of the government’s 1.6 million-ton goal, it said.

Cotton production slid 28 percent to 472,500 tons, the ministry said, compared with the government’s 681,000-ton estimate.

DAMASCUS, Feb. 12, 2011 — Iraqi President Jalal Talabani said here on Saturday that his country is keen on building a strategic relationship with Syria, Syrian official SANA news agency reported.

The president also stressed Iraq’s readiness to develop ties with Syria at all levels, when meeting with his Syrian counterpart Bashar al-Assad on bilateral ties.

Meanwhile, the two leaders also talked about speeding up the implementation of the agreements signed during Iraqi Prime Minister Nuri al-Maliki’s visit to Syria in October, 2010, and the recent visit of Syrian Prime Minister Mohammad Naji Otri to Iraq In January, the report said.

Syria and Iraq resumed diplomatic relations in November, 2006 after 26 years of rupture.

Bilateral Trade Reaches USD 2.5 Billion as Turkish Interest in Syrian Market Expands
Bilateral trade between Syria and Turkey expanded 43 percent last year to reach a total of USD 2.5 billion, as Turkey’s presence across various sectors of the Syrian economy is increasing at a fast pace.

Strait Tms [Reg]: Help us build up infrastructure, Syria tells Malaysia
2011-02-14 By Rupa Damodaran

SYRIA, which has embarked on a comprehensive reform programme that offers the private sector a bigger role, wants Malaysian businesses to be a major player in its infrastructure development.

Deputy Prime Minister of Syria Abdullah Al-Dardari, who is in Kuala Lumpur, said the country’s public private partnership (PPP) also provides opportunities in transportation.

Speaking at a dialogue meeting with Malaysian businesses yesterday, Abdullah said Syria is eyeing investments totalling US$100 billion (RM304 billion) between 2011 and 2015, with US$63 billion (RM191.52 billion) from the private sector.

“We are keen in co-developing an industrial park with Malaysians in the east region, which provides the right location for investors to export to Iraq, Europe and the Gulf,” he said.

Investors in the park will enjoy 10 years’ tax breaks and 100 per cent equity in business ownership.

Malaysia is keen to be part of Syria’s development in areas covering roads, highways, bridges, water works, housing, telecommunications, solid waste management and power supply.

Both countries see a close cooperation, which will provide access to the Asean and Asian market as well as the growing Middle East.

Read more: Help us build up infrastructure, Syria tells Malaysia

Government Hikes Fuel Oil Price

In a bid to curb its growing subsidies bill, the Syrian Government has decided a steep increase in the price of fuel oil sold to manufacturing concerns starting April this year, according to the local press.

Iraqis to be Issued Syrian Visas on Borders Starting February 1

Iraqis will be given visas on the Syrian border again starting February 1, following a decision by the Syrian Government.

Syrian President Dismisses Aleppo Mayor

Maan Shibli, the head of the municipal council of Aleppo, the country’s second largest city, has been dismissed by the Syrian President.

26-01-2011
بقلم: نادر الشيخ الغنيمي
منشور في العدد (108) من مجلة الإقتصادي

Further Improvements Ahead As Syria Reverses 10 Years Of Oil Production Decline

Syria’s first oil output gain in a decade has been accompanied by a near-doubling of gas output. With the country due to award exploration blocks and complete its new refinery in the near future, 2011 is set to be the most positive year for the Syrian oil and gas industry since US sanctions were imposed in 2004.

مخالفة النمو على الورق للنمو الحقيقي، مفارقة غريبة: تراجع النمو في سورية بين 2005 و2009 بينما ارتفع الناتج المحلي90%

One friend writes of the firing of the Aleppo Mayor:

It was truly astonishing that he had not been touched so far. All his guys were. the president’s last trip may have sealed it. He met with both the acting Foreign Minister of Iran and Foreign Minister of Argentina in Aleppo, which is unusual. He seems to have spent more time in Aleppo this time. last time he personally met with Maan Ober for two hours. I think he really wanted to give him a chance. It seems that in the end it was too much even for him to handle. The rest of the guys were all just found guilty.

Mahmoud Ramadan was going to prison in Aleppo and they are awaiting judge’s final decision on how long he will be there for. I think that when these guys were heading to prison, Maan could not just carry on. This is a very significant development. I now believe that the fight against corruption has taken a more serious step forward. That Maan’s mom is an iconic woman in the party and is an Alawi did is a testimony to that. The president trusted Maan. he gave him incredible powers given that he is merely the head of the municipality (raees baladiye). at one stage he was more powerful than the governor himself, thanks to an open line to the palace. but, Maan like all others could not resist the temptation of making millions over millions. having inside information on the tanzeem meant that a piece of real estate can jump 8-10 fold if it becomes part of the tanzeem (the code changes from agricultural land to residential or commercial).

I would like to think that this is a turning point. Future city officials will think twice before engaging in such wide-scale corruption. But the damage is already done. Large parts of Aleppo’s residential areas have been damaged for good, thanks to terrible instances of granting commercial licenses in the middle of first class residential areas. lots of people have made hundreds of millions and this has made people very very angry. Simple corporate governance procedures were never followed by government officials. on Fridays, Maan would sit with a group of close friends at a coffee shop and discuss what was going on in the city. They were clearly privy to information and even if they were not, the “appearance” of him sitting with business people openly in a coffee shop is not kosher.  It is not good public policy to allow for this corruption to continue. It adds to the resentment of the masses towards the growing income gap.

Will President Bashar Assad hold his nerve?Syria’s economy
Jan 20th 2011 | DAMASCUS | from PRINT EDITION
The market must prevail

SYRIA has been edging away from a centrally planned socialist economy to a “social market” one. “The last five years have been about deconstructing the socialist ideology in favour of the market,” says an adviser to the government. “The next five will be about implementing it.” That means big cuts in subsidies and painful belt-tightening for Syria’s far-from-opulent masses. But will the government, seeing unrest simmer in the region in the wake of Tunisia’s upheaval, hold its nerve?

The proposed changes risk breaking the social contract long upheld by President Bashar Assad’s Baath party. The old deal meant low wages and secure jobs, while providing life’s basics, such as food and fuel, very cheaply. The new plan envisages raising cash by issuing government bonds and soliciting foreign investment to the tune—it is hoped—of $55 billion. As subsidies shrink, the price of fuel, electricity, water, transport and food should rise to market levels.

Fearing unrest, the government recently wobbled. It announced a 72% rise in heating-oil benefits for public workers and froze the price of electricity. But it sorely needs more cash. Oil revenue has dipped as the population, which has doubled to 22m since the mid-1980s, continues to soar. The government cannot put off its reforms for long.

The IMF has for years been urging Syria to do away with subsidies. In 2008 the government leapt ahead of its counterparts in the region, notably Egypt, by raising petrol prices. It removed subsidies for fertiliser but kept many items, including electricity and food, artificially cheap. Direct energy subsidies still cost Syria around 5% of GDP a year, according to the government and the IMF.

Farming, a mainstay of the economy, is also being liberalised. An agricultural fund has been set up to replace blanket subsidies. The list of key crops, which have their prices set by the government as the sole buyer, has been pared down from seven a decade ago to three today: cotton, sugar beet and wheat—deemed the “red-line” crop since it is the basis for bread, the people’s staple. But Syria’s land is hard-pressed to meet demand, let alone provide for a strategic reserve.

The steady introduction of market reforms since 2005 has yet to make a big difference. Opening up business has so far benefited only a few. Property has been bought for speculation. Food prices have risen faster than wages. Quite a few industrialists have seen their businesses founder in the face of cheaper goods from China and Turkey. Plans to ease the pain by creating a welfare safety net have fallen behind. People scrimp to pay for private education and health care because state provision, due to be overhauled in the next five years, is so bad. “The growing wealth gap is threatening the middle class,” says a local economist.

Elections due this year are sure to be tightly controlled. People are still too scared to protest. And events in Tunisia may make the government even warier about pushing ahead with its reforms.

from PRINT EDITION | Middle East & Africa

وحضرته بحسب صحيفة الوطن شخصيات بارزة من شام القابضة

Will Syria become the Singapore of the Middle East? – Ayoon Wa Azan:
Thu, 20 January 2011
Jihad el-Khazen

My friend Nemir Kirdar, the President of the investment bank Investcorp, believes that. He proposed the idea as we were with other friends and our families on vacation for the Western holiday season. While everyone would be singing, I and Nemir would sit in the corner of the house or the restaurant, discuss what we know about Singapore and Syria, and study the possibilities.

There are several requirements for a given country to become a tiger economy, which are present in both Syria and Singapore, while some fundamental differences between both countries exist.

Nemir Kirdar believes that Singapore, not the United States, is the best model to be followed by Arab countries, specifically Syria. He reminded me that the founding fathers sought to build democracy and freedom first in the United States, and then the economy, whereas a country like Singapore (and China) sought to build institutions and advance its economy first, and democracy second. Since I agree with Nemir that we are an undemocratic people, I went along with him in what regards the idea of building a prosperous economy that would enable the government to gain popular support, and at which point democracy becomes possible…..

President Bashar al-Assad began a policy of cautious economic openness, after decades of isolation, and a Western economic embargo for political (read Israeli) reasons. I believe that Syria is capable if it begins a policy of economic openness out of conviction, rather than out of considering that it is an unnecessary evil. There is a trio in place to push the economy forward, consisting of Deputy Prime Minister Abdullah Dardari, who comes from the world of media and finance, the Minister of Economic Affairs Lamia Asi, who is an expert in modern technology, and the Minister of Finance Mohammed Hussein, who is rather familiar with the pulse of the street…..

After a later session in London, I agreed with Nemir Kirdar that Dr. Bashar al-Assad can do in Syria what Lee Kuan Yew and his comrades did in Singapore. The nature of the regime in both countries is similar, and so is the influence wielded by the ruler. Meanwhile, the human and natural resources of Syria are much bigger. What Syria is in want of are institutions for an open, competitive and creative economy, while corruption needs to be eliminated, all under the supervision of an independent rule of law.