Syrian state TV reported this week that Iran has offered a $3.6 billion line of credit to the Assad regime to purchase Iranian oil. The line of credit is a lifeline to a country that is strapped for cash and energy.
When the Syrian regime lost control of the country’s oil fields earlier this year to opposition forces, the government lost important access to fuel and hard currency. Once a small oil exporter, Syria now faces widespread fuel shortages and electricity cuts. Syria’s oil revenues, while small on a global scale, made up a large fraction of the government’s budget.
While the Syrian government no longer releases official inflation data, Steve Hanke, an economics professor at Johns Hopkins University and the director of the troubled currencies project at the Cato Institute, estimates that Syrian inflation rates have hit 200%. He says, “What that means is that prices in Syria have tripled in the last year.”
Hanke gathers information from Syria’s black market of money changers to track the value of the Syrian pound. He says by his measures, the pound has lost 66.2% of its value in just the last year. But still Syria’s currency crisis has not yet reached hyperinflation levels. Countries experiencing hyperinflation reach inflation rates of above 50% a month. So far Syrian inflation is just a little over 8% a month.
Syria has been able to avoid hyperinflation, thanks to lines of credit from its allies, like Iran. Majid Rafizadeh, a Syrian-Iranian scholar and analyst, says, “Iran has historically invested a considerable amount of money, resources, skilled forces and labor in Syria.” But that relationship has changed in the last two years. Before the Syrian uprising began, the Iranian-Syrian economic relationship was mutual. Now, Rafizadeh says, “Iran has become the major giver, or donor, and Syria has become the major receiver of these economic ties.”
Before the outbreak of popular uprisings, the two countries signed a $10 billion natural gas agreement that included plans for building a pipeline from Iran across Syria into Lebanon. In 2009, the first Iranian cars assembled in Syria rolled off an assembly line at a plant just north of Damascus.
“This was a political and psychological message,” says Samir Aita, a prominent Syrian economist and member of the Syrian Democratic Forum. Aita believes the Iranian aid is more pageantry than a serious economic investment. He argues that while there were a handful of Iranian investments in Syria before the uprising, the basis of the Iranian-Syrian relationship has primarily always been a military and strategic one.
Rafizadeh also sees the Iranian-Syrian relationship changing. He says the crisis has only brought the two countries closer in a meaningful way. “As both countries become increasingly isolated from the international community,” he says, “their ties to each other become exceedingly more important.”