Identifier
Created
Classification
Origin
06DAMASCUS4610
2006-09-21 15:08:00
CONFIDENTIAL
Embassy Damascus
Cable title:  

CIRCUMSTANCE SAVES ASAD AGAIN

Tags:  ECON PGOV PREL SY 
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OO RUEHBC RUEHDE RUEHKUK
DE RUEHDM #4610 2641508
ZNY CCCCC ZZH
O 211508Z SEP 06
FM AMEMBASSY DAMASCUS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1685
INFO RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY
RUEHTV/AMEMBASSY TEL AVIV PRIORITY 1307
RHEHNSC/NSC WASHDC PRIORITY
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHAAA/WHITE HOUSE WASHDC PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0168
C O N F I D E N T I A L DAMASCUS 004610 

SIPDIS

SIPDIS

NEA/ELA

E.O. 12958: DECL: 09/21/2016
TAGS: ECON PGOV PREL SY
SUBJECT: CIRCUMSTANCE SAVES ASAD AGAIN

REF: A. DAMASCUS 1926


B. DAMASCUS 425

Classified By: CDA Michael H. Corbin for reasons 1.5 b/d

C O N F I D E N T I A L DAMASCUS 004610

SIPDIS

SIPDIS

NEA/ELA

E.O. 12958: DECL: 09/21/2016
TAGS: ECON PGOV PREL SY
SUBJECT: CIRCUMSTANCE SAVES ASAD AGAIN

REF: A. DAMASCUS 1926


B. DAMASCUS 425

Classified By: CDA Michael H. Corbin for reasons 1.5 b/d


1. (C) Summary. Despite the isolation resulting from the
SARG,s increasingly confrontational stance vis-a-vis the
international community and its immediate neighbors, the
country,s economy appears to once again be saved by
circumstance from SARG incompetence and malfeasance. As a
result of the crisis in Lebanon, for the second summer in a
row, Syria enjoyed a larger than usual influx of rich Gulf
tourists who normally vacation in Lebanon. Also, as a result
of the conflict, all of Damascus,s best hotels and tourist
facilities were packed for most of the summer with wealthy
Lebanese who usually avoid Syria because of its anemic
service sector. As the tourist season has slowed in the last
few weeks and upward pressure has built on the Syrian Pound
(SYP),Syrian construction workers are reportedly flowing
back into Lebanon, generating much needed hard currency which
slackens the pressure on the SARG,s hard currency reserves.
Balancing these positives, the much hyped Gulf investments of
last year have been slow to materialize and are now showing
the first signs of possible withdrawal, in part, in reaction
to President Asad,s strident August 15 speech, parts of
which were perceived to be directed at Saudi Arabia, and the
SARG,s expanding collaboration with Iran. End summary.


2. (U) Though Syria,s economy remains vulnerable to external
shocks (ref A),Syria seems to be the largest economic winner
following last month,s conflict in Lebanon. Though
estimates of Lebanese refugees last month reached as high as
200,000 in Syria, the cost of hosting them was born
overwhelmingly by international donors and the Syrian private
sector. At the same time, Syria benefited from large numbers
of upper class Lebanese who arrived with hard currency.
While here, the Lebanese consumption patterns were much more
conspicuous than their Syrian counterparts and therefore
positively impacted sales rates in Damascus and on the coast.



3. (U) Added to this, contacts in Syria,s tourist sector
have commented to us on the increase in both the number and
the spending of Gulf tourists this summer. Syria normally
attracts the low-end of the Gulf tourist market, but with the
conflict in Lebanon occurring in the middle of the season,
more tourists from the higher-end diverted to Syria.


4. (U) The Gulf tourist season has largely ended now, but
with reconstruction efforts beginning in Lebanon, we have
been receiving increasing reports of long queues at the
border as Syrian workers head back to Lebanon. These workers
have historically been an important stabilizing force for the
beleagured Syrian Pound (SYP) as they seek to exchange their
salaries for SYP to repatriate to families in Syria.


5. (C) All trends are not positive however. The much hyped
FDI from the Gulf, which helped to restore shaken confidence
in the Syrian economy last year following the SYP,s dramatic
devaluation (ref B),is showing signs of retreat. For weeks
following President Asad,s strident August 15 speech, in
which he alluded to other Arab leaders as being &half-men,8
Damascus has been full of rumors of Saudis deciding to take
their money elsewhere. Though this does not seem to jibe
with groups like Bin Laden, which continues to pursue
expanding its business presence here, consultants and others
who make a living from Gulf investors have reported a clear
&cooling8 of interest that began in July with the
hostilities in Lebanon.


6. (C) Comment. With its glacial pace of reform and its
high-level corruption, the SARG continues to be its own worst
economic enemy. Nevertheless, the conflict in Lebanon shows
how Syria can enjoy relative economic stability despite the
SARG. Looking forward, a potential withdrawal of Gulf FDI
would be harmful, but most Syrians are doubtful that will
happen, as they believe the Gulf investors have a more
long-term investment strategy in Syria. Still, the Syrian
economy remains weak and vulnerable to external shocks, such
as any significant drop in international oil prices or the
loss of new Gulf investment.
CORBIN