Attack On Syria: Implications On The Global Economy

The year 2010 was earmarked by a major uprising in the Arab world, henceforth, referred as the Arab Spring. Since its inception, it was least expected that the revolution would reach such proportions. The movement not only toppled the existing government but also created a major havoc across the global economic forum. One of the countries still reeling under its pressure is Syria where the government is constantly battling a mass protest not only internal but from the international community as well. Once, the ruling Asad regime was quite content within itself and had managed to crush the rebels that comprised of clans from Hezbollah and other extremist groups. Unfortunately, the tactics employed by Asad has been widely condemned all over the world at present. Even close allies like Russia and China have shunned the methods opted by the ruling party. In retaliation to the chemical warfare and other human rights violation in Syria, foreign powers namely the US and its allies have started serving the rebel forces in order to curb the atrocities of Asad. The recent attacks have already made a negative implication on the global economic system.

The Implications
The Middle East controls around 56% of the global oil reserves and though Syria’s share is minimal, the highly tensed environment could hamper production in these regions. The oil market is already under severe pressure with disruptions occurring in Libya, Sudan, Nigeria and North Sea. There are chances that a full-fledged military strike in Syria could raise oil prices to above $125. Now, this could be an extreme deterrent for other countries across the globe. The significance of oil in sustaining GDP levels is unquestionable and major economies across the globe have already witnessed a steep decline in their output (India and China have witnessed a drop in GDP to 4.4% and 7.5%, respectively). As crude oil becomes more expensive, the effort to ensure higher GDP growth is jeopardized.

For any country getting involved in the Arab Spring, the economic burden of the war is not an inexplicable concept. The war in Iraq cost the US around $1 trillion but there was an underlying hidden pot of gold in this endeavor. Unfortunately, the defense expenditure in Syria may not be recoverable for America and its allies. It, therefore, does not come as a sudden surprise that foreign forces have been tentative in exercising their military might over Syria.

For countries like Russia and China, a neutral stance has been the order of the day. This, too, has an economic angle attached to it. China is the leading exporter of manufactured goods to Syria while Russia supplies most of the military equipment used by the Syrian Army. It is estimated that the Russian military contracts with Syria have already exceeded a mammoth amount of $4 billion. It is, therefore, not difficult to understand the reasons why these countries of the UN Security Council have played a watching game of late. Any foreign intervention poses a threat to the favourable trade agreements that these countries enjoy with Syria.

One of the worst-affected regions that have been influenced by the Syrian war are the countries located adjacent to it. There have been reports of hundreds and thousands of people fleeing to Turkey, Lebanon, Jordan and Iraq. Conflicts in Syria have spread to neighboring countries and, there, has been a huge drop in foreign investments in these areas. Let us consider the case of Lebanon. Foreign Direct Investments in the country have dropped abruptly to 2% from 10% after the Syrian war and the attacks by the US would only deteriorate it further. Trade among these countries has also been hampered as channels have been shut down on account of burgeoning immigration.

Syria and many of its allies in the region have always followed a look-East policy after the US imposed sanctions on them much before the Arab Spring. The trade policies of the country have also been fraught with uncertainty as Asad looks to curb it with an iron fist, household appliances and even food items have been imposed with a ban recently. A ban on import of cars that took place added to the dismay of the local population. Once foreign powers impose their dominance in the region, trade barriers are expected to be lifted and Syria along with other nations of the region would become a prime target for business conglomerates in the Western world. The possibility of a trade union in the region cannot be ruled out once the situation improves but that would only materialize if the Arab nations seek mutual trust and benefits from such a set up. This is one of the positive results that may emanate from years of turmoil in the region. Creation of such a group would make countries accountable and with the economic repercussions at stake, it could be a more potent union than the Arab League.

The Possible Takeaway
The international community has a lot to learn from the Syrian episode. The world order is so enmeshed that the fallout of the actions of one country cannot be avoided completely. A country like Syria with very little say in the economic order across the globe has sent ripples across the oil market and created panic among investors across the globe. Foreign investors are pulling out their money from Syria and other countries surrounding it, owing to the instability in the region. Equity markets across the globe felt the pressure of the tense moments in the regions. Countries like the US, the UK and Israel may be supporting limited strikes against Syria but there is no definite outcome in terms of the expenditure that the interference may incur. Allies like China and Russia remain skeptical of such a move as they want to sustain their trade relations with Syria. With so much at stake it is necessary to curb the situation before the things get out of control.

We are living at a time where economic harmony is given the utmost importance and it is high time that the onus of securing a stable world order is not limited to the US and its allies. Russia, China, and countries in Europe should assume greater responsibility and probably initiate a dialogue so that coercion is circumvented. A pen is always mightier than a sword but unless we write our history we may easily paint it with slashes of bloodshed.

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