Regional Elections Update
ASSAD'S IMPENDING VICTORY AND THE IMPLICATIONS FOR HUMANITARIAN WORK IN SYRIA
Government forces are a few steps away from recapturing most of Syria, as they prepare to launch a large-scale offensive on the final rebel stronghold. The extension of government control and resultant reduced fighting is likely to increase the level of NGO engagement in these regions. Here, S-RM examines the persistent security threats faced by NGOs operating in Syria.
The Syrian conflict has entered its eighth year as government and armed opposition groups continue to battle for control of the country. President Bashar Al Assad appears to be on the brink of victory, as soldiers and militias loyal to him have recaptured the strategic cities of Homs, Aleppo and not least, Daraa – the birthplace of the 2011 uprising. Al Assad’s forces are now preparing to launch a large-scale offensive on Idlib Governorate, the final rebel stronghold. The US and EU’s diplomatic efforts on Syria have largely aimed at coercing the regime into a political settlement, by imposing sanctions on President Assad’s regime and hindering his ability to attract foreign investment (see Information Box). However, no long-term political solution has been forthcoming, and the conflict has since become the largest active humanitarian crisis in the world; almost half a million people have been killed, and half the country’s population has been displaced. Few international aid agencies have been allowed to deliver relief supplies or work within the country. Those that have face various security threats. Now, as the extension of government control over previously opposition-held territories creates the impression of an improving security environment, and a degree of improving stability, the level of NGO engagement is expected to increase in these regions. Yet, while calm has largely returned to recaptured areas, latent security threats still exist across Syria, and are likely to hinder operations for returning NGOs.
Certainly, humanitarian organisations, NGOs and civil society who are proximate to frontlines, such as in rebel-held Idlib and western Aleppo, and Kurdish-held Hasakah, Qamishi and eastern Deir ez Zour, will be exposed to the highest threats. Tactics in the Syrian war mostly constitute the use of direct and indirect fire, such as airstrikes, barrel bombs, artillery and mortars, all fairly non-precision weapons which present the threat of collateral damage to NGO operations and personnel. The bulk of security incidents affecting NGOs to date have been damage to infrastructure, such as hospitals, ambulances, and other assets. In some cases, direct targeting has also been suspected. These incidents are likely to continue despite expectations regarding a degree of improved security under Assad’s military victories.
Unexploded ordnance (UXO) and improvised explosive devices (IEDs) present a major impediment to humanitarian operations, and will be a significant hindrance to NGOs’ ability to respond to conflict-affected regions, particularly in areas that underwent shelling and airstrikes. In recaptured areas, such as parts of eastern Ghouta, Rif Damascus and Deraa, UXO’s are scattered in residential and rural areas. While no organisation has estimated how many of the deaths in Syria are due to explosives, according to the United Nations Mine Action Service surveys, some 6.3 million Syrians are living in areas affected by explosive incidents. Additionally, armed groups have capitalised on the ease of sourcing IED component parts and their rudimentary assembly, deploying them with great effect in asymmetric warfare. While the majority of IED attacks typically target pro-government forces, there is a residual threat of collateral damage or misidentification to NGO staff, particularly in frontline areas.
In addition to the ongoing conflict, the Islamic State (IS) group continues to pose a high threat of kidnapping and terrorism throughout Syria; the threat is however elevated in recently Kurdish-captured territories, such as Raqqa, Al Hasaka and Ain Issa, and Deir Ez Zour, and along the eastern border with Iraq. IS’s capabilities have decreased considerably since losing the majority of territories it once controlled, particularly its stronghold in Raqqa in October 2017. However, IS sleeper cells are still operating in north-eastern Syria. According to US military sources, these cells are preparing to launch a guerrilla war campaign in recently liberated areas, similar to IS in Iraq. To this end, NGO operations are likely to offer attractive targets for future attacks.
Yet, it is not only in contested areas where NGO operations face security challenges. In Syrian government-controlled regions, such as Damascus, Aleppo, Hama, Homs, and Deraa, NGO staff face an elevated threat of extortion. Syrian government forces are made up from a coalition of military and paramilitary forces (armed militias), which include Iranian and Hezbollah-backed groups, that often act with autonomy and impunity. There have been increased reports over the past year of these armed militias extorting funds from people and businesses operating in these regions. Furthermore, considering the local economies in these areas have been significantly affected by armed conflict, NGOs should be wary of armed criminal groups, who have a financial motivation to engage in kidnap for ransom and violent crimes. Additionally, intrusion into humanitarian offices by armed personnel or the detainment of NGO staff, has been a regular occurrence since the onset of the civil war. In most cases, these incidents are non-violent and detained staff are released. This threat extends to opposition-held areas as well, and is further complicated by the lack of clarity with regards to the different attitudes of the various conflict actors towards NGO presence.
Despite Assad’s apparent success, the security situation is likely to remain volatile over the next 6-12 months. President Assad is expected to consolidate his control over most of Syria, which could renew tensions between the Assad regime and Kurdish groups in north-eastern governorates. Meanwhile, IS and other Islamist militant groups will maintain a presence, capability and intent to continue to stage opportunistic and complex attacks. Lastly, this volatility combined with violent criminality, including kidnappings, will continue to pose a threat across the country. In this regard, despite renewed will to step up humanitarian efforts in Syria, NGOs wishing to operate in the country will need to exercise maximum security precautions.
“Despite Assad’s apparent success, the security situation is likely to remain volatile over the next 6-12 months.”
US/EU sanctions on Syrian regime
US sanctions on Syria predate the current crisis. However, these were recently extended after President Assad’s crackdown on protests in 2011, and again as the country moved into civil war. Lately, President Donald Trump’s administration has sought to restrict the Assad regime’s access to oil and gas revenues as part of an economic strategy aimed at reaching a political settlement, and growing disagreement between Syria and its allies, Russia, Iran and China. The sanctions target the assets of the Syrian state and hundreds of companies and individuals, including government figures, military and security personnel and others accused of involvement in making or using chemical weapons. Furthermore, EU sanctions, including asset freezes, travel bans, trade restrictions, financial sanctions and an arms embargo, remain in place.
Although some firms have managed to do business in Syria, the wide scope of the sanctions and the long reach of US sanctions enforcement mean companies risk inadvertent breaches, together with reputational damage. Nonetheless, US and EU sanctions include exceptions for humanitarian supplies, and for items needed by UN missions in Syria. Despite the humanitarian exemptions, sanctions have negatively impacted certain humanitarian efforts, including the procurement of some medicines and medical equipment. Although NGOs are unlikely to face reputational damage for operating in Syria, commercial players should be more hesitant in re-engaging in the country. We can assist in gaining an in-depth knowledge of current global sanctions regimes, assisting in efforts to make companies’ operations compliant in the ever-changing sanctions landscape.
Postponed Aramco IPO hampers Mohammed Bin Salman's efforts to transform the kingdom
Vision 2030 still represents an unprecedented opportunity for economic and social change in the kingdom, but the continual delays to one of the crown prince’s key initiatives undermines the sustainability of such radical reform.
On 22 August, following a direct intervention by King Salman himself, the Saudi government shelved plans to publicly float 5 percent of Saudi Aramco. The IPO was intended to raise as much as USD 100 billion in capital for the Public Investment Fund (‘PIF’), a Saudi sovereign wealth fund that Mohammed bin Salman (‘MbS’) has earmarked for a central role in Vision 2030. As part of Vision 2030, the initiative launched by MbS in 2016 to modernise the Saudi economy, the PIF aims to invest USD 400 billion into non-oil assets at home and overseas by 2020.
Instead of the Aramco IPO, the Saudi government has proposed to raise USD 70 billion for the PIF through a more convoluted strategy whereby Saudi Aramco is to purchase SABIC, a giant petrochemicals business currently owned by the PIF. Although viewed as little more than creative state accounting by some observers, the plan will nonetheless go some way towards plugging the hole left by the postponed IPO.
But the transfer of funds to the PIF does not obscure the fact that the postponed listing represents a stumbling block to Vision 2030. The message seems to be that the Saudi government is not yet ready to expose Saudi Aramco – a vital means of wealth transfer amongst the ruling class – to the transparency and governance standards required of a publicly-listed company.
Furthermore, simply using the PIF to fund billions of dollars’ worth of state projects is not tantamount to structural economic reforms that would make the kingdom a more attractive and vibrant business environment. The World Bank’s ease of doing business rankings for 2017 indicate that Saudi Arabia offers one of the least conducive environments for business in the Arabian Gulf; only Yemen ranks lower.
“MbS has not shown any signs of becoming the liberalising force some suggested he would be.”
This problem does seem to have been recognised by MbS and the other architects of Saudi’s economic renewal. The IMF recently praised the Saudi government for its efforts at structural reforms, such as the introduction of a sales tax and the passing of a bankruptcy law, which came into effect in August. The government is also planning to privatise state businesses worth an estimated USD 9 to 11 billion in the next three years.
Whether Vision 2030 can ultimately transform the Saudi economy will hinge upon whether the government can continue to push through similar reforms.
Particular attention should be paid to improving the banking system. Banking services in Saudi Arabia are exclusive to state firms and businesses belonging to prominent families with close ties to the ruling Al Saud family. Small and medium-sized enterprises reportedly receive just 2 percent of bank loans.
Property law represents another area requiring significant efforts at reform. Saudi Arabia’s land registries are opaque and vulnerable to manipulation. Members of the Al Saud ruling family have been known to expropriate land indiscriminately for their own use. Today, start-ups find it difficult to obtain real estate in cities where significant quantities of commercially-zoned land belonging to political and merchant elites is left idle. Companies without any property assets to use as collateral face further obstacles in receiving financial banking.
Such reforms are desperately needed to win back foreign investment. Saudi Arabia had net capital outflows totalling USD 80 billion in 2017 and JP Morgan, an American bank, estimates that this number will fall to USD 65 billion in 2018. The Organisation for Economic Co-operation and Development published a report in 2016 stating that Saudi Arabia has the most restrictive environment for foreign investors out of the G20 countries. Again, there are signs the Saudi authorities are responding. For example, the government is set to allow foreign investors to wholly own businesses in some industries without having to cede equity to a local partner.
MbS has also not shown any signs of becoming the liberalising force some suggested he would be, potentially deterring some investors. Although MbS has overseen the opening of public cinemas and an end to the ban on female drivers, these measures have been offset by a harsh crackdown on internal dissent. The crown prince’s anti-corruption purge last year was touted as a move to clean up business in the kingdom but it has not really had this effect; many investors are increasingly concerned about the arbitrary expropriations from private businesspersons.
It is also apparent that MbS’ boldness and ambition have not paid off in the foreign policy arena. He has led an unpopular and costly military campaign in Yemen and initiated a trade embargo with Qatar which shows no signs of being resolved.
These trends all suggest that MbS’ grand strategy to change his country may be faltering. King Salman’s instructions to delay the Aramco IPO follow a similar intervention earlier this year to check his son’s power. In July, King Salman stated that his country would not endorse any plans to recognise Jerusalem as the capital of Israel, despite earlier indications to the contrary by MbS.
In spite of this, opportunities abound in the kingdom for global financial institutions; American banks JP Morgan and Morgan Stanley will miss out on potential fees worth around USD 200 million on the Aramco IPO but they are already reported to be working on the SABIC deal. And in the last year, US bank Citigroup has set up an office for its capital markets business in Saudi Arabia, as has boutique investment bank Evercore in anticipation of a wave of privatisations.
There is widespread acceptance within Saudi Arabia that the country must change in order to survive and thrive in a post-oil global economy. Although MbS’ brash and radical approach to reform appears to have faltered slightly, it is ultimately a question of when, not if, the country will open up fully to foreign investment.