Assad regime pockets millions from aid by distorting Syrian currency rate

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The Syrian government makes international aid agencies use a distorted exchange rate which allowed it to divert half of every international aid dollar spent in Syria in 2020, researchers from the Center for Strategic and International Studies (CSIS), the Operations & Policy Center think-tank and the Center for Operational Analysis and Research found.

Researchers analysed hundreds of UN contracts to procure goods and services for people living in government-held areas of Syria, where more than 90% of the population are living in poverty since the Syrian pound, or lira, crashed last year.

Hit by new US sanctions and the collapse of the banking system in neighbouring Lebanon, cash-strapped Damascus is relying increasingly on unorthodox methods for raising funds – money either pocketed by officials in Damascus for their own personal wealth, or put towards the 10-year-old war effort.

The Central Bank of Syria, which is sanctioned by the UK, US and EU, in effect made US$60m (£44m) in 2020 by pocketing US$0.51 of every aid dollar sent to Syria, making UN contracts one of the biggest money-making avenues for President Bashar al-Assad and his government.

While the central bank’s official exchange rate has improved this year to SYP2,500 to the US dollar, the black market rate is SYP3,500. Legitimate traders and consumers prefer to use the black market rate, as they receive more Syrian pounds for foreign currency.

Since the UN is forced by the Syrian government to use the official rate, half of foreign aid money exchanged into Syrian pounds in 2020, when the rates were hugely divergent, was lost after being exchanged at the lower, official rate.

“This shows an incredibly systematic way of diverting aid before it even has a chance to be implemented or used on the ground,” said Natasha Hall, of the CSIS, a Washington-based think-tank that helped compile the research.

“If the goal of sanctions overall is to deprive the regime of the resources to commit acts of violence against civilians and the goal of humanitarian aid is to reach people in need then we have this instance … where aid is at complete contradiction to those two stated goals.”

After 10 years of civil war in Syria, international donor fatigue, already seen in decreasing aid pledges, has turned to more overt political re-engagement with Assad’s regime.

Without the US playing a strong role in finding a political solution in Syria, which Washington still publicly advocates, Arab nations – including the US-allied Jordan, the United Arab Emirates, Saudi Arabia and Egypt – have recently restarted diplomatic talks, reopened borders for trade and signalled renewing economic cooperation.

The US allows Damascus to play a major role in funnelling Egyptian gas to Lebanon to power the country’s fuel-depleted power plants. Interpol allowed Syria to rejoin its network even as the fate of dissidents captured throughout the war remains unknown.

Examining 779 publicly available procurements for 2019 and 2020, listed on the UN Global Marketplace database, researchers found that up to US$100m was lost in the exchange rate.

If salaries, cash-aid programmes and other funding streams not made public were included, the bank could be making hundreds of millions of dollars, according to researchers.

The funding has been channelled through various UN agencies – the Office for the Coordination of Humanitarian Affairs (OCHA); the World Food Programme; the UN Development Programme; the UNHCR; the Food and Agriculture Organisation; and Unicef.

The UN’s financial tracking system told the researchers it did not monitor the amount of money exchanged into Syrian pounds as “tracking such information was beyond the scope of their mission”.

More than 350,000 people have died in Syria over the past decade, and governments have donated on average $2.5bn a year to the UN’s Syria programmes since 2014.

In 2016, the UN was accused of aiding the regime by diverting billions of dollars in aid to government-held regions while leaving besieged areas without food and medicine.

Human Rights Watch (HRW) has warned that UN agencies and governments risked complicity in human rights violations in Syria if they did not ensure transparency and effective oversight. (Source: The Guardian)

 

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