By Dafna Linzer
This past summer,
as the Syrian economy began to unravel and the military pressed hard
against an armed rebellion, a Syrian government plane ferried what
flight records describe as more than 200 tons of "bank notes" from
Moscow.
The records of overflight requests
were obtained by ProPublica. The flights occurred during a period of
escalating violence in a conflict that has left tens of thousands of
people dead since fighting broke out in March 2011.
The regime of Bashar al-Assad is
increasingly in need of cash to stay afloat and continue financing the
military's efforts to crush the uprising. U.S. and European sanctions,
including a ban on minting Syrian currency, have damaged the country's
economy. As a result, Syria lost access to an Austrian bank that had
printed its bank notes.
"Having currency that you can put
into circulation is certainly something that is important in terms of
running an economy and more so in an economy that is become more
cash-based as things deteriorate," said Daniel Glaser, Assistant
Secretary of the Treasury for Terrorist Financing and Financial Crimes.
"It is certainly something the Syrian government wants to do, to pay
soldiers or pay anybody anything."
According to the flight records,
which are in English and Farsi, eight round-trip flights between
Damascus International Airport and Moscow's Vnukovo Airport each carried
30 tons of bank notes back to Syria.
Syrian and Russian officials did
not respond to ProPublica's questions about the authenticity and
accuracy of the flight records. It is not possible to know whether the
logs accurately described the cargo or what else might have been on
board the flights. Nor do the logs specify the type of currency.
But ProPublica confirmed nearly
all of the flights took place through international plane-tracking
services, photos by aviation enthusiasts, and air traffic control
recordings.
Each time the manifest listed "Bank Notes"
as its cargo, the plane traveled a circuitous route. Instead of flying
directly over Turkish airspace, as civilian planes have, the Ilyushin-76
cargo plane, operated by the Syrian Air Force, avoided Turkey and flew
over Iraq, Iran, and Azerbaijan.
The flight path between Syria and Russia described in the manifests.
Tensions have been rising
between Syria and Turkey since the spring. Last month, Turkey forced
down a Syrian passenger plane traveling from Moscow. Turkey suspected
the flight of carrying military cargo but officials have not said what,
if anything, was confiscated.
If the flight manifests are
accurate, a total of 240 tons of bank notes moved from Moscow to
Damascus over a 10-week period beginning July 9th and ending on
September 15th.
U.S. officials interviewed said
evidence of monetary assistance, like military cooperation, point to a
pattern of Russian support for Assad that extends from concrete aid to
protecting Syria from U.N. sanctions.
In September, 2011, six months
into the violence, the European Union imposed sanctions that prohibited
its members from minting or supplying new Syrian coinage or banknotes.
In a statement,
the EU said the sanctions aimed "to obstruct those who are leading the
crackdown in Syria and to restrict the funding being used to perpetrate
violence against the Syrian people." At the time, Syria's currency was
being minted by Oesterreichische Banknoten- und Sicherheitsdruck GmbH, a
subsidiary of Austria's Central Bank.
President Obama has issued five
Executive Orders that prevent members of the Assad regime from entering
the United States and accessing the U.S. financial system.
"Increasingly, it is more
difficult to finance the war machine and the cost of the war is becoming
more expensive for the Assad regime," said one U.S. official who spoke
on the condition of anonymity. "Targeted sanctions on those leading the
violence are working and start to bite into their pocket books."
Russia appears to be helping Syria blunt the impact of the sanctions.
This past June, Reuters reported
that Russia had begun printing new Syrian pounds and that an initial
shipment of bank notes had already arrived. The report was denied by
the Syrian Central Bank, which claimed the only new money in circulation
were bills that had replaced damaged or worn bank notes. Such a swap,
the bank contended, would have no effect on the economy.
On August 3rd, the official Syrian news agency SANA, reporting
from a news conference in Moscow with Syrian and Russian economic
officials, quoted Syrian officials acknowledging that Russia is printing
money. Qadr Jamil, Syria's deputy prime minister for Economic Affairs,
was quoted by SANA as calling the deal with Russia a "triumph," over
sanctions.
Syrian Finance Minister Mohammad
al-Jleilati said that Russia was providing both replacement notes and
additional currency to, as SANA put it, "reflect the country's changing
GDP."
Al-Jleilati said the money would
have no effect on inflation. Printing new notes beyond simply replacing
old ones could undermine Syria's already battered currency.
At the time of the meeting, at
least 30 tons of currency had already been delivered, according to the
flight records, and another 210 tons would be delivered in subsequent
flights.
In its regional economic outlook
released earlier this month, the International Monetary Fund noted that
Syria's currency has lost 44 percent of its value since March 2011,
trading for about 70 pounds to the dollar compared with about 47 pounds
when the conflict began.
Ibrahim Saif, a political
economist based in Jordan and a resident scholar at the Carnegie Middle
East Center said 30 tons of bank notes twice a week is a significant
amount for a country like Syria.
"I truly believe it's not only
that they're exchanging old money for new notes. They are printing money
because they need new notes," Saif said.
"Most of the government revenue
that comes from taxes, in terms of other services, it's almost now dried
up," noted Saif. Yet, "they continue to pay salaries. They have not
shown any signs of weakness in fulfilling their domestic obligations.
The only way they can do this is to get some sort of cash in the
market."
Before the unrest broke out,
Syria had about $17 billion in foreign currency reserves. Saif said he
and other economists in the region estimate they now have about $6-8
billion in reserves, dwindling about $500 million a month for salaries
and supplies to keep the government running.
In Moscow, the Syrian finance
minister had said that his country required additional foreign currency
reserves, which Russia may provide in the form of loans.
"It's possible the Syrians are
acquiring foreign currency reserves, either Euros or US dollars, which
they would need to conduct any serious commerce," said Juan Zarate, who
served as Assistant Secretary of the Treasury for Terrorist Financing
and Financial Crimes during the Bush administration.
Zarate noted that other
countries, when faced with economic sanctions, have leaned on allies for
foreign currency reserves. China supplied North Korea with such funds
in the past and Venezuela agreed to sell reserves to Iran.
Syria's currency is still traded
on open markets, but there is limited on-the-ground information about
the economy, including inflation.
Officials at the IMF "have not
been able to get direct information about Syria for at least a year,"
Masood Ahmed, director of the group's Middle East and Central Asia
department, told reporters at a conference in Tokyo last month.
Glaser, at Treasury, declined to
put a figure on Syria's current reserves but said the Syrian economy is
suffering in part from a lack of tourism and a ban on oil sales, both of
which provided Damascus with foreign currency. "There is significant
inflation in the country. It can be caused by adding new currency or not
having foreign reserves to prop up the existing currency."
This article was written by Dafna Linzer, Michael Grabell, and Jeff Larson. Additional reporting by Quinn Norton.
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