Syria currency nosedives after Russian invasion of Ukraine

Syria’s currency tumbled in the last ten days following Russia’s invasion of Ukraine, dropping by over 7 percent relative to the US dollar.

The Syrian lira’s unofficial exchange rate dropped from 3,650 to nearly 4,000 lira to the dollar over the past week, the highest drop in its value since September 2021.

Analysts have connected the depreciation of the currency to Russia’s decision to invade Ukraine at the end of February.

Earlier last week, Syrian politicians had already sounded the alarm about the potential fallout of the war in Ukraine. Syria’s Council of Ministers cut public spending and pledged to ration imported basic goods like wheat, of which Russia is the main supplier.

Russia is Syria’s political patron in the region and has served as its representative to the international community for the last decade, after Syrian President Bashar al-Assad’s violent repression of protests led to western condemnation.

While Russia does not provide much financial aid to the beleaguered Syrian economy, without its political sponsorship, the Syrian regime would be almost completely isolated from the world stage.

Russia has consistently echoed Syria’s demands at the UN to have wide-ranging Western sanctions off of Syria’s economy and political class.

The unprecedented financial sanctions placed on Russia, as well as the cut-off of its banks from the SWIFT financial messaging system, could also have implications for the Syrian economy.

Officials of Syria’s central bank have reportedly raised concerns about a further foreign currency crunch and said that there is a heavy demand for foreign currency in Syria as importers clamor to meet rising prices.

Besides the appreciation of key goods that Syria imports from Russia, Moscow has been a “financial safe haven” for Syrian elites, according to the economic publication Syria Report.

While ties between the two countries’ financial institutions are limited, key figures in the Syrian economy have used Moscow to get around sanctions on Syria over the years.

Syria’s currency has severely depreciated since the beginning of the Syrian revolution in 2011, dropping from about 54 lira to the dollar to its current rate of nearly 4,000 lira to the dollar.

The result has been a severe decline in purchasing power for the Syrian people, with the cost of the average basket of goods more than double the monthly minimum wage. According to the latest World Food Program estimate, 12.4 million Syrians – a little over 60 percent of the population – is food insecure.