. The ‘MENA’ region and the International Monetary Fund | London Progressive Journal
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The ‘MENA’ region and the International Monetary Fund

Tue 23rd Apr 2013

The war in Syria approached its second year in March 2013. It has caused tens of thousands of civilian casualties. The infrastructural damage reflects the human dimension of loss in its destroyed hulks of buildings, block upon block, as was seen in Lebanon in the 1980s. The crisis has become regional with estimates of two million war refugees seeking safety in tent cities in other countries; another two million are displaced internally. It will take an end to the war to fully understand the dimensions of the destruction Syria has faced. In the present state of intense warfare, in its immediacy, it’s hard to look back into the past or foresee the future. To understand what is currently happening in Syria it’s also necessary to see what Syria was like before 2011. What was Syria like before, politically and economically? There, we find Western European and US leadership circles focusing on the MENA region (Middle East/North Africa). We find a series of sanctions placed on Syria by the US/EU nexus. We find the International Monetary Fund continuously demanding uniform economic policies, drawing those countries and regions into its financial system. We find the IMF waiting for its opportunity to move in.

Syria before 2011

Syria, like Iraq, Libya and Iran, had followed an economic model that was more state-centered. Syria established a central bank, rather than banks that are subsidiaries of large international consortiums. Syria maintained subsidization policies providing low cost food items and transportation petrol, heating and cooking fuel, along with low cost or free university education and health care, public transportation. Whatever other internal policies have been deemed repressive by certain segments of the population, it is clear that many economic policies, state-directed, had provided support in terms of basic and beyond-basic services to millions.

Though exporting less oil in comparison to other countries in the MENA region (e.g. Libya, Iraq and Iran), Syria’s oil industry has still accounted for anywhere between 16 to 25% of its budgetary income over the years, with Germany, France, Italy and the Netherlands among its customers. To finance infrastructural projects, Syria had borrowed monies from Eastern European countries and strategic-partner Russia, as well as Western Europe and from IMF-brokered loans and US aid for infrastructural projects in the hundreds of millions of dollars in the 1970s and 1980s when Syria was run by Bashar al-Asad’s father, Hafez al-Asad. But, in contrast to many other countries of the world ranked as ‘lower middle income countries’ by the IMF, Syria was able to avoid the deep sinkhole of debilitating and long term debt. The reason for this lies with Syria over the years receiving aid-grants from Libya, Saudi Arabia and Kuwait, which it did not have to pay back. The largest amount Syria owed was to the Soviet Union, now Russia, where 80% of its $13 billion debt was written off by Russia in 2005. [1]

In fact, Syria has managed to steadily reduce its ‘long term external debt’, according to a recent World Bank report, from a 1995 high of $16.995 billion to a turn-around drop in 2005 to $ 5.007 billion, mostly due to the Russian write off of 80% of Syria’s debt, to the 2010 figure of $ 4.171 billion. But what is most interesting is that in the category labeled ‘use of IMF credit’ in this same report, all that can be seen are a row of zeros from 1995 to 2010, meaning that Syria did not rely on the IMF for any loans for that fifteen year period. [2] Syria, like Iran and Libya, is not beholden to the IMF/World Bank for any loans, which would seem to be an unusual phenomenon in our present era of ‘globalization’.

US and Western Pressures on Syria and the MENA countries

In one form or another, Syria and other MENA countries such as Libya, Iraq and Iran have been subjected to intense political and military pressures which have been both covertly and overtly engineered by the US and certain allied countries. It was the Neocon planners’ focus on the Middle East prior to the 9/11 event in 2001 (e.g. the US-based ‘Energy Infrastructure Planning Group’ or EIPG), which led to the US invasions of Afghanistan and Iraq, followed by US sponsorship and arming of opposition forces in Libya and Syria, intense and widespread sanctions policies on Iran backed by the EU, the Gulf sheikdoms and Turkey, and continuous military actions and threats by the US and Israel.

There are of course always rationalizations behind the interventions and aggressive policies against countries; rationalizations however which are not equally applied to the US for its invasions, occupations, bombings, drone attacks, and atrocities against civilians. Legal proceedings against political figures in the US and Britain for ‘war crimes’ are briefly mentioned in the press and rarely repeated, unlike the battering ram of continuous news flashes and charges of crimes against the leadership of those countries targeted by sanctions, by the funding of opposition groups, by cyber warfare and assassinations of scientists. These rationalizations would include Saddam Hussein’s later undiscovered WMDs; Gaddafi and Lockerbie for Libya; the bombing attack on Hafiq Hariri in Lebanon in 2005; Iran and the unmaterialized bomb. In the case of Syria, the bombing attack on Hafiq Hariri would seem to run counter to any of its goals in the region, yet Syria remains for the West and its corporate-controlled media the unquestioned perpetrator. The US has aggressively applied and advocated continuous sanctions policies against Syria for its military and political presence in Lebanon up to 2005. Yet, it has been internationally agreed upon and recognized that Syria had played a stabilizing role in Lebanon when various armed factions, some aligned with Israel in its invasion of that country in 1982, had created absolute chaos and destruction, including the massacre of Palestinian men, women and children in the refugee camps of Sabra and Shatilla by the Phalangists. It was the presence of the Syrian armed forces that helped to stabilize the country after 15 years of war, beginning in 1975 and ending in 1990. [3]

But these rationalizations cover up the actual goal of internationally-based institutions and elites for certain desired economic outcomes. Economic pressures have been applied to Syria for some time, intersecting with the other pressures applied to this country. Two months before the US invasion of Iraq in March 2003, the US continued its pressure on Syria when Congress passed in January the ‘Syria Accountability and Lebanese Sovereignty Restoration Act’, condemning Syria’s political and military presence in Lebanon. The US led the way in 2005 in targeting Syria’s nationalized bank, the Commercial Bank of Syria; by specifically placing this bank under sanctions, which was added onto the US Patriot Act. The US charged that the bank was involved in ‘money laundering’; a charge usually associated with gangster-like financial activity and that could just as easily be applied to banks in the Americas needing to be investigated, which would of course include US banks, within an atmosphere of immense profits being created by the narcotics industry using front companies or personalities to open accounts. But in the case of Syria, the money laundering charge was levied against the Syrian government for accounts that were tied to regional and well known political players Hamas and Hezbollah, both branded as ‘terrorist’ organizations by the US, but which are in opposition to US and Israeli actions and policies in the region. The charge, then, can be clearly seen to be politically motivated.


With the beginning of the collapse of the Soviet Union in the late 1980s, Russian support for Syria declined. At the beginning of the 1990s, Syria and the West found common ground when Syria joined the US-led coalition in the first Gulf War against Iraq, where previously Syria had seen Iraq as the aggressor with expansionist ambitions in the Iran-Iraq War of the 1980s. Beginning with Syria joining the coalition against Iraq in 1991, there was a cautious reapproachment with the United States, starting with enhanced trade relations.

Later, Bashar al-Asad after assuming power following the death of his father, Hafez al-Asad, had promised in July 2000 to implement economic reforms. There would be a ‘liberalizing’ of the economy from a previously more state-controlled system: the opening up of Syrian markets to foreign investment; the licensing of foreign banks to operate within Syria, though restricted to a maximum 49% and not majority control of any banking venture; and other reforms. In 2006, Syria had set up a ‘Capital Market Authority’ as a regulatory framework for a securities market; all meant to create a more investor-friendly atmosphere. The European Union had previously proposed an ‘association agreement’ with Syria [4] , or a more formal trade-type agreement, but first Syria had to follow certain reform steps by ‘liberalizing trade procedures’, which includes reducing tariffs on foreign goods in order to attract Foreign Direct Investment (FDI). Syria had even worked on integrating its ‘anti-money laundering policies’ to align with those of the MENA Financial Action Task Force, originally initiated by the G7 countries and the European Commission.

So, while Syria put its economic house in order by lessening its external debt between 2005 and 2010, as well as implementing financial liberalization policies always in demand by the IMF, the country would face US/EU sanctions regardless. US/EU sanctions would be systematically applied to Syria which would disrupt what the IMF is fond of calling ‘macroeconomic stability’: it would negatively affect its balance of payments figures by increasing its budget deficit; it would place barriers against its commercial trade options previously and largely determined by its oil business with Europe. The series of sanctions would affect Syria’s currency exchange rates and reserves and lead to currency devaluation. Syria would then face rising inflation and rising unemployment in the key oil and agricultural sectors, so that it has become clear, according to the Arab Center for Research and Policy Studies, that the sanctions were “…aimed at stifling the Syrian economy within a period estimated in months, not years, leading to the collapse of the balance of its former macroeconomic framework.” [5] Then, internal war came in March 2011, where the opposition forces were quickly backed by Britain and France and the US, pushing for regime change as they had done in Libya.


When we look at the IMF-labeled ‘MENA’ region (Middle East/North Africa), which includes the US geostrategic targets of Libya, Iraq, Iran, Syria, and Yemen, we find that this is the region least integrated into the IMF/World Bank debt regime. According to the same 2012 World Bank report on the ‘External Debt of Developing Countries’, we find that ‘international capital flows’, which would include Foreign Direct Investment monies into developing countries reached $1.1 trillion in 2010, a 68% increase in investment monies just from 2009. But the ‘internal debt stock of developing countries’ had also steadily risen to $4.076 trillion dollars. [6] The contrast between the two figures means that loans of one sort or another had to be taken in order to continue financing investment in these countries, with a ratio of approximately 4 times the debt to incoming investment monies. In a 2011 report by the The United Nations Development Program (UNDP), there is concern over the ‘volatility’ of Foreign Direct Investment where investments appear and then dry up in boom and bust cycles. In this context, an over-reliance on FDI is seen negatively: “More worrying is the fact that there appears to be a growing trend for developing countries to rely more on foreign capital relative to domestic capital for investment, and this trend appears more pronounced in those countries and regions that have attracted growing inflows of foreign investments.” [7] So, the opening of markets in previously less developed regions of the world, through investments, is leading to further indebtedness of those regions and countries to outside lenders.

The 2012 World Bank report mentioned earlier breaks the world down into its component regions into ‘China’ ; the ‘BRIC countries’ (Brazil, Russia, India and China); ‘East Asia and Pacific’; ‘Latin America and Caribbean’; ‘Europe and Central Asia’; ‘South Asia and SubSaharan Africa’. All of these regions in the World Bank/IMF report, with listed statistical information provided, have shown increases in economic activity in the form of investments and loans leading to external debt. There is only one region; that is, the ‘MENA’ region, which is markedly different in the sense that an actual decrease is shown: “ The Middle East and North Africa was the only developing region where net inflows declined in 2010 with increased bond issuance not enough to offset a halving of net debt inflows from official creditors….” Table 4 from the report shows the Middle East North Africa region had the smallest numbers in terms of ‘net capital flows’ or ‘inflows’; numbers smaller than even Sub-Saharan Africa. [8] Of all the regions of the world categorized and mentioned in the World Bank 2012 report, it was the MENA region that was the least integrated into external investment and debt structures, whether to individual developed countries or international lending institutions like the IMF—and by a very wide margin.

The IMF and its Role

The International Monetary Fund can be viewed as less ‘international’ when one knows that the largest number of voting rights within the IMF belongs to the US, the greatest debtor-nation in the world. It should come as no surprise then that IMF geostrategic goals intersect with those of the US leadership circles, where the economic and political/military dimensions of control intersect. Contrary to what many university academics and theorists of all stripes and persuasions would like us to believe, ‘globalization’ in the economic sense is not a confused, haphazard phenomenon. It’s the result of a continual process of the concentration of capital through history, from early twentieth century stock companies, to monopoly capitalism to advanced monopoly capitalism in the form of multinational corporations. Large economic entities lead to large regulating bodies, whether NATO, the IMF, WTO, the Bank of International Settlements.

The US, losing its former prominence as the leading capitalist power, acts in desperation through its military to secure a foothold for itself in the competition for access to newly created markets; those formerly more localized, more state-controlled. For the time being, Western Europe is falling in line and participating in US interventions into countries that have not developed along similar capitalist paths. The IMF calls some of these countries ‘command economies’, when they meld capitalism with socialist-oriented subsidy programs; low cost university tuitions and public transportation. Disagreements between the leaders of Europe and the US may occur over relatively minor issues, but overall, there is general agreement that those nations not fully integrated into the ‘globalized’ model of capitalism should be, and the sooner the better.

The MENA countries are seen as especially important because of the oil resources in the region, with several OPEC members (i.e. Iraq, Iran and Libya) under pressures, from past crises to present ones, to produce as much oil as possible. The IMF waits in the wings, offering its assistance even when loan agreements are not an issue, as with Libya which is free of debt, but which still seeks out IMF help in putting its financial house in order, by becoming part of a ‘comprehensive technical assistance program’. The IMF advises ‘subsidy reform’ and structural reforms, and “…particularly reforms to the operation of state-owned institutions.” [9] In the case of Iraq in 2004, the Paris Club of creditors, or leading governments of the G8, cancelled 80% of Iraq’s $39 billion debt owed to them, but under the stipulation that Iraq’s economic policy be subjugated to the IMF/World Bank. [10] A year later, in December 2005, fuel subsidies were curtailed in due order by the Iraqi government. Similarly, Iran continues its relationship with the IMF as a member, and while under a severe series of US-led sanctions policies, was forced to implement fuel gas, natural gas and food subsidy cuts. The IMF saw this as an encouraging sign and urged the other states to follow Iran’s example. [11]

But subsidization policies, where the state offers resource assistance and services to its population, cannot be tolerated and are anathema to the World Bank and IMF. These institutions are the promoters of finance capitalism and demand drastic changes to the economies of countries they loan money to. They demand that subsidization programs be curtailed or eliminated altogether, with cuts in workers’ wages demanded in order to discipline the workforce, in order to prepare them for the arrival of foreign investors and the multi-national corporations. The US military is playing the role of enforcer in support of the process of finance capitalism seeking regions to dominate, while those very resources and services mentioned above are unattainable by tens of millions of impoverished US citizens; many in the inner cities. All the while, finance capitalism and its representative institutions like the IMF, continue to seek out opportunities.

In preparation for the economic and military assault, the intelligence agencies of the US and its key allies search for fissures in the social and political bedrock of societies. Chaos is created socially and economically, leading to intervention and the integration of those societies into the IMF-promoted new economic order. However, a new trend may be developing where countries are refusing further loan packages from the IMF. An alternative path may again surface with the promotion of regional economic cooperation, as has existed before in the MENA region and in other regions of the world. Finance capitalism seeks to disintegrate and isolate states, but maybe regional state-to-state cooperation will re-emerge. Maybe internal struggles between different factions of society can be peacefully negotiated to avoid war. Only one thing is certain: The IMF, like a machine, serves the needs of the speculators and oil multinationals who seek out profits from any situation round the world. It will sink regions and countries into its debt regime to serve that purpose.

[1] en.wikipedia.org/wiki/Economy_of_Syria; ‘Foreign Debt’

[2] “Global Development Finance: External Debt of Developing Countries”, ‘Country Tables’, pp.280-281, The World Bank, Washington D.C. 2012

[3] “Taif Agreement”; en.widipedia.org/wiki/Taif_Agreement

[4] Council of the European Union, 9921/09; Brussels, August 17, 2009/ register.consilium.europa.en/pdf/en/09/st09/st09921.en09.pdf

[5] “Effects of sanctions on Syria’s macroeconomy in 2012”, p.7 Arab Center for Research & Policy Studies (Doha Institute); Doha, Qatar

[6] Ibid. ‘Overview’ and ‘Table 1’

[7] “Towards Human Resilience: Sustaining MDG Progress in an Age of Economic Uncertainty”; “Chapter 3: Private Capital Flows: Foreign Direct Investment & Portfolio”, p. 105; United Nations Development Programme, Bureau for Development Policy, New York, September 2011.

[8] “Global Development Finance: External Debt of Developing Countries”, ‘Overview’, p.3 and ‘Table 4: Net Capital Flows to Developing Regions 2005- 2010’, p.5 The World Bank, Washington D.C. 2012

[9] www.Imf.org/external/np/sec/pr/2013/pr1369.htm

[11] “IMF urges world states to follow Iran in implementing subsidy reforms”, Tehran Times, April 22, 2012

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