Syria and Iran, both targeted by US sanctions, proclaim that their "independent" economies will suffer less than others from global financial turmoil. But economists in the region say neither Tehran nor Damascus will be immune from the credit crunch spreading from the United States, or from any ensuing world economic downturn.
Some argue that the cost of sanctions greatly outweighs any unforeseen benefits Syria or Iran might gain by being denied access-and direct exposure-to US financial markets.
The United States has long enforced unilateral measures against Iran, and has toughened them while seeking to tighten UN sanctions over Tehran's nuclear programme. It imposed sanctions on Syria in 2004, accusing it of sponsoring terrorism. "Sanctions are very damaging to their economies," said Louis Hobeika, an economics professor at Lebanon's Notre Dame University, saying they further isolated both countries from the potential gains of globalisation, as well as its occasional shocks.
It's true that Syrian investors have experienced no wild swings on the local stock market-they don't have one.
And the head of Tehran's bourse told Reuters its lack of links with the outside world was a "strong point" when asked why Iranian shares had so far escaped the panic in markets elsewere.
Iran's all-share index has gained some 20 percent this year-although inflation has run even faster. Total capitalisation climbed to $70 billion in August from $40 billion in January 2007, said Ali Rahmani, the stock exchange's managing director.
OIL PRICE THREAT TO IRAN:
President Mahmoud Ahmadinejad said Iran would survive better than others because its economy had grown more independent since the 1979 Islamic revolution that toppled the US-backed Shah.
He said falling oil prices, which have tumbled partly due to the weakening US economy, the world's biggest consumer, would have an impact, but would not derail Iran's economic plans.
Yet Iran, the world's fourth-largest crude exporter, relies heavily on oil revenue to fund its budget and is showing concern at volatility that has seen US crude plunge to around $93 a barrel on Friday, more than $50 below its $147 record in July.
"$100 or below is not suitable for oil producers or oil consumers," Oil Minister Gholamhossein Nozari said on Saturday.
An Iranian economist, who declined to be named, said no country could emerge unscathed from global financial chaos. "This credit crunch is everywhere in the world. The Iranian banks are also exposed to refinancing lines of credit," he said.
Iranian banks are not invested directly in the US market, but are vulnerable indirectly via business in Europe and Asia, he added. "They are subject to the systemic risk. It is multiplied in the case of Iran because of the sanctions."
Traders say the cost of financing trade, such as via letters of credit, has climbed as Western banks in particular have increasingly reduced or even severed links to Iran and perceived risks have risen as a result of US and UN sanctions. Syrian officials, echoing a line they took during world market turmoil in 1998, say Syria's curbs on foreign investment and capital flows have sheltered it from the latest crisis.
Finance Minister Mohammad Hussein, making a virtue of Syria's primitive financial system, strong state role and cautious economic reform, says the upheaval will have limited impact on a country with few links to global financial markets.
"The Syrian stock market is not born yet. Banks and financial institutions have just started," he noted recently. Syria's main problem is its financial sector, handicapped less by US sanctions than by its own inefficiency and lack of liquidity, argued Hobeika, the Lebanese economist.
The World Bank ranks Syria last of 178 nations in access to credit, although in a report last month it also said the Syrian business environment had improved slightly in the past year.
Foreign direct investment rose 47 percent to $885 million last year, mainly due to Gulf capital going into real estate in Syria, as well as neighbouring Lebanon and Jordan.
But such inflows might now be put on hold while Gulf countries grapple with the impact of the world-wide crisis. State finances are under heavy strain, with a budget deficit that widened to 10 percent of GDP last year. Government moves to curb subsidies were offset by rising world fuel and commodity prices that have fuelled inflation. The trade deficit trebled to $2.1 billion last year, the highest level in two decades.
US sanctions clearly do not quarantine Syria or Iran from the global economy and they have inflicted a degree of economic pain, without inducing major policy shifts in either country. Not surprisingly, America's foes in the Middle East have tried to score points over its financial discomfiture, with Iran's ex-President Akbar Hashemi Rafsanjani even linking it to President George W. Bush's wars in Afghanistan and Iraq.
"If the economic crisis in America is becoming a serious threat for the West and the industrial world, one of the underlying reasons is the high costs which the Americans have been forced to spend in the region in the past seven or eight years," Rafsanjani declared in a recent Friday prayer sermon.
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