Amid Israeli War: What Links Assad’s Economy to Lebanon?

Following the imposition of Western sanctions on Bashar al-Assad's regime for its suppression of the Syrian revolution in 2011, Lebanon became a “free market” for the regime and its affiliates, allowing for economic and commercial maneuvering to fill financial gaps.

The Syrian economy faced a second blow when “Israel” launched an air and ground assault on Lebanon, claiming it aimed to dismantle Hezbollah.

Trade Disruption

The first severe shock to Syria’s economy came in 2019 with Lebanon’s financial collapse, which led to a liquidity crisis and forced the head of the Syrian regime Bashar al-Assad to admit that around $60 billion belonging to his allies was stuck in Lebanese banks. 

The Israeli Occupation's recent escalation in Lebanon, beginning on September 23, 2024, dealt a second devastating blow, halting the flow of goods that had long served as a critical economic artery for Damascus. This interruption has compounded shortages in Syrian markets, sending prices for essential goods soaring in government-held areas.

A report from the Middle East Institute on October 30, 2024, highlighted the impact of the Israeli campaign in southern Lebanon on Syria’s informal trade routes, which have served as a lifeline for the Syrian regime since 2011. 

With vital supply lines at risk, Syrian businesses have faced skyrocketing prices, triggering a black-market surge in gasoline costs in Damascus—from 12,000 Syrian pounds per liter (approximately $0.81) to 30,000 pounds (around $2.50) in a matter of days. This inflation has rippled through the economy, raising transportation costs for produce like fruits and vegetables by over 15-25%, burdening Syrian families already struggling under economic strain.

The crisis has been further exacerbated by a massive influx of refugees fleeing Israeli strikes in Lebanon. Lebanon’s Minister of the Displaced, Issam Charafeddine, confirmed in early November 2024 that 162,000 Lebanese citizens had sought refuge in Syria, joining 195,000 returning Syrian refugees from Lebanon out of the 1.5 million who initially fled Assad’s regime. This surge in arrivals has strained Syria’s scarce resources, escalating costs for essential items and deepening economic hardship for families.

Beyond consumer goods, the disruption has impacted Syria’s industrial sector, with raw materials—mostly sourced from Lebanon—becoming increasingly scarce and costly. These shortages have raised production costs for Syrian manufacturers, further unsettling an economy where nearly 70% of the population relies on humanitarian aid.

The roots of Syria’s economic isolation extend back to the sanctions imposed by Western nations in response to Assad’s brutal crackdown on protests beginning in 2011. 

The European Union has frozen the assets of top Syrian officials and prohibited trade with targeted companies, while the U.S. implemented strict sanctions against imports and the sale of Syrian oil as early as August 2011. 

But the Caesar Syria Civilian Protection Act, enacted in June 2020, has had perhaps the most devastating effect, targeting individuals and entities linked to the regime with an unprecedented level of scrutiny and pressure.

Direct Impacts

Syrian industries, already weakened by sanctions, now face a critical threat as prices rise, local purchasing power dwindles, and access to global markets remains limited. Syrian exports have also been hit hard. 

Before recent escalations, 30-40 trucks transported goods from Syria to Lebanon daily, including clothing, cotton, plastics, and food. Israeli Occupation’s targeting of border crossings has nearly halted this trade.

On October 4, 2024, an Israeli airstrike struck the Masnaa border crossing, severing a major route between Lebanon and Syria. While the Lebanese crisis in 2019 exposed Syria’s economic vulnerability, the disruption of trade with Beirut—a key market and vital source of foreign currency—deals a severe blow to Damascus. 

Lebanon has long been Syria’s critical outlet for foreign trade and essential imports, due to strong ties with Lebanese authorities.

Lebanon’s official and unofficial crossings, including 136 illicit routes managed by entrenched smuggling networks, have helped Syria circumvent international sanctions. 

The Lebanese state has been unable to curb this customs evasion due to the entrenched and expanding smuggling mafias that have operated for over 25 years.

According to a 2021 report from the Lebanese Forces Party, fuel smuggling to Syria costs Lebanon around $2 billion annually, with protection from Hezbollah—an ally of the Assad regime.

Anticipated Damage

Amid Assad’s growing concerns over Lebanon—long considered a critical “safe economic outlet”—Syrian officials have urged action to brace for potential fallout. Abdel Razzaq Habza, Secretary-General of the Consumer Protection Association, emphasized the importance of expanding strategic reserves, warning that Lebanon’s political and economic instability could soon impact Syria’s fragile economy. 

In early October, Habza told Tishreen newspaper that the full consequences “will only reveal themselves over time, depending on the inflow or halting of new arrivals from Lebanon.”

Meanwhile, Mohammed al-Hallaq of the Damascus Chamber of Commerce urged Syria’s government to accelerate import facilitation to prevent goods from stalling in ports, stating, “Periods of crisis require swift government action, including financial support, to ensure goods move through customs quickly.” Al-Hallaq emphasized that food-sector traders are not hoarding supplies but instead face burdensome operational costs, compounded by slow capital turnover and escalating expenses.

Sanctioned from the global financial system, the Syrian Regime has relied heavily on Lebanese banking connections to sustain trade amid an economy stretched thin by war. Syrian journalist Ali Ibrahim recently highlighted to Al-Estiklal the nearly complete halt in cross-border trade between Syrian and Lebanese business owners, as fears of Israeli targeting grow. 

“Prices have climbed higher, and internal payments in Lebanon have risen for Syrian importers since the conflict’s escalation,” Ibrahim noted, adding that Lebanon’s banking sector has served as Syria’s financial gateway since the 1950s.

Without direct dollar access, Syrians abroad have turned to Lebanese banks to manage transactions and skirt sanctions, preserving vital trade channels. Lebanese banks have issued letters of credit and facilitated payments crucial for Syrian traders. 

“Lebanon is where Syrian businessmen deposit their savings,” Ibrahim said. “It’s through Lebanese banks that Syria sustains imports, using intermediary firms to dodge sanctions.” 

But the strain on Lebanon threatens Syria’s access to these lifelines, as many critical goods flow from Lebanon via these channels.

In a candid statement, Syria’s Trade Minister, Mohammad Samer al-Khalil, admitted in 2021 that sanctions evasion had become “a Syrian profession,” advising companies fearing repercussions to adopt false names. Last year, former Prime Minister of the Syrian regime Hussein Arnous reported that Syria’s trade deficit had reached €1.641 billion by August alone—a stark reminder of the country’s growing economic isolation.