CAPE TOWN, South Africa – Formal and social media feeds erupted with reports of the United States of America’s intention to take action upon Syria late last week. While many have been eyeing the situation in Syria and the Assad regime for some time, rumors of suspected chemical weapon use has brought this country to the forefront of global news.
I was relieved that the world was finally interested in this suffering country, but the prospect of war concerned me.Nevertheless, U.S. Secretary of State John Kerry on August 30, and U.S. President Barack Obama earlier this week made it clear that no intention for a war likened to those in Iraq and Afghanistan exists.
While the immediate reaction is to consider repercussions for the U.S.A. and Syria, I am concerned for the global repercussions, especially for developing countries and emerging markets, such as my own country, South Africa. I spoke to a Cape Town financial analyst, my good friend Charl Bruwer, about the potential economic effects of action on Syria. He explained that although markets would dip before a definitive decision was taken, they usually rise again when a decision is made with certainty, such as was witnessed when the decision was made to invade Iraq. This is because the country requires the production of war materials, and the conscription of soldiers, which relates to economic turnover.
Bruwer explained that this may not happen in this case, because of Obama’s statement that he does not intend an extensive war with “feet on the ground,” but that it will be a concerted effort, along with U.S. allies, to bring about a regime change.
“I think that the market movement will not be as strong to the upside as in the previous times where military action was taken,” Bruwer said.
The next thing that will likely be affected – and has already – is the cost of crude oil, said Bruwer. The situation in Syria brings about disruption in the Middle Eastern bloc, which is a security concern for ships moving in the region, thus affecting the supply of oil.
Finally, said Bruwer, emerging economies may weaken. The U.S. dollar is seen as a safe-haven currency, and in times of crisis many citizens of developing nations will move their money out of their country and into dollars. This outflow of money then causes weakening of those markets.
Gold and silver, which are major commodities in African nations such as South Africa and Ghana, are likely to experience a drop in price, which naturally is also expected to affect the resource sectors of these countries.
The price of gold has already declined in the past several days.
South Africa has encountered problems in terms of currency weakness and inflation over the past several months, and Bruwer said a movement of capital out of the country may result in further inflationary pressures.
It is clear from the above that there is more to the Syria situation than a simple question of war or no war. One must consider the pressures that action or no action would exert globally, even on countries presumably uninvolved.
However, the question is whether it is possible to split humane decisions from economically-based decisions.
According to Bruwer, the U.S. is likely to make a decision based on immediate humanitarian concerns due to the long-term repercussions of failing to act.
It’s important, he said, for the U.S. to remain prominent as a strong global force, but also that events in Syria are directly oppositional to the American philosophy of freedom and liberation, giving rise to the difficult decision ahead.
“It is always possible to devalue … or to strengthen your currency or affect interest
rates,” he said, “but it is not possible to raise the dead.”
rates,” he said, “but it is not possible to raise the dead.”
Mariechen Puchert is an Associate Editor in South Africa for Youth Journalism International.
