By Mariechen Puchert
Associate Editor
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.
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 finallyinterested 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 considerrepercussions 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.”
always possible to devalue … or to strengthen your currency or affect interest
rates,” he said, “but it is not possible to raise the dead.”
