US Attack On Syria: Assessing The Regional Fallout

BMI View: A US-led coalition is likely to strike Syria over the coming days or weeks. Our core view sees the West only a modest campaign, with limited consequences for regional stability. That said, we cannot exclude that a more protracted US involvement could ensue. Under such scenario, risks of a civil war in Lebanon and Iraq could increase significantly, while Israel and Jordan would be increasingly vulnerable to retaliation. Although Iran's options to counteract an attack are limited, relations with the West could deteriorate further.

A military attack by the US and its allies on Syria over the coming days or weeks is highly likely, owing to Damascus' alleged responsibility for a major chemical attack in which hundreds of people were reported to have been killed on 21 August. Although UN inspectors on the ground have yet to confirm culpability for the attack, while the Syrian government has denied responsibility, the US appears certain that Syrian President Bashar al-Assad's regime carried out the strikes. US President Barack Obama has long maintained that the use of chemical weapons by the regime would constitute a 'red line' that could trigger American intervention, and Washington appears to have little choice but to respond militarily. Such scenario is likely to play out even as the UK, a key US ally, will not be able to take part in the operation, as the British parliament failed on August 29 to pass a motion that would have authorised military action against Syria. Indeed, the US Navy is re-positioning several vessels, including four cruise missile-carrying destroyers in the eastern Mediterranean and probably a missile-firing submarine. If more firepower is needed, two US aircraft carriers could launch air strikes, while land bases in Turkey and Cyprus might also be used. French air power could also play a part.

The US has been emphasising that any military strike against Syria would be limited in scope. This cautious rhetoric appears designed to reassure American voters, and allied Middle Eastern governments, that Washington does not intend to get drawn into another multi-month air campaign as seen in Libya in 2011 and Yugoslavia in 1999, let alone a multi-year ground war as seen in Afghanistan (2001- present) and Iraq (2003-2011). From our point of view, the US's planned 'limited' strike is the safest course of action for Washington. Our core view sees a US-led coalition - supported by Turkey and other regional actors - undertaking a modest attack of precision missile and airstrikes against Syrian military targets, primarily intended to demonstrate the Western powers' willingness and ability to act if 'red lines' are crossed, as well as deter the future use of chemical munitions by Damascus. In our view, a small scale attack would not fundamentally change the course of the civil war in Syria, nor significantly hinder the regime's military capabilities. In addition, we believe that the safest Syrian response would be to avoid military retaliation, which could prompt more forceful attacks from the US and potentially degrade Syria's military capabilities further. Under our core scenario, the regional fall out would be relatively limited. The influx of Syrian refugees in neighbouring countries could increase, putting significant pressure on Lebanon and Jordan in particular. Tourism in the region will be hit hard, and diplomatic relations between the West and Iran and Russia, two key allies of Syria, would likely worsen.

Political Risk Could Further Increase
MENA - Short-term and Long-term Political Risk Rating, Out of 100

US Attack On Syria: Assessing The Regional Fallout

BMI View: A US-led coalition is likely to strike Syria over the coming days or weeks. Our core view sees the West only a modest campaign, with limited consequences for regional stability. That said, we cannot exclude that a more protracted US involvement could ensue. Under such scenario, risks of a civil war in Lebanon and Iraq could increase significantly, while Israel and Jordan would be increasingly vulnerable to retaliation. Although Iran's options to counteract an attack are limited, relations with the West could deteriorate further.

A military attack by the US and its allies on Syria over the coming days or weeks is highly likely, owing to Damascus' alleged responsibility for a major chemical attack in which hundreds of people were reported to have been killed on 21 August. Although UN inspectors on the ground have yet to confirm culpability for the attack, while the Syrian government has denied responsibility, the US appears certain that Syrian President Bashar al-Assad's regime carried out the strikes. US President Barack Obama has long maintained that the use of chemical weapons by the regime would constitute a 'red line' that could trigger American intervention, and Washington appears to have little choice but to respond militarily. Such scenario is likely to play out even as the UK, a key US ally, will not be able to take part in the operation, as the British parliament failed on August 29 to pass a motion that would have authorised military action against Syria. Indeed, the US Navy is re-positioning several vessels, including four cruise missile-carrying destroyers in the eastern Mediterranean and probably a missile-firing submarine. If more firepower is needed, two US aircraft carriers could launch air strikes, while land bases in Turkey and Cyprus might also be used. French air power could also play a part.

The US has been emphasising that any military strike against Syria would be limited in scope. This cautious rhetoric appears designed to reassure American voters, and allied Middle Eastern governments, that Washington does not intend to get drawn into another multi-month air campaign as seen in Libya in 2011 and Yugoslavia in 1999, let alone a multi-year ground war as seen in Afghanistan (2001- present) and Iraq (2003-2011). From our point of view, the US's planned 'limited' strike is the safest course of action for Washington. Our core view sees a US-led coalition - supported by Turkey and other regional actors - undertaking a modest attack of precision missile and airstrikes against Syrian military targets, primarily intended to demonstrate the Western powers' willingness and ability to act if 'red lines' are crossed, as well as deter the future use of chemical munitions by Damascus. In our view, a small scale attack would not fundamentally change the course of the civil war in Syria, nor significantly hinder the regime's military capabilities. In addition, we believe that the safest Syrian response would be to avoid military retaliation, which could prompt more forceful attacks from the US and potentially degrade Syria's military capabilities further. Under our core scenario, the regional fall out would be relatively limited. The influx of Syrian refugees in neighbouring countries could increase, putting significant pressure on Lebanon and Jordan in particular. Tourism in the region will be hit hard, and diplomatic relations between the West and Iran and Russia, two key allies of Syria, would likely worsen.

Political Risk Could Further Increase
MENA - Short-term and Long-term Political Risk Rating, Out of 100

We cannot however dismiss the possibility of different scenarios playing out in Syria. For one, instead of surgical strikes, Western powers could find themselves pursuing a broader military intervention. This could eventually take the form of a 'no-fly' zone, to prevent the Syrian government from using its air power to strike rebels on the ground and to re-supply isolated bases around the country. Such a tactic would probably require Syria's air defence system to be disabled, and forces would have to be available to shoot down Syrian military aircraft that took to the skies. Alternatively, the West could establish safe havens inside Syria - probably close to its borders with Turkey and Jordan - from which rebel forces could operate and within which refugees could be protected. Such safe havens might require the establishment of a limited air exclusion zone, and might need to be defended from the ground. Although the above appear unlikely at this stage, such scenarios would involve a much larger and more protracted US involvement in Syria.

Moreover, even under our core scenario whereby the US gears up for a 'limited' strike on Syria, there is a danger that Washington could inadvertently escalate the conflict beyond its control. Elements within the Syrian regime could carry out retaliatory attacks - possibly involving chemical weapons - against rebel-held areas within Syria. Syria or its allies Hizbullah or Iran could also retaliate against a US strike by attacking proximate targets in Turkey, Lebanon and Iraq, which would likely force the West to escalate its response and expand the scope of military action. Although an aggressive Syrian response in particular may seem irrational, and would be exceptionally risky for the Damascus regime, it is in our view not unthinkable.

If US military intervention results in a further intensification of the conflict, with the potential for a more lengthy involvement of the West, the regional fallout could be highly significant.

Lebanon And Jordan The Worst Affected
Middle East - Syrian Refugees by Country of Destination

Lebanon And Iraq: Fundamental Stability At Stake

Lebanon is arguably the country most at risk of experiencing a prolonged period of instability as a result of the civil war in neighbouring Syria, due to its diverse ethnic make-up and entrenched confessional political system, as well as the strong historical ties between the two countries. Tensions between Sunni and Shi'a communities in Lebanon have risen noticeably over the past few months. In the latest development, a pair of car bombs exploded near two mosques on August 23 in the northern Lebanese city of Tripoli, killing at least 42 people. Earlier, a car bomb which ripped through the southern Beirut stronghold of Lebanon's militant group Hizbullah killed at least 24 on August 16. Under a scenario whereby the conflict in Syria escalates further, risks that Lebanon would fall into a full-blown civil conflict would rise significantly. Importantly, Syria could seek to use Hizbullah to carry out attacks against US or Western interests, particularly in Jordan or Israel. While unlikely, such a step could prompt a severe Western reaction, which could drag Lebanon deeper into the regional confrontation.

The deteriorating situation is being exacerbated by the increasing number of refugees from Syria. According to the UN, over 714,000 Syrian refugees have fled to Lebanon since the onset of the civil war as of August 30. For a population of approximately 4.3mn, this is a very significant burden, The influx of refugees could increase dramatically if the Syrian civil war intensifies further. Apart from worsening the already hostile social tensions, such developments could further stretch the provision of government services and pose significant downside risks to the country's already uninspiring macroeconomic outlook ( see 'In A Soft Patch', July 19).

Attacks Spiking In 2013
Iraq - Civilian Casualties

Meanwhile, the level of political violence in Iraq has increased significantly over recent months. July was the deadliest month in more than five years, according to the UN mission in Baghdad. Bombings, the majority of which were reportedly carried out by hardline Sunni Islamist militant groups, killed 1,057 people during the month, 928 of whom were civilians and 129 members of the Iraqi security forces. The ongoing civil war in neighbouring Syria has been one of the main factors contributing to the deterioration in relations between Sunnis and Shi'as. According to the US State Department, Abu Bakr al-Baghdadi, the leader of Al Qaeda's Iraq affiliate Al-Qaeda in Iraq (AQI), and other senior members of the group, are operating from Syria. AQI is both coordinating the rebellion to al-Assad through affiliate groups such as the Islamic State of Iraq and the Levant, and orchestrating attacks in Baghdad and other cities.

A US intervention in Syria will likely trigger a significant uptick in terrorist activity in Iraq, as AQI seeks to take advantage of spiralling violence in the region to undermine the country's political stability further. Iraq's political system has overcome several critical junctures since the withdrawal of US troops in December 2011. However, risks that the country could descend into outright civil war over the coming years remain significant. Under a scenario whereby the conflict in Syria intensifies further, risks of a collapse of the Iraqi state could increase dramatically.

Jordan And Israel: Increased Vulnerability

Jordan has long adopted a cautious stance on the Syrian conflict, a reflection of its acute exposure to the regional unrest. The government was careful to say it would "not be used as a launching pad for attacks on Syria" on August 28, while King Abdullah stated that dialogue was the "only option" to end the conflict in a meeting with Pope Francis on August 29. The United States has steadily boosted its support to the Jordanian government in recent months, offering loan guarantees and direct budget support, as well as deploying approximately 1,000 troops in the country in addition to Patriot missile systems and F-16 fighter aircraft. Yet this close relationship could turn into a liability - with Damascus potentially choosing Jordan as a target for any potential retaliation on US allies or assets. Moreover, any further intensification of the conflict will have adverse consequences for Jordan's tourism sector and FDI inflows, both of which already remain well below potential. In addition (and as with Lebanon), Jordan has seen a considerable increase in the number of refugees since the beginning of 2013. As of end-August, the UN Refugee Agency estimates that there are 515,842 Syrian refugees registered or waiting to be registered in Jordan, while government estimates put the figure at 600,000, equivalent to approximately 8.5% of the total population. These numbers could rise significantly if the conflict escalates. Beyond the costs imposed on Jordan's fiscal and external accounts, the steady influx in refugees has provoked rising tensions with the native population, notably in northern border towns. The Zaatari refugee camp, which hosts as many as 120,000 Syrians, has seen chronic riots from residents demonstrating against poor living conditions.

A Steep Curve
Middle East - Total Syrian Refugees

There is also a risk, albeit unlikely, that Syria and its allies - most notably Hizbullah - choose to retaliate by firing ballistic missiles against Israel. Threats of revenge attacks from Gaza are also not to be dismissed. Palestinian militant organisation Islamic Jihad Movement in Palestine on August 29 threatened to fire rockets at Israel if the US attacked Syria, although it denied making any such threat within few hours. Given Israel's strong defence capabilities and its determination to defend its borders, such development could potentially trigger an harsh military response, exposing the Syrian regime and its allies to a potentially existential threat. Even if such extreme scenario does not play out, rising political risks stemming from an intensification of the civil war in Syria will have a significant impact on Israel's economy. We forecast real GDP growth in Israel of 3.5% and 3.2% in 2013 and 2014, respectively, compared to growth of 3.2% in 2012. The acceleration in growth this year will be mainly triggered by the beginning of natural gas production in the Tamar gas field. That said, mounting security risks would certainly hinder business confidence, which could result in significant delays in investment as well as damage private consumption (see 'Sluggish Growth In 2013 and 2014', August 28).

Risks To The Downside
Israel - Components Of GDP (ILSbn) & Real GDP Growth, % chg y-o-y

Turkey: Open Retaliation Unlikely

While Turkey had good relations with Syria before the beginning of the anti-Assad uprising in early 2011, the brutality of Assad's crackdown has completely alienated Ankara. Given Turkey's membership in the North Atlantic Treaty Organisation (NATO) and its strong ties with Washington, the country is likely to participate in a potential US strike on Syria, either through active military support or by allowing the use of US military bases in its territory. Given Ankara's strong defence apparatus and membership in NATO, an open military retaliation against Turkey is highly unlikely even under a scenario in which a protracted conflict takes place between Syria and the West. Ankara will however be increasingly worried about the security of its border with Syria. After several episodes of cross-border shelling in 2012, NATO has deployed Patriot missiles to Turkey to help its troops repel attacks. The incidence of violence spilling over the Syrian border will likely increase as the conflict intensifies, as elements of the Syrian regime will be increasingly willing to conduct small-scale retaliatory attacks in Turkish territory.

Iran: Options Limited

Iranian President Hassan Rouhani said on August 29 that Iran would work to prevent any military action against Syria, in "extensive cooperation" with Syria's ally Russia. Rouhani added that Western military action against Syria would be an "open violation" of international laws. That said, we believe that Iran's options to counteract a US attack are limited, given its inferior military capabilities vis-a-vis the West. Importantly, Rouhani favours a rapprochement of sorts with the West, which points to new negotiations over Tehran's nuclear programme, and we believe that Tehran will likely continue to support Assad militarily while avoiding outright confrontation with the US. That said, many in Iran's national security establishment are deeply committed to supporting the Assad regime, due to Tehran's core interest here in maintaining a Shi'a corridor from Iran to the Mediterranean via Iraq, Syria, and Lebanon. Under a scenario whereby a prolonged conflict takes place between the West and Syria, we cannot exclude that Iran could pressure Hizbullah to retaliate on US interests in the Levant. Such scenario would significantly increase risks of a wider conflict, as well as jeopardise efforts to negotiate on the Islamic Republic's nuclear programme.

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