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Insight: Syria's economy goes underground as black market thrives

A street vendor sells traditional bread before the time for iftar, or breaking fast, during the Muslim fasting month of Ramadan in Aleppo, J
A street vendor sells traditional bread before the time for iftar, or breaking fast, during the Muslim fasting month of Ramadan in Aleppo, J

By Humeyra Pamuk and Jonathan Saul

ONCUPINAR, Turkey/LONDON (Reuters) - With his truck fully laden with vegetable oil, driver Mustafa Demir makes his regular trip to the Syrian border from Turkey to sell to rebels desperate for provisions as war closes off normal trade channels.

"There is so much demand from the Syrian side. There is demand for everything. Last time I was carrying paper napkins," he said.

"I usually deliver to the Syrian rebels on the other side. They bring their own lorry and the transfer is done on the other side. And then I leave," Demir, 55, said, as he stood by his vehicle at the front of a queue of trucks waiting to transit through Turkey's busy Oncupinar border crossing.

Every day, hundreds of trucks piled high with goods ranging from cooking oil to cement and nappies form queues stretching for miles at Oncupinar, now a bustling hub for trade with Syria.

At other crossing points along Syria's hilly border with Turkey, people can be seen with suitcases crammed with goods such as baby milk powder to sell back home, where food prices are soaring.

The scenes being played out along the frontier are part of a broader shift in patterns of trade with Syria, where the conflict now in its third year presents growing opportunities for those willing to take the risks.

"The chaotic situation in Syria, with decreasing central control over the economy, has provided new opportunities for those foreign traders that do not have established links to the regime," said Torbjorn Soltvedt of risk consultancy Maplecroft.

The war economy means canny traders can set up their own commodity deals to fit local circumstances and the black market is unlikely to be much disrupted by any foreign air strikes directed at President Bashar al-Assad.

CHAOS OF WAR

In the chaos of a war that has cost more than 100,000 lives and forced millions to flee their homes, smugglers, middlemen and small companies working with shipping agents are finding ways to do profitable business, operating from neighboring countries such as Lebanon.

"Whoever is going to trade to Syria is going to make a profit because of the risks and the war. The Syrians realize that is the only way they can get their goods," said a Middle East based source active in the commodities trade with Syria.

The worsening conflict and increasing payment problems that suppliers face in deals with Syria mean big international companies are increasingly wary of the trade.

"What we are seeing is the emergence of the smaller companies who are driving this trade now," a European based shipping source said.

"Ship owners do not want to take the insurance risk of bringing in ships to Syria. What we are seeing is suppliers delivering goods to ports like Turkey's Mersin and then local companies handle it from there."

Shipping agents, truck drivers and local officials say a new trade route has emerged between Turkey's Mediterranean port of Mersin, where goods destined for Syria arrive to be repacked, and the buffer zone inside Syria, where cargoes are picked up by Syrians, mostly rebels.

The buoyant border trade has created a more profitable route for truck drivers, even prompting them to stop taking cargoes destined for further away, as they can make the same money by driving the shorter route from Mersin to the buffer zone in Syria.

HIGH STAKES

A shipping agent in Mersin said the trade with Syria was causing local prices to rise, with potatoes now five times their normal price.

"I have been working here for decades and I can tell you there was no proper trade from Mersin to Syria. Since the war, it has exploded and it's like a new line of business is open."

In Lebanon too, small companies are supplying Syria with goods.

"There are small local freight companies that are still willing to transport goods including wheat and sugar in containers from Beirut to Syria - that is the way it is going," the Middle East source said. "With the prospect of air strikes all the big traders have left the scene - no one wants to take a risk."

Trade sources say an active fuel trade continues via Lebanon to Syria by road without too much scrutiny from authorities.

While much of the black market trade involves buyers in rebel-held areas, the Syrian state is still trying to procure goods.

State buyers face growing problems trying to purchase food from foreign suppliers despite offering to pay with funds held in frozen bank accounts abroad, which has forced Damascus to cancel a number tenders to buy wheat, sugar and rice.

Trade sources say any state related efforts to pick up supplies are likely to be less organized than they were when tenders were formally held. But they still offer price premiums for suppliers looking to sell to buyers in government areas such as Damascus.

At current market prices, a cargo of wheat sold to Syria carries a 10 percent premium above normal market rates, meaning millions of dollars can be made by local traders, assuming they can secure payment.

"Direct trading is a high stakes game and not for the faint hearted. It will increasingly be driven by people with direct contacts on the Syrian side who are willing to pay even if it means in cash," another European trade source said.

Dealers active in the sugar trade said a worsening conflict in Syria would make it even more difficult to send food into the country in bulk and increase smuggling of sugar into Syria from nearby countries such as Lebanon, Egypt and Iraq.

"A lot of sugar in Syria is now being smuggled," a European sugar trade source said.

It is a situation that has set alarm bells ringing at international aid agencies.

"We are extremely worried about food access and prices at the same time. Prices have sky-rocketed, sometimes more than 300 percent," Muhannad Hadi, the World Food Programme's regional emergency coordinator for Syria, told Reuters.

"In the past week in Damascus we have also noticed an increase in prices. Some commodities are no longer available in the market."

(Additional reporting by Oliver Holmes in Beirut and David Brough in London; writing by Jonathan Saul; editing by Giles Elgood)

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