Syria and Iran are not immune to US turmoil

Beirut : Syria and Iran, both targeted by US sanctions, proclaim that their "independent" economies will suffer less than others from global financial turmoil.

But economists in the region say neither Tehran nor Damascus will be immune from the credit crunch spreading from the US, or from any ensuing world economic downturn.

Some argue that the cost of sanctions greatly outweighs any unforeseen benefits Syria or Iran might gain by being denied access - and direct exposure - to US financial markets.

The US has long enforced unilateral measures against Iran, and has toughened them while seeking to tighten UN sanctions over Tehran's nuclear programme. It imposed sanctions on Syria in 2004, accusing it of sponsoring terrorism.

"Sanctions are very damaging to their economies," said Louis Hobeika, an economics professor at Leb-anon's Notre Dame University, saying they further isolated both countries from the potential gains of globalisation, as well as its occasional shocks.

It is true that Syrian investors have experienced no wild swings on the local stock market - they don't have one.

Strong point

And the head of Tehran's bourse said its lack of links with the outside world was a "strong point" when asked why Iranian shares had so far escaped the panic in markets elsewhere.

Iran's all-share index has gained some 20 per cent this year - although inflation has run even faster. Total capitalisation climbed to $70 billion in August from $40 billion in January 2007, said Ali Rahmani, the stock exchange's managing director.

President Mahmoud Ahmadinejad said Iran would survive better than others because its economy had grown more independent since the 1979 Islamic revolution that toppled the US-backed Shah.

He said falling oil prices, which have tumbled partly due to the weakening US economy, the world's biggest consumer, would have an impact, but would not derail Iran's economic plans.

Yet Iran, the world's fourth-largest crude exporter, relies heavily on oil revenue to fund its budget and is showing concern at volatility that has seen US crude plunge to around $93 a barrel on Friday, more than $50 below its $147 record in July.

"$100 or below is not suitable for oil producers or oil consumers," Oil Minister Gholamhossein Nozari said on Saturday.

An Iranian economist, who declined to be named, said no country could emerge unscathed from global financial chaos.

"This credit crunch is everywhere in the world. The Iranian banks are also exposed to refinancing lines of credit," he said.

Iranian banks are not invested directly in the US market, but are vulnerable indirectly via business in Europe and Asia, he added.

Traders say the cost of financing trade has climbed as Western banks in particular have increasingly reduced or even severed links to Iran and perceived risks have risen as a result of US and UN sanctions.