The growing Syrian crisis is either causing or triggering a reversal and entrenching in recent market trends. For months markets have been dominated by the unwinding safe haven trade on Fed tapering discussions. This has pushed global bond yields up, the US dollar down, gold down and commodity currencies down and, more recently, emerging market capital flight. With military action in Syria now looming as a real possibility we have a new overlay of a safe haven push. Gold is rallying hard, US bonds have caught a bid and yields are down sharply, stocks are getting hit, the US dollar is up but emerging markets are getting hit again. The Australian dollar is down in sympathy.
So, where does it all go from here? First, let’s examine Syria. I’ve argued previously that military intervention was unlikely owing to the major potential for regional destabilisation as a refugee crisis could overtake Syria’s borders (which was less of a concern in the earlier Libyan campaign). That now looks an optimistic assessment if Assad is proven to have used chemical weapons. The world has ignored such uses in the past, most notably in Iraq, but not so publicly (if true) and the chemical weapons ban is a powerful international norm worthy of protection.
So, there are two courses of action for the US and the international community. The first is to bomb Syria and try to cow or destabilise Assad (a la Gadaffi or Milosovich). The second is to threaten as much and send in the UN WMD inspectors. The latter is obviously a fraught path at the best of times and near impossible amid a civil war. Coverage in The Australian this morning gives you the idea:
As UN inspectors braved sniper fire near the scene of last Wednesday’s attack in Damascus, which is believed to have killed 1300 people, Mr Kerry said the US had additional information implicating Syrian President Bashar al-Assad’s government.
In the strongest rhetoric yet from Washington, Mr Kerry couched his attack in personal and emotive terms.
“As a father, I can’t get the image out of my head of a man who held up his dead child, wailing while chaos swirled around him, the images of entire families dead in their beds without a drop of blood or even a visible wound, bodies contorting in spasms, human suffering that we can never ignore or forget,” he said.
The tone of Mr Kerry’s rhetoric gave the strongest pointer to a US-led intervention. “What we saw in Syria last week should shock the conscience of the world,” he said. “It defies any code of morality.”
Prime Minister Kevin Rudd discussed Syria with Barack Obama yesterday as the most senior US military commander, General Martin Dempsey, attended a meeting in Jordan with military and intelligence chiefs from NATO, France, Britain, Germany, Saudi Arabia, Qatar, Turkey and Canada. “Make no mistake, President Obama believes there must be accountability for those who would use the world’s most heinous weapons against the world’s most vulnerable people,” Mr Kerry said.
The US has moved navy vessels to the Mediterranean close to Syria. The most likely intervention would be the use of cruise missiles from these ships directed at Syrian military and intelligence installations.
UN investigators in Syria were set to continue their assessment overnight, despite one of the vehicles in their convoy being hit by sniper fire. The lead vehicle was left crippled after snipers opened fire on the convoy as it crossed the front line between government-held central Damascus and the rebel-held suburb of Mouadamiya, one of four sites of last week’s alleged chemical attack.
So, if action is required, how will it be engendered? From the Lowy Interpreter:
Australian foreign policy has been at the forefront of advocating the principle of the responsibility to protect (R2P). It was the publicly stated rationale for Kevin Rudd’s diplomatic activism in support of the intervention in Libya in 2011 (when he was minister for foreign affairs), and early indications of Prime Minister Rudd’s speech at the Lowy Institute suggest he is once again looking at the crisis through the prism of R2P, evident in his allusions to the poor international response to the ethnic cleansing in Screbrenica and the genocide in Rwanda.
Meanwhile, UK Foreign Secretary William Hague was quoted in a BBC radio interview as saying thatmilitary action could be lawful even without a UN Security Council resolution, though he did not provide a rationale for this position.
So what are the legal arguments surrounding foreign intervention in Syria following the chemical weapons attack that occurred in the early hours of 21 August?
The case for military strikes must be predicated on conclusive proof that it was the Assad Government which launched the weapons that killed hundreds of civilians. Being sure of the case is the first rule of fighting a just war. It is a test the US and its allies miserably failed in the Iraq war.
Reliable evidence is a necessary but not sufficient condition for a military response. Other conditions include having a humanitarian motive for the action; retribution alone will not do. Neither will it be justifiable to target the regime’s military assets if this poses an unacceptable risk to civilians.
Even if these conditions are satisfied, the use of force will be unacceptable unless it is justifiable under international law. Again, the Iraq war casts a long shadow over current debates. Back in 2003, the US and its ‘coalition of the willing’ fought a war of regime change without UN Security Council backing and without an adequate legal justification. George W Bush believed he only need Congressional permission.
Those unipolar days are over. This time a war of regime change fought by air, land, and sea is not on the agenda; neither is adopting the same disdainful view of multilateral institutions that came naturally to America’s neocons.
In the days immediately prior to the key UN Security Council debate on Libya, President Obama made it clear that he would not use force even for civilian protection without proper authorisation. Yet it is highly unlikely that the Council will get an agreement for robust action against Syria, meaning the most direct route to international legality will be blocked off by Russia and China, with a few non-permanent members also likely to withhold their support.
This does not mean there are no other possible legal arguments to support the use of force against Syria. The least compelling would be for the US and its allies to claim self-defense despite the fact that the Assad regime has not mounted any direct attack upon them. There might have been a shred of credibility to this claim in late 2012 when Syrian Government shells exploded in Turkey, causing loss of life. A NATO council meeting condemned Syria but did not trigger Article 5 of its constitution whereby the organisation would take collective action to defend one of its members.
An alternative legal argument would be to say that the actions of the Syrian Government have been so shocking that Assad and his ruling party has forfeited the right to rule. Instead, the Syrian National Coalition (SNC) would then be the legitimate representative of the Syrian people, and any military action would therefore be lawful as it would rest on the consent of the state. The weaknesses of this claim include the fracturing within the SNC and the fact that, despite the presence of the SNC at meetings of the League of Arab States, a majority of UN member-states do not recognise it as the legitimate government of Syria.
A more likely basis for a legal defence of Western intervention, outside of the Security Council, would be to argue that proportionate force is justifiable in response to the conscience-shocking events of 21 August. This position would be bolstered by the stark facts of the massive harm that has been perpetrated in two-and-a-half years: over 100,000 civilian deaths, 2 million refugees, and nearer 5 million internally displaced.
In the face of such large-scale atrocities, the ‘P3’ could claim that diplomacy has failed, and more pertinently from a legal perspective, so has the UN Security Council (a point that the UN Secretary General’s envoy Lakhdar Brahimi has previously made). Force would therefore be a last resort justified by the escalating humanitarian emergency.
Could Western militaries find themselves invoking such a right, as they did in 1999 with respect toMilosevic’s ethnic cleansing of Kosovo? The convenience of this historical analogy has not been lost on US officials. Getting a prior Security Council resolution proved as elusive then as it has done in the Syria case. But it is worth recalling that US legal counsel at the time of Kosovo was of the view that NATO’s action ought not to be interpreted as precedent-setting, since there was a fear that illiberal coalitions could invoke the same argument against Israel or another Western ally.
There is one other aspect of the Kosovo case that is germane to Syria. The conclusion of the Kosovo Commission report recognised what Foreign Secretary Hague is implying, namely, that ‘a 2/3 or better majority’ could supersede the right of veto where there is a clear and present humanitarian necessity.
One other lesson from Kosovo is that all of this takes time, although in the case of Libya action was forthcoming relatively quickly.
For markets, this will be a headwind so long as the question of what action will be taken is unresolved. Gold, oil, US bonds and dollar will all benefit. Stocks will get hit. The Australian dollar will too. For emerging markets already in the gun this is a very unwelcome escalation of recent flows. The Indian rupee was slaughtered last night.
Pressure will ease upon resolution of the course but then it becomes a blow-by-blow affair of outcomes. Expect headwinds to linger.
