Syria – from Stratfor

 

Syria: What Prevents U.S. Military Involvement

March 7, 2012

 

 

Summary

 

The United States is not eager to launch an air campaign against the Syrian regime that would be similar to the NATO campaign in Libya even though numerous U.S. lawmakers have called for such a campaign. Not only did Libya not have the formidable air defense systems that Russia has provided to Syria, but Syria’s rebels have not been able to control large areas of territory. These factors would complicate any air campaign against the al Assad regime, but Washington’s reluctance to get involved militarily is based on the fear that it could slip into a much messier conflict than it did in Libya.

 

Analysis

 

Amid increasing calls from some U.S. lawmakers for an air campaign against the Syrian regime, the U.S. administration appears to be making a concerted effort to explain to the public why this is not a preferred course of action. Beyond the significant regional implications of such an action, Washington does not want to get involved in a conflict with Syria that likely would pose credible threats to U.S. air forces and risk involving ground forces as well.

 

The Rationale in Washington

 

When U.S. Central Command chief Gen. James Mattis briefed the U.S. Senate Armed Services Committee on Syria on March 6, his overarching message was that any military action in the country would not be easy. Mattis noted that the lack of any safe zones in Syria would mean deploying a significant number of ground troops to create such zones and warned that the United States believes the Syrian government possesses chemical and biological weapons. When asked about the possibility of imposing a no-fly zone in Syria, as NATO forces did in Libya, Mattis warned of the potential dangers posed by the advanced air defense systems Syria has received from Russia.

 

Mattis’ remarks were a subtle rebuttal to calls made in recent days by Sen. John McCain, one of the committee leaders, to launch airstrikes in Syria. On the same day as Mattis’ briefing, Foreign Policy published an article citing two anonymous Obama administration officials discussing what the White House is planning for the next phase in the Syrian conflict. One official referred to the same danger posed by Russian-supplied air defense systems, adding that a recent Russian shipment to Syria contained large amounts of advanced anti-aircraft missile systems, presumably intended to defend Syria should the conflict become international.

 

Washington seeks to dampen the expectation that it intends to do in Syria what it did in Libya. An air campaign is not on the horizon, and the United States is also hesitant to publicize any of its attempts to arm the opposition, though remarks from the officials cited by Foreign Policy seem to indicate that Washington is giving other countries (likely Saudi Arabia and Qatar) approval to do so. Public discussions of arming the opposition forces are, however, more for public relations to show that something is being done to assist an opposition under siege. If the United States were actively engaged in such activities, it would manage the operation covertly.

 

Syria’s Defenses Compared To Libya’s

 

The United States has a strategic interest in seeing the fall of the al Assad regime because of the effect it would have on Iran’s influence in the Levant. Aside from levying sanctions and a public acquiescence to other countries sending in weapons, Washington does not appear to be publicly doing much to hasten al Assad’s downfall. The United States is wary of entering the fray due to its fears that it would get dragged into a much messier conflict than those calling for an air campaign are anticipating. Pointing to the potential dangers posed by Syria’s air defense network is one way of discouraging calls for military intervention.

 

This is not to say that the Syrian Air Defense Command (ADC) is not formidable, especially in comparison to what NATO forces went up against in Libya. With an estimated 54,000 personnel, it is twice the size of former Libyan leader Moammar Gadhafi’s air force and air defense command combined at the start of the NATO campaign. Syria’s ADC consists of the 24th and 26th anti-aircraft divisions comprising thousands of anti-aircraft guns and more than 130 surface-to-air missile (SAM) batteries. The bulk of Syria’s ADC SAM weaponry is the SA-2, SA-3, SA-5, SA-6, and SA-8 SAM systems that were also operated by Gadhafi’s forces. However, the Syrians operate these systems in far greater numbers, have devoted significant resources to the maintenance and upgrade of these missile batteries and have also successfully deployed their SAM systems in a dense and overlapping layout that would complicate potential Suppression of Enemy Air Defenses operations.

 

Though also a Russian ally, Gadhafi did not have the more advanced Russian air defense systems that the al Assad regime possesses. For instance, Iran reportedly financed Syria’s acquisition of 50 SA-22 systems first delivered in 2007 — 10 of which allegedly ended up in Iranian hands. The Syrians are also thought to operate several SA-11 systems, which the Libyans did not have. Furthermore, reports emerged in November 2011 that the Russians upgraded numerous Syrian radar sites and transferred a number of advanced S-300 systems to Syria and that a Russian naval mission to Syria that month also served to transport several Russian missile technicians who were to assist the Syrians in operating the S-300s.

 

Syria’s defenses against an air campaign are not restricted to the ground. Its air force can contribute dozens of fighter aircraft and interceptors, the most advanced of which are the MiG-25 and MiG-29. But while the Syrian air force is both quantitatively and qualitatively superior to Gadhafi’s air force, which was just starting to re-equip and modernize itself after years of sanctions, it has neither played a meaningful role in managing the unrest in the country nor would it play a meaningful role in defending the country from an air campaign.

 

Perhaps the biggest difference between Libya and Syria is that the Syrian rebels have not yet been able to hold significant territory. This matters not just for their ability to have safe areas from which to launch attacks, but also for the air defense network’s ability to function properly. Air defense systems typically are designed to provide cover through overlapping areas of coverage. When eastern Libya fell into rebel hands early on during the revolution, that overlap was severely damaged, which in turn degraded the Gadhafi regime’s overall air defense network. The Syrians are not facing this difficulty.

 

A Feb. 28 CNN report said that the Pentagon had drawn up detailed plans for military action against the Syrian regime. The U.S. military indeed has updated its order of battle (orbat) for Syria in preparation for any contingency operations, and this work allegedly produced the best orbat the United States has had on Syria since 2001. However, contingency plans exist for numerous countries with which war is unlikely. The situation in Syria — whether through the loss of territory, massive defections from the regime or the loss of Russian support — will have to change before Washington implements any of the plans it has prepared.

 

 


Morning Report

Vital Statistics:

Last Change Percent
S&P Futures 1361.8 9.0 0.67%
Eurostoxx Index 2494.7 33.9 1.38%
Oil (WTI) 106.55 0.4 0.37%
LIBOR 0.4736 -0.001 -0.21%
US Dollar Index (DXY) 79.298 -0.414 -0.52%
10 Year Govt Bond Yield 1.99% 0.02%

Markets are stronger this morning a strong economic report out of Germany and optimism that Greece’s debt swap will go through without major problems. Markets are continuing yesterday’s rally that was sparked by QEIII hopes. Initial Jobless Claims were 362k.

I was at the JP Morgan Securitized Products conference all day yesterday. Congressman David Schweikert (R-AZ) spoke regarding the regulatory environment. It is an election year, so expect more initiatives out of the administration to provide relief. A couple takeaways from his talk:

  • LIberals agitating for wholesale principal reductions are just conducting election – year posturing. Everyone in Congress is getting phone calls from their state pension funds (who are large holders or MBS) begging them not to do it. Liberals acknowledge in private they would annihilate pension funds and would do great damage to the future housing finance system if they allowed large-scale principal forgiveness in GSE paper. Which makes FHFA Director Ed DeMarco a very convenient figure at this point and means he probably isn’t going anywhere.
  • The MERS headache is generating preliminary discussion of a global settlement fund (a la asbestos or tobacco) to settle all of the claims coming from the financial crisis. Probably a low-probability event, but it is out there.
The other takeaways from JPM speakers.  (For the ATiM folks, a lot of this is going to be really “inside baseball”)
  • Origination margins have spiked – originators are probably making 3-4 points on new loans (pre-expenses)
  • QEIII will not do much for housing. The Fed is pushing on a string at this point. Fund managers are at record overweight levels on MBS, which means the Fed could spend a lot of money and not move mortgage rates (or affect house prices) all that much.
  • The Fed thought it would be cute to institute new fail charges right ahead of QE, thus adding a short squeeze to the mix. Dealers are having a tough time getting paper to satisfy the appetite of the Fed and won’t short due to the fail charges. This is part of what is driving MBS spreads so tight.
  • Ally is scaling back the correspondent business, while Wells and Citi are getting more aggressive. Chase overshot in downsizing correspondent lending and plans to increase it this year.
  • House prices will fall another 3% this year and that should mark the bottom
  • The government is probably going to experiment with a “first loss” tranche in conforming paper. Expect this in the next 3 – 6 months. This would accomplish two things – first it would start the process of handing off mortgage financing to private capital and it would give a market-based indication of what it should charge for its guarantee (its G-fee). The G-fee is set on the basis of politics and funding needs (for example, it was just raised 50 bp for 10 years to pay for the 2 month payroll tax extension). It would be subordinated paper that absorbs the first 5%, making FHA more of a re-insurer. Concern is demand for the first loss tranche.  Banks would have to reserve 100% for it, so hedge funds would have to buy it. The concern is that they don’t have the capacity.
  • JPM estimates the shadow inventory to be about 5.5 million homes and net demand for housing is 1.25 million per year. Household formation has fallen off a cliff.
  • Basel III requirements for MSRs are extremely harsh (MSR value over 10% Tier 1 becomes a capital deduction) Expect MSRs to remain very cheap. Banks are contemplating cutting servicing fees to 12 basis points.
  • Fan and Fred will remain wards of the state. It would take $250 – 300 billion to capitalize them and they already owe Treasury $160 billion. That is basically the enterprise value of Exxon Mobil. You can’t raise that kind of capital in the private sector.
  • Once the economy picks up steam, the fiscal problems will become front and center. We are looking at about half a trillion of contraction in early 2013, with the expiration of the Bush tax cuts ($250B), the sequestration due to the failure of the debt supercommittee ($100B) and the expiration of the payroll tax cut ($120B). Don’t be surprised if we fall into a recession early next year.
  • Household balance sheets are improving, (DTI ratios are falling) but this has been 100% due to defaults. Debt service ratios are at multi-decade lows due to low interest rates.

Quick Administrative Note

Mich pointed something out to me a couple days ago of which everyone should be aware.  It seems that, for reasons unknown (perhaps user error), occasionally a comment will end up in the trash rather than on the site as intended.  I noticed this morning, for example, that a novahockey comment from yesterday is in the trash.  There doesn’t seem to be any reason for it to have been trashed (in fact, I agree with it wholeheartedly!) so I am guessing it got put there inadvertently.  If so, nova, you may want to go into the trashcan and reinstate it.  Similarly, Mich discovered several posts in there earlier in the week, including one of her own, that didn’t belong there.

Anyway, I just wanted to make everyone aware, and  perhaps it is sensible for everyone to occasionally check the trashcan from the dashboard to make sure nothing is getting mistakenly trashed.