The de-synchronized and divergent processes of a worsening economic situation in Syria on the one hand, and the diplomatic normalization with the regional actors on the other are the most important issues to look at when assessing whether Syria is on the way out of its decade-long crisis, writes Alexey Khlebnikov, a Middle East expert with the Russian International Affairs Council.
In 2023, the Syrian Arab Republic entered its 13th year of conflict. Although over the last three years, the intensity of the fight has remained at its lowest ebb since the start of the crisis, it did not bring desired peace, stability and economic revival to the country. Undoubtedly, less violence and fewer people killed in the hostilities is a positive trend. However, increasing economic distress, which leads to more hardship and suffering among the civilian population, is definitely bad.
However, the last several months have brought a breakthrough on the diplomatic level and led to a normalisation between Damascus and many regional actors. Deepening cooperation with the UAE, Oman, Bahrain and Jordan, as well as reconciliation with Egypt, Saudi Arabia, Tunisia and Algeria have definitely set up a positive trend which eventually resulted in an Arab consensus to restore Syria’s membership in the Arab League on May 7. The country’s reintegration back into the Arab family can be parlayed into more economic assistance and the reconstruction of Syria.
Thus far, the de-synchronized and divergent processes of worsening economic situation in Syria on the one hand, and diplomatic normalization with the regional actors on the other, are the most important issues to look at when assessing whether Syria is on the way out of the decade-long crisis. These two processes must be synchronized and converged in order to lead to tangible results and real progress in the settlement of the crisis. Diplomatic normalization must yield concrete economic steps and projects in order to move the Syrian crisis closer to an end.
Below we will try to look at the main issues in economic and diplomatic dimensions. Of course, there are certain reasons and factors which led to the current situation – both internal and external.
First of all, the country’s economy was tremendously damaged by the decade-plus of hostilities: Destroyed civilian infrastructure (water pump stations, plants, schools and hospitals, electric grids, roads, etc.), a sharp decrease of agricultural lands, a lack of fuel, the brain drain, etc.
Over the past three years, Syria has been going through some very rough times. The socio-economic and financial situation has been worsening, humanitarian needs only rise, and large-scale economic reconstruction is still not a reality.
According to World Bank data, Syria’s GDP has been in decline since 2018, primarily a result of unilateral Western sanctions (the Caesar Act of 2019), the Lebanese economic and financial crisis, rising pressure on Iran, the COVID-19 pandemic, the recent earthquake, etc. The Syrian currency has depreciated tremendously over the past year from 4,000 SP per USD to 8,000 SP. 15.3 million people in Syria are in need of humanitarian assistance, which is 700,000 people (5%) more than in 2022 and almost 2 million (14%) more than in 2021. According to some Syrians, today life in the country is worse than at times during the intense fighting of 2016-2017.
That said, it is important to underline that the current state of the Syrian economy is an outcome of various factors and it is hard (if possible at all) to evaluate which one contributed more to the today’s situation. However, there is a set of underlying factors, which hinder the process of economic recovery and reconstruction.
Seemingly, the main overarching issue in economics is the fact that Syria’s economic space is fragmented. De-facto, there are several parallel economies in the country, which preclude it from having a united economic space:
Territories under Syrian government control (about 65%);
North-eastern Syria, which is under the Kurdish Autonomous Administration of North-eastern Syria (AANES) control and backed up by the US military presence (about 25%);
Northern Syria “buffer zone” which is under the control of Turkish and Turkish-supported Syrian armed groups (about 5%);
Idlib zone, which is de-facto controlled by Hayat Tahrir al-Sham and under the leadership of the Salvation Government (about 2%);
At-Tanf zone in South-eastern Syria, which is under US control (about 3%).
As a result, economic and trade ties across the country have been disrupted and it doesn’t contribute to the economic recovery.
Unilateral Western sanctions, especially those imposed by the US (the Caesar Act), are another key stumbling block preventing the economic recovery of the country. According to Dr. Igor Matveev, a senior fellow at the Oriental Studies Institute of the Russian Academy of Sciences, US secondary sanctions remain among the main obstacles preventing the revival of economic activity in Syria. They prevent external actors and other third parties from providing more humanitarian assistance, including the launch of more early recovery projects and post-conflict reconstruction activities. They also do little to encourage bigger investments into the revival of the Syrian economy. The removal of these sanctions is a fundamental element for reviving the Syrian economy and finding a solution to the crisis. Moscow has been among the key advocates for this move for years. Although the West has little desire to lift the sanctions, regional countries and non-Western states are more prone to take a risk and to gradually restore and develop economic relations with Syria.
Lebanon’s financial crisis, which started in late 2019, had an extensive negative impact on the Syrian economy. Traditionally, the Lebanese and Syrian economies have enjoyed close ties. Lebanon is considered the Syrian economy’s lungs, which helped the country bypass sanctions, import goods, and allow cross-border cash flow, both legally and illegally. Some estimates say that Lebanese banks hold up to $60 bln in Syrian money.
Rising external pressure on Iran over the past years and the worsening economic situation in the country have also affected Tehran’s ability to provide Damascus with economic assistance, including fuel, financial and humanitarian aid. Being one of the key backers of the Syrian government and/or the country’s economy is definitely dependent on Tehran’s assistance.
Diplomatic games of Damascus
Over the past few months, tremendous developments happened on the diplomatic track. The countries of the region have made a series of positive steps to normalize diplomatic relations with Damascus, which set up a positive trend, and Russia played an important role here.
Thanks to the Russian diplomatic activity, Syria and Turkey started to move towards normalization. Back in fall 2022 Russian and Turkish presidents agreed on the “algorithm” of actions which could eventually lead to a Syria-Turkish summit. First steps have been made in December 2022 when defence ministers of Russia, Syria and Turkey convened in Moscow. It paved the way, first, to the April 4 meeting of deputy FMs in quad-lateral format (Russia, Syria, Iran, Turkey) in Moscow and secondly to defence ministers (plus intel chiefs) talks on Apr. 24. Eventually it led to FMs talks which took place in Moscow on May 10. It also important to remember that Syria-Turkey ties were never completely cut as the two countries maintain contacts on the level of security and intelligence agencies.
Although the process of Syria-Turkey normalization has started and is ongoing, it still faces multiple obstacles, which slow it down. One of the key factors which is currently affecting progress in reconciliation is the overly high demands from both Ankara and Damascus to each other, although the latter seems less prone to compromises. Turkey wants Syria to undergo political reforms and find a compromise with the opposition incorporating it into the governing process as well as to make sure Turkish concerns about Syrian Kurds are fully addressed. Feeling “victorious,” Assad did not want to allow Erdogan to play Syrian card in his electoral campaign as there were and still are doubts in Damascus about who will eventually win the elections in Turkey given that Erdogan could not secure his victory in the first round of elections. Seemingly, Syrians believe that the Turkish opposition will be easier to deal with and finally strike an advantageous deal regarding northern and north-eastern Syria and the Kurds, including Turkish support to the Syrian opposition groups.
That said, there is yet another important factor affecting Syria-Turkey normalization– Saudi-Syrian rapprochement.
Saudi-Syrian normalization has already led to a restoration of Syria’s membership in the Arab League (AL). On May 18, Syria’s president arrived in Saudi Arabia to take part in the May 19 AL Summit in Jeddah. Moreover, the Syrian and Saudi foreign ministers have already met twice this year – in Jeddah and in Damascus, where the Saudi minister also held talks with President Assad.
Many observers see Iranian-Saudi steps towards normalization as a major reason for Saudi-Syrian rapprochement, which is definitely one of the key factors. However, it should be remembered that Turkey is another important factor in Saudi-Arabia’s change of its Syria policy.
Basically, it was Turkey which initially changed its approach towards Syria in the second half of 2022. Prospects of Syria-Turkey normalization has become quite worrying for the Saudis, who consider Erdogan to be one of their key rivals/threats in the region. Back in February, Riyadh sent several planes with humanitarian aid to the Syrian government-controlled areas in order to help fight the consequences of the earthquake. Later, Riyadh declared (for the first time Saudi foreign minister stated it at the Munich Security Conference 2023) a need to come up with a new approach towards Syria. In April, two meetings of Saudi and Syrian foreign ministers finally happened and decision to restore flights and consular services has been reached. All of these developments happened just in two months. All of this led to restoration of Syria’s membership in the AL and Bashar al-Assad visit to Saudi Arabia for the organization’s summit.
As a result, Damascus has put itself in an interesting situation. Basically, Assad “made” Riyadh change its policy towards itself by using the Turkish card. Now Saudi Arabia is on the way to normalize relations with Damascus and is even more successful on this front than Turkey. A full restoration of Saudi-Syrian ties may greatly contribute to the Syrian economic restoration and conflict settlement. In the end, normalization with the Gulf States and Saudi Arabia might be more important for Damascus because these countries are in a much better economic shape and can actually contribute a lot more to Syria’s reconstruction and economy. At the same time, Turkey has quite significant economic issues and is in a “political transition” which makes it less helpful from all sides. In addition, normalization with their peer Arab countries is more natural for Syria than with the “Ottomans.”
Thus, Assad was quite reluctant to meet with Erdogan before the first round of the Turkish elections (May 14). Even if Erdogan wins and becomes more prone to reconcile with Damascus (trying to revenge for no help from Assad during his electoral campaign), Assad will already have almost all key GCC states by his side, which will definitely improve his negotiating positions.
However, some observers in Russia believe that Syria needs normalization with Turkey more than Turkey needs it with Syria. On the one hand, they are right, as eventually, Damascus needs to reach a deal with Ankara in order to settle the conflict, because Turkey is an important party to this crisis. On the other hand, despite sitting on many chairs, Assad is able to choose what chairs are more comfortable to sit on. Moreover, full reconciliation with the Gulf States will provide Syria with more opportunities for reconstruction and economic development.
In the end, normalization with Saudi Arabia, the other GCC states and Turkey will greatly contribute to the “legalization” of Damascus in the international arena, will help to find a settlement to the crisis and contribute to the country’s reconstruction.
However, this current positive trend will have little practical impact if it fails to transform into real economic projects and moves. US secondary sanctions are still a big obstacle and have a serious impact on the countries’ decisions to develop economic ties with Damascus. This is why it remains to be seen how far the regional states are ready to go in their normalization with Syria and how the US will react.