Conflict and Leadership
War, the Economy and Politics in Syria: Broken Links

The latest alarming global events, like the coronavirus pandemic, the oil price crash and the slowdown of world economic growth have eclipsed the armed conflicts in the Middle East, which drop off and flare up from time to time. The temporary disappearance of Syria from front page news and new Russia-Turkey agreements on a ceasefire in Idlib are far from comforting. This is merely a tactical pause that should give serious food for thought on Syria’s future in the increasingly unpredictable and rapidly changing world.

This primarily applies to Syria’s leaders. Judging by everything we see, Damascus is not particularly interested in displaying a far-sighted and flexible approach continuing to look to a military solution with the support of its allies and unconditional financial and economic aid like during the old days of the Soviet-US confrontation in the Middle East. 

For over nine years, longer than the world wars in the previous century, Syria has remained an arena of hostilities, a humanitarian disaster and ethnic and religious strife. It is often difficult to differentiate between the anti-terrorist struggle and violence on the part of the government toward its opponents in that country. Thus, tensions have again escalated in the southwestern regions of Syria (the provinces of Deraa and Quneitra), which have been freed under the agreements with a part of the armed opposition on actually the semi-autonomous local power sharing. “Mysterious” murders, threats and abductions have become more frequent against the backdrop of outrages by Syrian secret services.
The experience of “national reconciliation” at the local level has created a bad precedent, which throws a shadow on Russia that initiated these agreements, incidentally with the participation of the US and Israel.

Syria has de facto been divided into spheres of foreign influence between Russia, Iran, Turkey and the US. The local administration in Afrin and other Turkish-controlled regions in northern Syria have been subordinated by the Turkish authorities in the border province of Hatay. It is operating under Turkish law on finances, investment, personal rights and the status of citizens and is subject to the Islamization of public life. Vast territories to the east of the Euphrates River (the provinces of Raqqa and Deir ez-Zor) are governed by local councils that represent a mobile Kurdish coalition from among the US-supported “Syrian democratic forces” and some Arab tribes. Albeit limited to 1,500-2,000 troops (our 300 Spartans as the Americans joke) is still periodically rotated and restocked with arms and equipment. 

Despite the tactical successes, achieved mostly with the support of the Russian Aerospace Forces, the military campaign in Idlib has illustrated the limits of what’s possible. During the war years, the Syrian army sustained big losses in troops and equipment. The strength of the combat capable elite troops, being restored with Russia’s assistance, has also declined. High level statements on the use of force if Turkish and US troops do not leave Syria appear divorced from reality. For its part, Russia has reached the limits of compromise in the Astana format, which allowed Damascus to regain control over its territories in three de-escalation zones in 2017-2019 through force and temporary agreements. The price for this was the creation of a reinforced terrorist hotbed in Idlib and adjacent regions to which “irreconcilable” militants and their families fled from Aleppo, Homs, the suburbs of Damascus, and from the south of Syria. It now comes down to the long-term interests of the two major players in Syria. Russian-Turkish tensions over Idlib last February showed how different they are.
Can Idlib Ruin the Turkey-Russia Entente?
Aaron Stein
Despite the tensions, Turkey and Russia still have an incentive to talk. Ankara depends on Russia to ensure its place at the table to draft a new Syrian constitution, presumably written in a way to minimize Turkish concerns about the Syrian Kurds. Moscow, most probably, still wants Turkey to arrange for the surrender of the proxies it supports.

Russia’s resolve to destroy the last bridgehead of international terrorism and support for the Syrian regime that is resisting inevitable reforms have collided with Turkey’s strategic plans to complete the creation of a long buffer zone in the north of Syria, which includes Idlib territory to the north of the M-4 road by using the anti-Assad militants under its control. In doing so, Turkey wants to ensure the security of its borders and gain more room for the relocation of Syrian refugees. This time, temporary agreements between the military and the secret services won’t be enough for reliable stabilization. It is time for Russia and Turkey to seek more meaningful compromises based on a common vision of Syria’s political future. 

The al-Assad government’s understandable and lawful desire to quickly establish sovereignty over the country’s entire territory (it now controls 65-70 percent of it) less than fully commensurate with the military and economic resources of Damascus and its allies and the real situation on the ground. Obviously, the restoration of territorial integrity and the government and legal system is indispensable for the normal functioning of domestic trade and economic ties and transport considerations. The question is how to achieve it. A sustainable settlement is impossible unless the fundamental socio-economic causes of the conflict and the mentality that triggered it are eliminated.

In this context, a choice of priorities is important: should emphasis be placed on exhausting military efforts in the northwestern and eastern areas, which are fraught with the risk of a direct clash with Turkey or the US, or is it better to temporarily keep the status quo with a view to resolving the urgent objectives of postwar development, which are vital for the majority of the people.

Syria has sustained the biggest losses of all the conflicts in the Middle East. From 2011 through 2018, GDP fell by almost two thirds from $55 billion to $22 billion a year. This means that recovery costs (that amount to at least $250 billion) are equal to 12 times the current GDP. According to the World Bank, about 45 percent of housing has been destroyed, including a quarter of it that was razed to the ground. Over half of health facilities and about 40 percent of schools and universities are out of operation.  

Apart from the destruction of physical infrastructure, no less serious consequences are being caused by the damage done to human assets and the economic and social ties by human losses and migration and a death rate that has increased by three times, and not as a result of the hostilities. Since the war, the living standards of 80 percent of the Syrians have dropped below the poverty line, and their life span has decreased by 20 years. Syria is short of doctors and nurses, teachers, technicians and qualified government officials.

The economic challenges now faced by Syria are even more serious than during the active phase of hostilities. It is in the economy that a web of old and new problems has emerged, and this is not just due to the catastrophic destruction during the war or US and European sanctions, although the humanitarian consequences are very sensitive, especially for the majority of the population. In the course of military de-escalation it is becoming increasingly obvious that the regime is reluctant or unable to develop a system of government that can mitigate corruption and crime and go from a military economy to normal trade and economic relations. According to prominent Syrian economists, the central government in Damascus is failing to restore control over economic life in the more remote provinces.

Local “law” continues to prevail even in the government-controlled areas, including kickbacks in trade, transit, transport shipments and humanitarian convoys in favor of a chain consisting of privileged army units, security services, commercial mediators and related loyal big-time entrepreneurs, both those that are traditionally close to the president’s family and those that have become rich during the war.

The war produced centers of influence and shadow organizations that are not interested in a transition to peaceful development although Syrian society, including businesspeople and some government officials, have developed requirements for political reform (“Syria can no longer be what it was before the war”). However, this requirement cannot be expressed openly in an atmosphere of total fear and domination by the secret services. 

The conditions for implementing major economic recovery projects simply don’t exist. Neither Syria, nor a small group of foreign donors are able to cope with this task. The changing global environment is limiting the abilities of Syria’s allies to render the needed financial and economic support. The US, the EU states and the Gulf oil monarchies are making their participation in Syria’s recovery dependent on the demand addressed to Damascus to start the UN Security Council Resolution 2254 political process that provides, inter alia, for the introduction of amendments to the constitution and the holding of “free and fair elections” under UN aegis. The Syrian government isn’t ready for this: “Why take risky steps now that we have won if we didn’t take them under strong military pressure?”
Who Will Pay to Rebuild Syria?
Paul J. Saunders
While Russia appears to have prevailed in its latest showdown with Turkey in Syria—helping Damascus to blunt Turkey’s operations around Idlib and securing an advantageous cease-fire afterward—Moscow’s longer-term strategy for Syria has become murkier after the crisis.

Meanwhile, in the near-term perspective, a destabilization of the socio-political situation in Syria can easily be triggered not just by terrorist actions but by simultaneous and immediate threats like the financial crisis in neighboring Lebanon, a change in global trends in the global raw materials markets, a delayed effect of mounting US sanctions, and the apprehensions surrounding an explosive spread of the coronavirus.

The first alarm sounded in March-April of 2019, when Syria had problems with oil product supplies. This caused a fuel crisis that led to a sharp deterioration in the economic situation for the first time since 2011. Signs of discontent with the actions of the authorities, rampant corruption and questions about the public administration’s low quality also appeared. 

A temporary solution to the problem was found at that time, but the basic issues remain. Before the war, revenues from oil exports were 35 percent of the state budget. With the loss of large oil deposits in the east (al-Omar, al-Tanak, Jafra and Rumeilan), Syria can meet its requirements for oil domestically by 20 percent and for gas by 60-70 percent. Until recently, it made up for the annual supply shortfalls worth of about $3 mostly through importing hydrocarbons from Iran and illicit supplies from Lebanon and Iraq. However, government-related Syrian experts believe that against the backdrop of diving oil prices and mounting sanctions and military pressure on Iran, secure supplies can only be provided with the liberation of oil fields in the east or the replacement of Iranian oil with Russian oil. In the meantime, Russian companies are also threatened by the US’ secondary sanctions.  

The Syrian economy took a big hit by the financial crisis in Lebanon, whose banking sector had always opened a window to the outside world for Syria. About a quarter of deposits in Lebanese banks belong to Syrian business, including government-related companies. The introduction of currency restrictions in Lebanon froze the deals on the import of basic necessities, including grain and the chain of spare part deliveries, and it led to soaring prices. The Syrian pound continued to fall.

The so-called Caesar Act or an additional package of sanctions signed by President Donald Trump on December 20, 2019 presented a serious threat to Syria’s foreign economic ties. Not only does the president have the option to introduce secondary sanctions against government bodies, companies and individuals in third countries for cooperating with Syria, but he is required to. The Act lists specific industries that are part of trade and economic cooperation with Russia, including the oil industry, aviation and air parts supplies, and the construction of facilities for the Syrian government. The Act also opens an opportunity for introducing sanctions against banks that make transactions via the Central Bank of Syria if it is found guilty of money laundering.

The threat of the coronavirus outbreak is among the risks that can aggravate the economic crisis and trigger social upheaval. The government reported the first case of the disease on March 22 but there are no complete official statistics. After this, Syria introduced a quarantine and a curfew. The apprehensions of a worst-case scenario are linked with the fact that the Syrian healthcare system has been undermined by the war, and the country is short of doctors, medications and medical equipment. Moreover, the spread of the epidemic might accelerate due to high population densities in cities and refugee camps. 

The situation in Syria, which is being aggravated by non-military, albeit no less dangerous, challenges, is compelling the Syrian government to properly assess the current risks and draft a long-term strategy with consideration for the fact that the main components of a conflict settlement are closely linked. A new military reality cannot be sustainable without economic reconstruction and the development of a political system that will rest on a truly inclusive approach and international consent. This is particularly important because the next presidential election in 2021 is not far off.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.