Introduction
Despite the considerable de-escalation of hostilities following Bashar al-Assad’s recent victories in Syria, the country’s political and economic recovery remain uncertain. Millions of Syrians have fled their homes and found refuge in neighbouring countries, hundreds of thousands of citizens have been killed and unlawfully detained, and national infrastructure has been damaged to the extent that its rehabilitation cannot be completed without international efforts.1
Many international actors believe that, with the help of Russia and Iran, the regime of Bashar al-Assad has overcome the military threat posed by opposition forces. The US and EU now see an opportunity to induce behavioural changes in the regime by leveraging financial support for the reconstruction process. Meanwhile, Russia wishes to see the international community offer support, without conditions for Assad to step down, in exchange for the regime’s involvement in stabilizing the country and the region. At the same time, Damascus is gearing up for a phase of reconstruction and stabilization by enacting new legislation, reinforcing its security and military apparatus, and endorsing new middlemen and businessmen to lead future reconstruction efforts.
Russia and Iran are the most influential external powers supporting the Assad regime and it is expected that Moscow and Tehran will reap the benefits of Syria’s economic recovery. However, the reality of this dynamic is complicated. Participation in the Syrian civil war has come at great cost to Syria’s allies. Both are facing their own economic difficulties at home, which limit their capacity, and, crucially, they are pursuing different agendas in Syria. Moscow and Tehran may share a common objective in preventing the military and political collapse of the Syrian regime, but they have assumed different roles in their interactions with the regime, the state and local communities.
Russia and Iran are the most influential external powers supporting the Assad regime and it is expected that Moscow and Tehran will reap the benefits of Syria’s economic recovery. However, the reality of this dynamic is complicated.
In pursuit of maintaining their interests in Syria, Moscow and Tehran have adopted different strategies and tools to fulfil their respective objectives. Russia aims to institutionalize its influence in Syria by reinforcing the state’s capacity to exercise its full sovereign functions. In a sense, Moscow believes its interests are best preserved by a friendly central autocratic regime, which requires minimal investment and risk on its part to ensure stability in the long run. This objective implies re-establishing state authority over all armed actors by either integrating them in the Syrian military and security apparatus or simply eliminating them. In addition, this strategy requires the restoration of the government monopoly over governance and public service provisions as well as control of the economy and revenues generated.
Iran on the other hand seeks to work with new local partners – Syrian nationals sympathetic to Iran’s objectives – while maintaining its influence over Assad. Through this bottom-up approach Iran attempts to incorporate its Syrian local allies into state functions including those that manage security, governance and the economy. This strategy is motivated by Tehran’s awareness of Russia’s greater influence within Syrian state institutions. Engaged in a regional competition with the Arab Gulf monarchies and Turkey, Iran wishes to establish influence beyond traditional state-level actors. Tehran’s relations with influential local communities in Iraq, Lebanon and Yemen have allowed it to challenge or disrupt its rivals. The Syrian arena has a part to play in this regional strategy. It is true that Iran enjoys a certain amount of leverage over the regime, but Assad’s willingness to fulfil his end of the bargain remains transactional and subject to negotiations with other regional and international actors. Hence, ensuring the relevance and status of local partners, either on their own or within state institutions, constitutes a guarantee for Iran’s future interests in Syria.
Russia and Iran view their support for the regime as a means of delineating their spheres of influence and attempting to secure their long-term interests in the country. But this complicated relationship is increasingly becoming tense regarding reconstruction and investment opportunities.
Despite these differences, both Moscow and Tehran expect to benefit from their interventions in Syria. Their respective participation in the economic recovery of Syria is intended partially to compensate them for their role in supporting the regime and partly to maintain their influence in the post-war era. Moscow has gained massive privileges and concessions from Damascus with little persuasion needed on its part, while Tehran has been held back by Syrian state corruption, bureaucratic obstacles, competition with regional actors and Russia, and the imposition of US sanctions.2 The cost of Russia’s decisive intervention in Syria is lower than Iran’s investment in Assad’s survival. Moscow has not provided substantial equity or commodities to Damascus, while Tehran delivered major financial and economic contributions to the regime in addition to its own direct involvement. At the peak of its military intervention in 2015, IHS Jane estimated the cost of the Russian involvement at $2.4 million–$4 million a day, this amounts to $2.5 billion–$4.5 billion since September 2015.3 In comparison, the US State Department estimates that Iran has spent over $16 billion in Syria since 2012.4 According to Ali Akbar Velayati, a senior adviser to Iran’s Supreme Leader in international affairs, Tehran provides $8 billion a year to support the Syrian regime’s survival, amounting to $48 billion over the same period.5 Even though there are limited reliable sources on the real cost of both the Russian and Iranian interventions in Syria, it is clear that Tehran’s engagement goes deeper than that of Moscow, which has mainly provided logistical and air support. Iran has equipped and financed tens of thousands of fighters in Syria, sent ammunition, provided refined oil products and lost soldiers on the battlefield.6 Consequently, the Iranian leadership expects large trade concessions in the energy and telecommunications sectors,7 although to date few of the Syrian regime’s promises have materialized.
Russia and Iran view their support for the regime as a means of delineating their spheres of influence and attempting to secure their long-term interests in the country. But this complicated relationship is increasingly becoming tense regarding reconstruction and investment opportunities. This is mainly due to two factors: first, the way the Syrian regime is managing economic recovery and the contracting process; second, the reluctance of companies in the Russian and Iranian private sectors to invest in the Syrian economy because of the substantial security and financial risks they may face. The recent award of a phosphate mining contract demonstrates how tensions may continue to rise between Russia and Iran. In January 2017, the Syrian and Iranian government signed memoranda of understanding that included the rights to mine the Sharqiyeh field near Palmyra for phosphate.8 But six months later, the Syrian government awarded Stroytransgaz, a Russian private company, an exclusive contract to annually extract and sell 2.2 million tonnes of phosphate for a period of 50 years from the same mine, with 30 per cent of the revenues reserved for the Syrian state.9 There is a growing trend of initial Iranian agreements with the Syrian regime that fail to materialize into binding contracts. Iran’s difficulties in Syria are also due to sanctions crippling its economy,10 and the Syrian regime’s attempts to play Iran and Russia against one another.11
This paper looks at Russian and Iranian engagement in the post-war Syrian economy and at how their interaction with local stakeholders is shaping their ventures and possibly creating areas of competition and contention. The paper is divided into four sections: how Russia and Iran are seeking compensation for their role in the Syrian conflict; how they interact with potential regional and international partners or competitors in the Syrian economy; how they are gearing up to maintain long-term influence; and the possible impact of US sanctions on their respective investments in the reconstruction phase.
1 The UN estimates the cost of the damages caused by the conflict to be as high as $388 billion in physical destruction and economic losses. The former UN special envoy to Syria Staffan De Mistura has stated that reconstruction could cost at least $250 billion, while Assad predicted that the process could last 10–15 years with a cumulative cost of $400 billion. Associated Press (2018), ‘The Latest: UN says civil war has cost Syria $388B in damage’, 9 August 2018, https://www.apnews.com/aa0aaa2c44cd430196f572227b45c150 (accessed 21 Feb. 2019); UN News (2017), ‘No preconditions accepted from Syrian parties, UN envoy says ahead of Geneva talks’, 27 November 2017, https://news.un.org/en/story/2017/11/637402-no-preconditions-accepted-syrian-parties-un-envoy-says-ahead-geneva-talks (accessed 21 Feb. 2019); RT Arabic (2018), ‘الأسد: 400 مليار كلفة إعادة إعمار سوريا’ [‘Assad: $400 Billion Is the Cost of Syria Reconstruction’], 16 April 2018, https://arabic.rt.com/business/938644-%D8%A7%D9%84%D8%A3%D8%B3%D8%AF-%D9%83%D9%84%D9%81%D8%A9-%D8%A5%D8%B9%D9%85%D8%A7%D8%B1-%D8%B3%D9%88%D8%B1%D9%8A%D8%A7 (accessed 21 Feb. 2019).
2 Bozorgmehr, N. and Solomon, E. (2018), ‘Iran faces uphill battle to profit from its role in Syria war’, Financial Times, 13 February 2018, https://on.ft.com/2srFVu7 (accessed 20 Feb. 2019).
3 H. Ellyatt (2015), ‘This is how much Russia’s ‘war’ in Syria costs’, CNBC, 21 October 2015, https://www.cnbc.com/2015/10/21/this-is-how-much-russias-war-in-syria-costs.html (accessed 20 Feb. 2019).
4 Iran Action Group (2018), Outlaw Regime: A Chronicle of Iran’s Destructive Activities, Washington: US State Department, https://www.state.gov/documents/organization/286410.pdf (accessed 20 Feb. 2019).
5 Alavi, H. (2018), ‘Iran To Suffer Most in Syria’, Forbes, 13 April 2018, https://www.forbes.com/sites/heshmatalavi/2018/04/13/iran-to-suffer-most-in-syria/ (accessed 21 Dec. 2018).
6 Taheri, A. (2018), ‘Why Iran’s Intervention in Syria Proved so Costly’, Asharq al-Awsat, 14 March 2018, https://aawsat.com/english/home/article/1204601/exclusive-why-iran%E2%80%99s-intervention-syria-proved-so-costly (accessed 19 Jan. 2019).
7 Koman, M. (2018), التموضع الاقتصادي الإيراني في سورية, [The Economic Positioning of Iran in Syria], Omran for Strategic Studies, 4 April 2018, https://www.omrandirasat.org/%D8%A7%D9%84%D8%A5%D8%B5%D8%AF%D8%A7%D8%B1%D8%A7%D8%AA/%D8%A7%D9%84%D8%A3%D8%A8%D8%AD%D8%A7%D8%AB/%D8%A3%D9%88%D8%B1%D8%A7%D9%82-%D8%A8%D8%AD%D8%AB%D9%8A%D8%A9/download/413_b5ddc9986b24f9be41ca8ba27d51df90.html (accessed 19 Jan. 2019).
8 Syria Report (2018), ‘Iran Gains Access to Syria’s Large Phosphate Reserves’, 19 June 2018, https://www.syria-report.com/news/oil-gas-mining/iran-gains-access-syria%E2%80%99s-large-phosphate-reserves (accessed 22 Dec. 2018).
9 Al-Alo, S. (2018), الصراع على الثروة السورية بين إيران وروسيا: الفوسفات نموذجاً, [The Iranian-Russian Competition Over Syria Resources], Al Jazeera Centre for Studies, http://studies.aljazeera.net/mritems/Documents/2018/7/30/13fb3cbef0c146358943f89235d8c0a6_100.pdf (accessed 20 Dec. 2018).
10 Bozorgmehr and Solomon (2018), ‘Iran faces uphill battle to profit from its role in Syria war’.
11 Sinjab, L. (2018), Russia and Iran are increasingly competitive in Syria, Analysis, London: Chatham House, https://syria.chathamhouse.org/research/russia-and-iran-are-increasingly-competitive-in-syria (accessed 30 Jan. 2019).