The Middle East is perhaps the least integrated region in the world. Two of its biggest countries, Iran and Saudi Arabia, are involved in a cold war, and numerous blocks pit countries big and small against each other, making inter-state trade difficult. Where there are close economic ties, the relationships are often massively unequal, one-sided and based on war-driven needs.
A case in point is the economic relationship between Iran and Syria. Before 2011, there were very few economic ties between the two countries despite their 30-year-long strategic alliance. But as Syria’s President Bashar al-Assad brutally cracked down on a nationwide uprising and led his country into a civil war, Iran became his main regional supporter — and economic ties began to develop on that basis.
A new report published by the online economic bulletin The Syria Report (TSR) shows an extensive but slanted economic relationship between Tehran and Damascus which, according to the report “is deep and is here to stay.” Edited by the Syrian journalist Jihad Yazigi, The Syria Report is published by a Lebanon-based company and is known to be among the most accurate sources for economic information on the country.
During the last decade, Iran has lent at least US$5.6 billion to Syria, with almost all of this funding covering the import of Iranian crude oil, petroleum products, machinery and equipment. According to an estimate by a Damascus-based think tank, Syria imported $1.3 billion from Iran in the year 2017, which makes the latter the second biggest source of imports for the Arab country. On the other side, Syria only exported $13 million worth of goods to Iran in the same year, ie a hundred times less, and representing less than two percent of Syrian exports.
Khamenei Saving Bashar Credit: Ali Ferzat
Bound Together by Sanctions and War
Upon coming to power in 2013, Iran’s President Hassan Rouhani prided himself on his ability to develop economic ties with the West in the context of the nuclear negotiations that led to the Iran Deal (the Joint Comprehensive Plan of Action) of 2015. Since that deal unraveled following Donald Trump’s scuttling of it, the desperate Rouhani administration has been forced to turn more and more to countries that share the burden of economic sanctions with Iran, ranging from Venezuela to Syria. They have formed what could be called an Axis of Desperation.
Iranian-Syrian economic ties are partially based on the fact that both countries suffer from US-led sanctions, TSR’s report shows. For instance, while Iran has lost the vast majority of its customers for oil, its oil exports to Syria have increased, despite the difficulties the transfer of oil can sometimes bring (last year, Britain seized an Iran-flagged ship passing Gibraltar because it was shipping oil to Syria.) Sanctioned outlets such as the Commercial Bank of Syria and Iran’s Bank Saderat are the main drivers of economic ties between the two countries.
But even more than sanctions, it is the war that has allowed Iranian economic presence in Syria. Prior to 2011, a lack of historical business ties as well as that of a land link meant that very few serious transactions took place between the two countries. In 2004, Iran invested in a jointly-owned petrochemical refinery in Al-Dumeir outside Damascus. An Iranian company, Ehdase Sanat, also helped expand a cement plant in the city of Hama. But even these projects didn’t properly get off the ground.
Since the start of the war, Iran has moved into many major and strategic sectors of the Syrian economy. Tehran has made it clear that it wants to make back the billions of dollars it has spent on the country, militarily and otherwise. The report reveals that Iran now has a major presence not only in the oil sector but in phosphate extraction, real estate, aviation, automobiles, electricity, mobile telecommunications, port administration, agriculture, livestock, and education. It also details Iranian presence in each of these sectors.
The basis of the economic relationship seems to be the three lines of credit that Iran has offered to Syria in the last decade. The first major one was extended in July 2013, worth $3.6 billion, and focused on the selling of oil and its derivatives. There have been two others worth about $1 billion each. Exact information and figures about the trade between the two countries are often hard to come by. According to the report, “it is safe to assume” that Syria has already used much of this credit — which makes the future of this relationship difficult given the dire economic straits both countries now find themselves in.
Competition with Russia
Together with Iran, Russia has been the other major foreign power backing Assad’s government. The TSR report makes it clear that Tehran and Moscow are in competition with one another over the Syrian economy. While the competition is most intense in port management and phosphates extraction, it even extends to fields such as education, where Iran’s pushing of Persian language courses and those aimed at reconciliation with Shia Islam compete with Russia’s promotion of courses focused on Russian language and culture.
In many fields of the Syrian economy, Iran is ahead of Russia. Its supply of electricity is noted as “historically the most important” area of economic ties between the two countries. Giant Tehran-based holding company Mapna has won three contracts to build power plants in Tishreen, Homs and Lattakia. According to TSR’s estimates, the work on the latter, a project worth $411 million that started in 2019 and was supposed to be completed in three years, can’t continue due to a cash crunch on both sides. In fields such as phosphates extraction, however, Iranians seemed to have lost out to the Russian firm Stroytransgaz.
The most intense area of Iranian-Russian competition is over the Syrian ports. In other fields, such as mobile telecommunications, Iranian companies will likely face competition from countries other than Russia. The Revolutionary Guards-linked firm MCI had a preliminary deal for the Syrian market in January 2017 but it’s not clear what has developed since then. The report doesn’t mention anything about Rami Makhlouf, Assad’s cousin and one of the richest men in the country, who has a major stake in the mobile telecom market. Makhlouf recently had a public clash with Assad, which should translate into his demise. He had previously used his regime ties to kick foreign competitors such as the Egyptian Sawiris family out of the Syrian mobile market, and was known to have close economic and cultural ties with Tehran.
A Country up for Grabs
Most worrying for many in the Syrian opposition is the possibility of Iran buying significant real estate in Damascus, especially the old city, hoping to alter the demographics there. The Syrian capital has been majority Sunni for centuries but an increasing number of Iranian, Afghan and Syrian Shias have moved there in recent years, while many Christians and other non-Muslims have fled the country due to the civil war. The TSR makes clear that while Iran “clearly has an interest” in this sector, there is not enough “hard evidence” to back some of the opposition claims. Some facts are noteworthy, however: Sale of property by Syrian Christians to the small community of Syrian Shias has increased and the latter are known to have economic ties with Iran. In March 2019, an Iranian construction firm pledged to build 200,000 housing units in the country.
Behind the Iranian rhetoric of Islamic brotherhood, the “axis of resistance” and so on, the Tehran regime seems intent on capitalizing on its intervention in Syria.
Behind the Iranian rhetoric of Islamic brotherhood, the “axis of resistance” and so on, the Tehran regime seems intent on capitalizing on its intervention in Syria. A conservative MP, Heshmatollah Falahatpisheh, recently estimated that Iran has spent between $20 and $30 billion in Syria — and made clear that Tehran expected to make it back.
This is in accordance with reports, such as one by the pan-Arab Al-Hayat newspaper in 2015, that said Iran was holding $20 billion worth of Syrian real estate in collateral.
According to the report, the economic ties between the two countries will continue into the future as a “long-term strategic alliance” between Tehran and Damascus has survived with the tenacity of both regimes. A May 2020 contract given to Iran for the exploration of oil on the Syrian-Iraqi border is the latest major deal.
Having relied on foreign soldiers to kill his own people, Assad has now left the country open to foreign economic interest — and what is sure to be their ruthless competition with one another.