Economic Peace-building in Syria

By Luca Delpippo

With the Syrian civil war reaching its close, at least in terms of conventional warfare, a new battle to reconstruct Syria has begun. With costs estimated to be between $250bn and $400bn, it is likely that this new battle has little end in sight. Current western approaches have not only failed but are actually reinforcing the very regime they intended to weaken. This article takes the view that a new approach, centred around building private enterprise and economic co-operation, could be productive in achieving long term peace in Syria and contribute to a more liberal society. It is important not to forget the atrocities committed by the Assad regime whilst at the same time considering the current state of affairs and the wellbeing of the Syrian people out-with the actions of the regime.

The current economic situation in Syria is a recipe for disaster, with GDP expected to be, at best, one third of its pre-war value and illicit black-market activities centred around theft and violence filling the gap. It is important to recognise that an economy centred around crime will help to further destabilise the Syrian economy, discourage investment and only serve to strengthen the economic position of armed entities as opposed to the traditional business class. It is thus important to prioritise rebuilding the Syrian economy, providing employment, hope and a stake in society for those that have lost these fundamental human needs. Indeed, a non-inclusive economic society has been found to fuel tensions and ‘perhaps widespread violence’which, lest a conversation centred on economic peacebuilding takes place between the regime and the west, is an ever-present danger in ruining what is an extremely unstable peace. Indeed, the Assad regime, having lost about 90% of the state’s total foreign currency income to European oil sanctions, has focused resources on the areas that remained loyal to the regime, cementing the government’s control and fuelling tensions.

Current western actors, particularly the EU and USA have adopted a stance toward the Syrian regime of exclusion for the atrocities the government has committed throughout the war in an effort to encourage political reform. These sanctions have in fact strengthened government political control, created a makeshift alliance between Syria, Russia, Iran and, increasingly, China and have only really impacted the Syrian people. According to a policy brief from the European Council on Foreign Relations, “Very little, if any, of the blacklisted investors have switched to the opposition.”, which, written in 2014, has shown a consistent failure in Western policy achieving its aims. Furthermore, sanctions against state entities and investors have created a situation in which the state creates intermediaries in foreign countries, enriching regime cronies and greatly increasing the costs of basic commodities for the Syrian people. At the time of writing, in the last week, the Syrian Central bank has launched a new drive to reduce foreign imports, signalling a dry foreign currency reserve and further price hikes for Syrian consumers8. Previous sanctions on Iraq had similar effects to those in Syria, i.e. higher prices for consumers whilst providing an ideological ‘external enemy’ rhetoric for the regime. 

Not only are sanctions harming the Syrian people, failing objectively and strengthening the regime, they are also weakening Western global influence. Instead of the regime introducing widespread political reforms towards liberal democracy, they have simply sought closer ties with illiberal, undemocratic regimes more than content to strengthen their influence at the expense of Western states. For example, in a recent “Rebuild Syria Exhibition” aimed at strengthening public sector ties to foreign and domestic private enterprises, Russia, China and Iran were the main contenders, with the Syrian government largely disregarding Iran as a partner prior to the sanctions. Further, the Damascus International Trade fair saw three oil and gas contracts being awarded to Russian companies and a $2mil contract being signed between Syrian and Crimean entities. The aforementioned reduction in foreign currency reserves is also likely to see closer financial ties in the form of credit options and oil bartering with Iran and Russia, cementing Russian and Iranian influence in the region. For these reasons, this article understands the failures of contemporary Western approaches and suggests a turn towards free trade, economic co-operation and a focus on building private enterprise in Syria.

With recent efforts being made by the Syrian Central Bank to integrate itself within and conform to EU banking standards, it may be time to at least open a conversation with the Syrian government concerning rebuilding the Syrian economic base. Without a strong economic foundation that provides people with a stake in society, prosperity and balances government control, realistically, there cannot be a well-functioning democracy. This is especially true if, as the current situation suggests, the economic platform is cementing post-war tensions. It may be advisable to discuss lifting select sanctions on banking and transactions to help speed up the supply of food and medicinal supplies to the Syrian people, whilst at the same time bringing the sector under the oversight of international banking standards. It may also be advisable to discuss rebuilding foreign direct investment towards micro enterprises, such as family farms, given findings that this sector is among the most important sources of ‘livelihood for populations living in conflict-prone countries’ and that ‘Interventions to strengthen local economies and economic actors should therefore be promoted as aspects of long-term conflict prevention and peacebuilding efforts.’

There are of course an extraordinarily large number of challenges facing an approach centred around economic peace-building in Syria and it is unlikely that a wholly positive outcome will be achieved by lifting sanctions. What is important to note is that Western sanctions have failed and are inadvertently hurting the Syrian population. Coupled with this is the acknowledgement that a basic step towards a long-lasting peace and a discussion surrounding political reform is that of building a strong private sector and job market. A lack of which would inevitably preclude a stable peace and democracy. 

Image source: Frederic Edwin Church [Public domain]

The opinions expressed in this article are the author’s own, and may not represent the views of The St Andrews Economist

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