Syria’s Reconstruction-a Russian Political Project

Nidal Youssef

November 6, 2017

Europe is hesitant. Gulf States are excluded. And the keys are in the hands of Russia and Iran.

The Assad regime grants exclusive right to its allies and Lebanon.

ESCWA: The cost of the Syrian war amounts to $227 billion and $100 billion for its reconstruction.

It is beyond the bounds of possibility that Syria will be able to rebuild itself. Similar experiences confirm that there are those who wait for the war to stop in order to implement their investment portfolios and present their projects. If we assume that wars are not free of charge but the hidden face of a war economy, then reconstruction and the sharing of power and influence is in fact the new face of the conflict in Syria.

Who are the countries and companies that are allowed to participate in the reconstruction? How will the Syrian cake be divided between these companies and countries? What are the profitable sectors that will be awarded to powerful countries? Will the crumbs be given to some other countries as consolation prizes?

Meagre Studies

For three years the Syrian regime has been talking about reconstruction. Its government is preparing certain projects for the regime’s allies that will be launched once the war stops. Although the basic infrastructure and conditions for the reconstruction of Syria are not yet available, research centers, international organizations, and academics are already racing to prepare studies based on estimates and costs. Despite the discrepancy in different figures and estimates, all these studies agree on a single point; the real cost of reconstruction will not be agreed upon until the war ends.

We have one question: How much does Syria need for the reconstruction?

Here we need a number that cannot be measured, interpreted or subordinated to viewpoints. At this point lies the difficulty; the war has caused destruction and losses that may be difficult to count because of the simple fact that more than 40% of the Syrian economy prior to the war is an unregulated shadow economy, which further complicates the problem, and the process of developing a study based on real facts, not assumptions.

The Toll of War

However, a study entitled the “National Agenda for the Future of Syria” which has been prepared by United Nations Economic and Social Commission for Western Asia (ESCWA), and launched earlier this year in Beirut, might be more accurate and objective.

According to the study, the cost of the Syrian war amounts to $327.5 billion. This figure is larger than the World Bank’s estimates which stated in a report published in July 2017, entitled "The Toll of War: The Economic and Social Consequences of the Conflict in Syria," that the cumulative losses in gross domestic product (GDP) have been estimated at $226 billion; about four times the Syrian GDP in 2010.

All estimates of the cost of the war and reconstruction, including those provided by the regime's government draw a conspicuously bleak and tragic picture of Syria.

The economic researcher Shadi Ibrahim believes that it is too early to talk about the cost of Syria’s reconstruction. According to him, all aspects of the current discussion on reconstruction fall within the framework of political marketing, which has been initiated by the Syrian regime to determine who will be getting a big chunk of the reconstruction cake and who will be deprived of it.

Vulnerable to Destruction

In its study, ESCWA divided the cost of the Syrian war, between $227 billion from lost opportunities and $100 billion due to losses in physical capital incurred by Syria in the past six years. The study also identified the extent of destruction in each sector with the housing sector being the most vulnerable to destruction as it incurred 30% of losses or an estimated $30 billion. The proportion of destruction in the industrial sector reached nearly 18 %, 9% for both electricity and water, and 7 % for the agricultural sector.

Other studies, however, have presented greater estimates based on the financial capital needed for the reconstruction of each sector according to their losses. These include $111 billion for real estate, $75 billion for industry, $45 billion for services, $24 billion for public services, $18 billion for transportation and communications, $15 billion for agriculture, and $12 billion for financial services.

However, according to a number of researchers the assessment of losses does not mean that the cost of reconstruction has been determined. According to Dr. Wathiq al-Halabi, the contradiction in estimating the cost of reconstruction is caused by studies originating in foreign capitals and institutions that are motivated to participate in the reconstruction, in order to reap abundant and rewarding profits.

The former Jordanian Deputy Prime Minister Jawad Anani mirrored these sentiments in press statements last month, saying that Western parties were promoting an exaggerated budget for reconstruction in Syria. Preliminary estimates of the World Bank have indicated $100 billion is needed to restore Syrian infrastructure, followed by another $80 billion to run development projects.

Trends and Scenarios

The cost of reconstruction will increase as long as the war continues. However, the important question now is who will participate in the reconstruction? This is particularly important given that the preparations for the reconstruction phase have already commenced among Arab states and the international community.

In this regard, Suwar Magazine has tried to explore different scenarios according to political trends. The reconstruction of Syria is not merely a financial or economic issue but a political process, wherein the victors will have the right to determine which parties and countries are entitled to participate in this lucrative operation. They will also determine the form of reconstruction and the modalities of its financing. Therefore, it goes without saying that the needs of the Syrian economy will be reassessed in the upcoming period.

According to its officials, the Syrian regime requires that its allies have the exclusive right to reconstruction. That means Russia, Iran, China as well as its allies in Lebanon. Syrian President, Bashar al-Assad, does not hesitate to talk about the exclusivity of Syria’s reconstruction projects for his allies in all his meetings. In a meeting with a Russian economic delegation, Assad pointed out that “It is logical that countries which have supported the Syrian people in their war against terrorism will participate in the process of rebuilding Syria.”

At the meeting of the Syrian-Russian Joint Commission for Economic, Commercial, Scientific and Technical Cooperation that were held in Sochi in October 2017, Foreign Minister Walid al-Muallem, addressed the Russians, saying “It is entirely expected that we are going to cooperate to build the Syrian economy, and that citizens in the Russian Federation would feel that the work done by Russia in Syria is also rewarding." In response, Russian Deputy Prime Minister Dmitry Rogozin who is in charge of defense forces said that Russian companies would "start" their work towards Syria’s reconstruction as "the time has come to revive" the Syrian economy.

Shifting the Compass of Syria’s Reconstruction

Foreign capitals, particularly those in Europe as well as Washington, which stand against the Syrian regime, require the departure of the Assad government as well as a political transition to guarantee their participation in the rebuilding of Syria. Many Arab countries, particularly the Gulf States, agree with this position. But the Assad’s regime, which refuses to discuss any issue before the "elimination of terrorism", is trying to achieve victory so that it can sign reconstruction contracts as the sole victor and power in Syria.

According to researcher Shadi Ibrahim, Russia has been able to make a fundamental adjustment to the direction of reconstruction. After the Russians secured agreements with Turkey on various issues, the tension between President, Recep Tayyip Erdogan, and Bashar al-Assad has been reduced.  Therefore it is likely that Erdogan will withdraw his demand to remove Assad in order to ensure Turkey's participation in the reconstruction process. Ibrahim added that the attitude of the Arab countries should also be noted within this recent context. Through a realistic reading of the current political situation, we can notice that the offensive Arab statements against the Syrian regime have largely subsided. Ibrahim also noted that the cessation of US support for the Free Syrian Army, Turkey's attitude towards Russia after their agreement on Idlib, Jordan's threats to the Syrian opposition to hand over Nasib crossing in southern Syria to the regime, and the Saudi position on the Syrian coalition and High Negotiations Committee, all indicate that Russia is preparing a list of countries that are eligible to participate in reconstruction.

The Syrian Opposition’s Loss of Economic Power

While the Syrian regime is discussing Syria’s reconstruction, the opposition is still mired in internal rupture and fragmentation. With the support of its allies, the Syrian regime is achieving clear victories and preparing for the start of a reconstruction process that will signal its victory, even if it is only a partial win.

Opposition groups and forces are still dependent and under the control of their supporters and their different interests. This situation has created new and more complex circumstances regarding the departure of Assad, wherein optimists believe that at best his removal will be limited to a political transition under conditions which will be determined with the participation of the Syrian regime itself. In addition, the Syrian opposition has no economic power through which it can exert pressure to insure its involvement in reconstruction, as its participation will not be possible unless it is guaranteed in a political process.

According to researcher Ibrahim, the Syrian regime in the past has refused to compromise and give any role to any opposition groups, even during its most difficult and challenging period between 2012 and 2014. So how can the regime agree to make concessions now or when the cessation of military operations is agreed upon? Ibrahim asserted that any change in the regime’s position on this issue will only occur under pressure from Russia and Iran, which do not consider the Syrian opposition as a force whose demands should be met. Ibrahim predicts that in the best case, the opposition could be merged with a new Syrian regime after the war ends.

Marginalization of European Countries

The current political developments indicate that Russia and America are seeking to neutralize the European countries from the process of reconstruction in Syria. This was confirmed by expert Abdulrahman Taqi al-Din who spoke to Suwar Magazine. Russia and America have historically had dismissive attitudes towards European participation in any conflict zone, while welcoming their presence only when it is subordinated to the two strongest capitals in the world. According to Taqi al-Din, Donald Trump's attitude confirms that he considers the EU as a marginal party, which corresponds to Vladimir Putin's desire to be the strongest player in Europe.

After Taqi al-Din spoke about the complexities of the war in Syria, he went on to talk about the issue of determining the countries that will participate in the reconstruction process, as well as their role. Taqi al-Din said that some countries such as America, Europe, Russia, and Turkey will send their companies, while others countries such as Iran, will act directly through their governments in the reconstruction process. Finally, there are also those countries that will carve out a large share based on the funding they will provide.

Preparing Contracts

Russia and Iran have held their position in Syria through various economic and military contracts. Therefore, it will not be easy for any other forces to limit their political or military influence on Syrian territory. A Syrian government source revealed to Suwar Magazine that more than 65 Russian companies have received project contracts that are pending agreement. As for the remaining chunk of the reconstruction cake, it will be for those who want to be involved in Syria’s reconstruction.

However, there is something the researchers ignore when it comes to Syria's reconstruction; the role of the Syrian businessmen. Businessmen associated with the regime will not give up their share of the reconstruction market and many are waiting for the opportunity to start various projects as part of the reconstruction of Syria. Dr. Al-Halabi asserted that the Syrian regime has traditionally rewarded its domestic supporters in different ways, and that it must allocate some reconstruction projects to the businessmen who supported it during the war. According to Dr. Al-Halabi's expectations, these businessmen’s share of reconstruction projects will be mere crumbs, because their competitors for these projects are states and giant companies.

A platform for Syria’s Reconstruction

Lebanon is seeking to attract those who want to rebuild Syria. It is a country divided between supporters and opponents of the Syrian revolution, but money will be crucial. Lebanese Prime Minister Saad al-Hariri first sparked this issue of reconstruction in Syria. Following his meeting with President Trump in Washington in July 2017, he asked that Lebanon be a platform for Syria’s reconstruction process. In addition, a joint Lebanese-Russian meeting was held during the summer of 2017, when the issue of rebuilding Syria was discussed. Lebanon is fully aware that Russia will be the ultimate party in deciding who will participate in the reconstruction of Syria.

Lebanon is expected to assume a “godfather role” for reconstruction in Syria. Its leaders are seeking to ensure the participation of Lebanon in this process, providing a logistical role as its geographical location make it essential, particularly as the Syrian regime will maintain its strict position against Turkey in the north, and will try to reduce cooperation with Jordan, which has been a supporter of the Syrian revolution against Assad.

Lebanon also has its own expertise in reconstruction to draw from. Lebanon’s reconstruction started in the 1990s after the signing of the 1989 Taif Agreement, which ended the civil war in the country. Lebanon also has considerable experience and capacity in import-export, services and banking. However, the Syrian regime is concerned that Lebanon will be a facade for Arab and foreign companies that stood against it during the war years and now want to secure their share in the reconstruction. Such countries will establish companies in Lebanon to participate in the reconstruction and it seems that the Lebanese are ready to provide this cover. On the other side, the EU, which refuses to participate in the reconstruction process unless a political transition is achieved, will also become involved in the reconstruction process through Lebanon; the back door that allows EU countries to operate in Syria.

Behind the scenes, both sides of the political divide in Lebanon agree on the need to ensure a Lebanese role in the reconstruction of Syria. They talk about Lebanon as a "base or work-station" for all those who want to rebuild in Syria. It is no secret that the Lebanese press is talking about deals between Gulf and international companies on the one hand and the registration of new companies in Lebanon, on the other. These practices will function as the back door for these actors, which will allow them to participate in the reconstruction in Syria: The most prominent of these are construction companies.

The Local Version

Many figures in both the political and economic spheres are asking whether Syria needs a version of Saad al-Hariri. This is a logical question that will determine the form of reconstruction, the modalities of its funding, and the political and economic price that Syria will pay for reconstruction. Reconstruction entails power, profit, and control, not just companies which work for money.

After the civil war ended in Lebanon, Lebanese business tycoon, politician, and former prime minister (1992–98; 2000–04) Rafiq al-Hariri, founded a state-affiliated company, Solidere, which led the rebuilding efforts in Beirut in exchange for the post of prime minister. This is a historical experience that cannot be denied, and its effects are still reverberating. Under the present circumstances, is there a Syrian businessman who is capable of carrying out this responsibility? What are the international guarantees that allow a specific name to take the largest share in this process?

All indicators confirm that Lebanon's reconstruction experience, as represented by Rafiq al-Hariri, is not applicable in Syria. The Syrian regime's allies, who have already begun to distribute among themselves the relevant projects, will not allow the Lebanese experience to be replicated. In addition, there are the fundamental differences between the regime's allies; China, Russia, and Iran, with the opposition axis represented by America, Turkey, the European Union and Arab countries, especially the Gulf States, which prevent any consensus.

Taqi al-Din believes that the structure of the Syrian regime is likely to remain similar to its current model and won’t allow for reconstruction process similar to Lebanon’s. He says that “the Assad’s regime will not grant a certain person the opportunity that would entitle him to later be called the “builder of Syria.” Taqi al-Din also pointed out that no man could risk undertaking such a job, even if he received international guarantees. The process is purely political, and no one will dare to take such a risk. Previous experiences in Lebanon and elsewhere, where a regime has had the upper hand, have brought multiple disasters.

Little Optimism

After the war stops, Syria will wake up one day to find that many companies and countries are willing to participate in its reconstruction. Moreover, it will not find it difficult to secure funding or to find parties which are willing to be involved in the process. However, the inevitable difficulty Syria will face is what will the Syrian “Marshall Plan” be like? And what will be the conditions for this “support?”

According to Dr. Al-Halabi, reconstruction is an enormous and extremely expensive operation, and there are massive financial resources just waiting to be pumped into reconstruction projects once the war stops. Financing modalities will not be a problem. However, the problem according to Dr. Al-Halabi is that Syria highly will become highly indebted and will lack sovereign decision-making powers. These will be the conditions that companies and countries participating in the reconstruction process, will demand. He also concludes that the Syrian people, who long for the end of the war, will find themselves in the midst of a new phase; the phase of debt and the depletion their country’s wealth. States that have been rebuilt after similar wars remain heavily indebted, beyond the capacity of their finances to repay, as is the case with Lebanon.

Researcher Ibrahim has a more optimistic point of view. He argued that the cessation of war means the end of destruction and killing. After that, any other loss can be accepted, as it will be less onerous than the continuation of war.

Caught Between the War and the Reconstruction

Syria’s reconstruction is no less dangerous than the war itself, because it includes the drawing of the future policy of the Syrian state. A great deal of care will be taken in selecting countries and companies involved in the distribution of reconstruction projects, and Syria will find itself again caught between different forces as it was in the war.