Commentary: Syrian reliance on Iranian loans and oil, and how it all connects to China’s Silk Road aspirations of reconstructing the devastated nation. Part II of Prof. Giancarlo Elia Valori’s special review
In Syria, after the decade-long and still unfinished war, the energy shortage resulting from the loss of control over the main oil fields in the East was replenished mainly by Iran and through smuggling from the Lebanon and Iraq. Nevertheless, due to a collapse in oil prices, increased sanctions and military pressure on Iran, the delivery programme was interrupted.
Another blow to the Syrian economy came from the financial crisis in the Lebanon: about a quarter of the deposits in Lebanese banks belong to Syrian companies, including those associated with the government. The introduction of currency restrictions in the Lebanon slowed down transactions for the import of essential goods, including the purchase of wheat, disrupted the supply chain for spare parts and components and led to a sharp increase in prices.
Under these conditions, the Syrian government can only print money, rely on Iranian loans and force Syrian businessmen to help the State directly. Earlier this year, a banknote of 5,000 Syrian Pounds (about 3.98 US dollars) was put into circulation, while the previous maximum denomination was 2,000 Syrian Pounds.
In 2011, Syria ranked 33rd in terms of oil production, after South Sudan and ahead of Vietnam. While in 2011 its production share was 0.4% of the world volume, in 2012 that figure dropped to 0.25% (BP Statistical Review of World Energy calculations).
In the Middle East, the Syrian share before the outbreak of armed clashes was also very small: 1.2% of all production in the region in 2011 and 0.75% in 2012 (BP Statistical Review of World Energy calculations).
The level of oil production in Syria in 2010 was 386,000 barrels per day. With the onset of the crisis in 2011, production fell to 333,300 barrels, and in 2012 it was already almost half the volume of 2011, i.e. 182,000 barrels. In the autumn of 2015, Russia intervened with military means in the Syrian conflict: upon Bashar al-Assad’s initiative, Russian military advisers were deployed in the West of the country.
This changed the entire course of the conflict: it enabled Assad to remain in power and made Russia a major political player in the region. At that time, Russia’s relations with Western countries were in deep crisis due to the return of Crimea to its traditional borders and the outbreak of war in the Donbass.
The intervention in the Syrian conflict changed the dynamics of Russia’s contacts with the international community: In particular, cooperation between the Russian military and the United States of America intensified and relations with Israel reached a new level (the Jewish country has recently opened a new consulate in Yekaterinburg).
From a tactical viewpoint, Russia can be considered one of the beneficiaries of the conflict. The successful, relatively low-budget military operation quickly turned Russia into a key external player in the Syrian arena. As far as can be judged, however, in six years of direct involvement in the Syrian conflict, Russia has not developed an exit strategy. The extent of Russia’s influence on the Syrian regime also remains an open issue.
The active phase of the Russian military operation in Syria lasted 804 days, from September 30, 2015 to December 11, 2017. As a result of the Russian air force attacks, over 133,000 terrorist facilities were destroyed, including illegal oil refineries; 865 gang leaders were eliminated and over 133,000 followers were neutralised (4,500 came from Russia and other countries of the Commonwealth of Independent States).
In December 2017, during a visit to the Khmeimim air base, President Vladimir Putin ordered the withdrawal of most Russian troops from the country.
According to the Defence and Security Committee of the Council of the Russian Federation, as of September 2018 Russian casualties in Syria since the start of the operation have amounted to 112 people – almost half in the crash of the An-26 transport plane (39 people) and of the Il-20 one shot down by anti-government Syrian forces’ anti-aircraft (20 people).
Furthermore, Bloomberg and Reuters reported that hundreds of Russian mercenaries were killed in Syria. The Russian Defence Ministry, however, did not confirm those figures.
At the same time, Russia has two points of presence in the Syrian Arab Republic. The aforementioned Khmeimim air base, where an air group is deployed, which, in 2018, included 28 combat aircraft of the Russian air force, and ten transport and special aircraft and nine helicopters.
Moreover, the naval logistics centre is located in the port of Tartus. In December 2019, Deputy Prime Minister Yuri Borisov, who oversaw the defence industry, said that over the following four years it was planned to invest 500 dollars million in the modernisation of Tartus, the management of which had been entrusted to the Russian Prime Minister.
The precise number of Russian military and civilian personnel in these two sites is unknown. According to the Central Electoral Commission, in 2020 in Syria, 6,424 Russians took part in the vote on amendments to the Russian Constitution.
The combat experience gained by the Russian officer and non-commissioned officer corps is also relevant. During the period of counter-terrorist operations in the North Caucasus, the control, planning, financing and supply centres were located outside Russia – hence the operation in Syria was necessary from a political-military viewpoint.
If the ISIS pseudo-State with all the resources of that country had emerged on the Syrian territory, it would have posed a deadly threat to neighbouring States, starting with the Western European ones, by financing and swelling the ranks of terrorists. We can thank Russia and certainly not the United States, which has begun to destabilise Syria as the final stop on the Chinese Silk Road.
In fact, neither the European Union nor the United States of America have imposed full sanctions against Russia due to the conflict in Syria, but only some partial ones. The US personal restrictions apply to twelve individuals and seven Russian companies: Tempbank, AKB RFA Bank, Rosoboronexport, Russian Financial Corporation, Global Concept Groups, Promsyryeimport, Maritime Assistance.
Russian companies do not yet carry out large-scale activities in Syria. Earlier, the Financial Times wrote that Stroytransgaz’s subsidiary, Stroytransgaz Logistics, associated with the family of billionaire Gennady Timchenko, obtained permission from the Syrian authorities to extract phosphates, as well as a contract to manage the port of Tartus for deliveries abroad.
Timchenko, however, is already subject to US sanctions and the EU does not ban the supply of phosphates. The media also wrote about businessman Yevgeny Prigozhin’s interests in Syria. It was claimed that in 2019 the Syrian Parliament approved the conclusion of contracts for oil exploration, development and production with two Russian companies – Vilada and Mercury Limited.
Novaya Gazeta wrote that both companies were connected to Prigozhin’s facilities, to which the media had previously related the activities of Wagner’s Private Military Company (PMC). The businessman himself denied the existence of such a connection. Prigozhin, however, is already subject to sanctions by both the EU and the USA.
Nevertheless, the sanctions are hampering Russian companies’ wider participation in the Syrian economy. During Russian Foreign Minister Sergei Lavrov’s visit to Abu Dhabi, UAE Foreign Minister Abdullah bin Zayed Al Nahyan complained that the law “on the protection of Syria’s civilian population” – the
“Caesar Act”, adopted in the United States of America and in force since June 2020, which strengthens the existing restrictions on Syria’s allies and expands them – complicates the country’s relations with Syria and interferes with the establishment of a dialogue. The Russian Foreign Ministry called this a serious interference with the provision of even humanitarian aid to the country.
What is the prospect of a political solution in the country? Turkey, the United States and their other sponsors maintain their interests in the region, which means they cannot be taken for granted. Syria has lost its sovereignty and decisions are often taken without it by Russia, Turkey and Iran.
We can therefore say that Assad won the war, but did not achieve peace, and the opposition lost the war, but did not lose peace. Moreover, many Syrians do not live in the territories controlled by the regime.
Assad’s regime will continue to give proof of miracles of survival against the backdrop of growing economic problems, new sanctions and the ongoing power struggle in Damascus itself. In the near future, the country surely expects neither the full restoration of territorial integrity, nor the return of thousands of refugees and internally displaced persons, nor a large-scale plan for post-conflict reconstruction. Neither European nor Gulf countries have the financial resources to do this.
At the same time, the Chinese government is strongly opposing the use of force to resolve the Syrian issue and has advocated a political solution to the internal issue. In the process of rebuilding Syria, China has put forward the idea of developing the Silk Road Initiative and post-conflict reconstruction, and it has received a positive and proactive response from the Syrian government.
The connection between the Silk Road and post-conflict reconstruction is a historic opportunity for the two countries to achieve interconnectedness. The current internal situation in Syria, however, is still subject to many uncertainties and the current security risks need to be carefully examined, as noted above.
The friendship between China and Syria has a long-standing tradition and the ancient Silk Road is a symbol of this mutual feeling. After the founding of the People’s Republic of China, Syria was one of the first Arab countries to recognise and establish diplomatic relations with China.
In the aftermath of the outbreak of the Syrian crisis in 2011, the Chinese government took the UN Charter and the basic rules of international relations as the principles and fundamental steps to deal with the Syrian crisis and firmly opposed the military solution, which was aimed precisely at breaking the Silk Road.
In 2018, the focus of Sino-Syrian relations began to shift from the Syrian civil war to the country’s post-conflict reconstruction. With the gradual improvement of the internal situation in Syria and the stabilisation of security, the Chinese government readily suggested to Syria it wished to participate in the post-war reconstruction process, thus resuming to restore and strengthen the Silk Road, which hetero-directed terrorism from the West had tried to disrupt.
The Chinese government not only adheres to a policy of impartial political resolution of the Syrian issue and actively participates in the UN-led multilateral peace process negotiations on the Syrian issue, but also provides a large amount of free humanitarian assistance to the Syrian people for free.
The Silk Road in Syria is of great importance geopolitically and strategically. Infrastructure construction, energy and industrial cooperation, as well as seaport construction projects are key areas of China’s participation in Syria’s reconstruction. At the same time, China should also address the uncertain risks of Syria’s internal security situation and the influence of political games between the major powers.
Here lies Syria’s tragic recent past, and a desirable future of peace and prosperity.
Giancarlo Elia Valori