Iran faces battle to profit from its role in Syria

It has poured billions of dollars and hundreds of lives into bolstering President Bashar al-Assad’s government.

Yet Iran may struggle for a return on its investment in Syria. On paper, the Iranian government and entities linked to the Iranian Revolutionary Guards Corps have been granted big economic prizes in Syria — a memorandum of understanding to run a mobile phone operator and a role in one of its most lucrative phosphate mines. It has been given agricultural lands, and plans to develop university branches.

But businessmen and diplomats in Syria say implementing those agreements has been stalled by regime officials more eager to attract Russian and Chinese business — and wary of Tehran’s ambitions to increase its influence.

“Just look at the telecoms — they still only have an MOU. It’s been over a year, and they cannot get a deal signed,” one Syrian businessman said. “The Iranians haven’t gotten anywhere when it comes to making a profit off of Syria.”

To friends and foes alike, Iran is often seen as one of the wiliest actors in the Middle East, spreading its influence by developing networks of ideologically like-minded militias. For Iran, Syria is a critical part of its “resistance axis” that extends across Iraq and Syria and to its most powerful regional proxy, Hizbollah, the Lebanese Shia movement, right next to Israel.

Its growing presence on Israel’s doorstep is a serious concern for Israel and its western allies, especially Washington: tensions escalated dramatically at the weekend when an Israeli jet was shot down. Israel responded by carrying out its most intense wave of air strikes on Syria in years.

Soldiers carry the coffin of a member of Iranian Revolutionary Guards who was killed in Syria © Reuters

Iran was the first regional power to come to Mr Assad’s aid, and the only one to throw significant manpower behind him — mobilising Hizbollah first, deploying troops, supporting the creation of local paramilitaries and bringing in Shia militias made up of Afghans and Iraqis.

But, for all that, some Iranians worry that efforts to benefit from Syrian resources and future reconstruction contracts could be hampered by Damascus’s biggest international backer, Russia. Its 2015 military intervention turned the war decisively in Mr Assad’s favour.

Iranian, Russian and European officials all warn that it is far too soon to talk about the potential windfalls of a so-far hypothetical reconstruction, which the UN has estimated as costing about $300bn. The war between Mr Assad and the rebels who sought his ouster still rages.

Iran’s investment in Syria

$4.6bn

In lines of credit to the Assad regime

$16bn

Spent propping up the Assad regime since 2012 and supporting other partners in Syria, Iraq and Yemen

$58m

Annual trade with Syria

Most importantly, it is not clear who would bankroll reconstruction as long as western and Gulf countries — who have the cash to do so but who supported the opposition — stay on the sidelines.

Some Russian officials express as much concern about limiting Iranian investments as they do about blocking potential western re-engagement.

“Assad is often acting very much in Iran’s interest,” one official said. “When it comes to potential trade deals and reconstruction, it is therefore vital that we do this in a way that it creates benefits for him, or for people around him . . . but that this remains between him and us — without Iran.”

Initial trends, diplomats in Damascus say, already show headaches for Iran. One official who observed recent trade fairs and business expos in Damascus described Iranian companies as “picking up the scraps” compared with firms visiting from China, an economic powerhouse Syria is keen to woo.

Business inroads are important for Iran — first, to regain the estimated $6bn that Iranian officials say Syria owes them, but also because they are important to the soft power influence that Iran needs to develop longer-lasting influence and economic ties.

In neighbouring Iraq, Iran is already reaping the dividends of that strategy. Not only is Tehran often seen as more dominant there than Washington, its trade has skyrocketed: In 2008, trade with Iraq was at $2.3bn; by 2015, that had reached $6.2bn. “It will take Syria a long time to stand on its feet, unlike Iraq, which has many resources,” one Iranian businessman said. “For Iran, the priority is Iraq where we have competitive advantages.”

Ahmed Majidyar, a fellow for the Middle East Institute in Washington, says Iran’s goal is to make itself Syria’s largest trading partner. He points out how Iran has successfully set up branches of its Azad Islamic University in Iraq and across the region and now has plans to open branches in several Syrian cities. The university has already begun a small exchange programme for students from the University of Aleppo.

Areas of control in Syria

But the headway in cultural efforts could mean little if economic relations lag behind. Iran simply does not have the money on its own to launch its own big ventures. “What Iran has in Syria now cannot be exploited without investment,” one Iranian businessman said.

But private Iranian companies are reluctant to become involved, one person familiar with Iran’s business efforts in Syria said, because Tehran has allowed the IRGC and the companies affiliated with it to lead the effort.

“Their [IRGC] companies are not flexible, they are tainted with corruption because of a lack of transparency. They are not accountable and hence do not enjoy efficient management.” The IRGC may need to try to attract business partners from China or other Arab states to bring in the money needed, the person said.

Some problems are out of Iran’s hands: Syria’s black market economy has flourished amid the chaos, creating smuggling networks and warlords who will be keen to protect their profits from any outsiders.

Businessmen and diplomats in Damascus say regime officials and low-level bureaucrats have sought to gum up Iranian efforts by requesting more paperwork and further discussions.

“They feel like the Iranians want to meddle in everything, so it’s worth it for the Syrians to try to wait them out,” one diplomat said.

Despite its regional might, Tehran can do little to exert pressure, one Syrian businessman argued, given his country’s importance to Iran’s regional strategy: “What can the Iranians threaten us with? To withdraw? The Iranians are stuck with us — and the regime knows it.”

Additional reporting by Kathrin Hille and Asser Khattab

This post originally appeared on Financial Times

Leave a Reply