Syria: Rebuilding a Dictatorship

Political economics will be the greatest challenge to Russia’s ambition to maintain its grip over Syria.

In the last few months much has been written on how the West should contribute to the reconstruction of Syria. While virtually everybody agrees that waiting for a political settlement of the conflict is an unrealistic perspective, most of the analysis have focused on the diplomatic actions undertook by the UN an in particular Russia, which has tried to broker alternative peace settlements in Astana and Sochi. However, a discussion on Moscow’s intentions can’t be complete without accounting for the economic costs related to protecting the regime.

From market economy to feudal lords

Russia has of course amply demonstrated having a vested interest in the survival of the regime, and in the long term this will largely depend on the efficacy of reconstruction efforts. But reverting to the prewar order will be neither enough nor possible: the social tensions which erupted in the 2011 revolution can be largely attributed to a disastrous economic recalibration which married the worst of privatization and government intervention. Instead of selling state enterprises to private market actors, the regime established a procurement system which increased the incentives for businesses to seek corruptible patrons inside the government, becoming thus even more dependent on the political elite. But beside the well-connected “awlad al-sultah” (children of the authority), who were resourceful enough to distribute generous bribes and cultivate the ties to the ruling elites, very few benefitted from what at first seemed a policy of business liberalization. Cut off from the profitable procurement market, small and medium business owners bore the costs of a retreating welfare state, creating the conditions that allowed the protests of 2011 to escalate in a full-blown revolution.

Nevertheless, it’s also apparent that transparency, rule of law and all the other recommended measures to stimulate growth are inherently incompatible with the system of cronyism and corruption of the regime. If in peacetime reforming the established spoils system would have likely meant loss of power for the Assad family, this is even more true years into the war. Nonexistent capital, trade and basic infrastructures have contributed to the emergence of a new class of war profiteers which resemble more feudal lords than business owners. This class constitutes the new heart of the regime’s security forces, and while people like George Haswani “simply” play the role of intermediaries between factions, many military leaders have benefitted from the war economy by extracting rents and racketing local communities. An example of this phenomenon are the elite Tiger Forces, founded by the smugglers Mohamed and Aymen Jaber. This basic conflict between what would be economically sustainable and what’s politically necessary for Damascus also explains the staunch opposition of Assad to federalization, a proposal which has been supported by Russia in the past. Decentralization of power would allow for an extension of the patronage system to all those forces which have emerged from the civil war, but would also deprive Damascus of a significant portion of spoils to distribute. A practical example is the syphoning of international aid funds, which are currently been used by the central authorities as a mean to reward allies and punish those communities deemed disloyal.

Red: Controlled by governemnt forces. Yellow: SDF and Kurdish allies. Green: Rebels. Black: ISIS.
A spoils system everybody can get behind

Coopting the opposition, however, still seems to be Russia’s privileged strategy, and for good reasons. Its numerous diplomatic ties with pretty much every actor in the region allows to have access to the main sponsors of the fighting militias. Turkey’s intervention with operation Euphrates Shield in the north also provides an excellent geographic delimitation that could allow Moscow and Damascus to discriminate between the rebel groups deemed worthy of de-escalation and “terrorists”: Erdogan’s numerous conversations with Putin and the Turkish participation to the Russia-sponsored talks in Sochi also seem to indicate Ankara’s willingness to act as a patron for the “reasonable” Free Syrian Army (FSA) rebels. This goes beyond the will of Turkey to maintain a leverage over Syria after the civil war: by controlling much of the reconstruction funds flowing to the zone controlled by the FSA, Ankara has turned the region into a de-facto  . The prospect of a grand deal aimed at a redistribution of rents extended to penitent rebel leaders isn’t thus so far-fetched.

Given the context, it doesn’t thus surprise that Russia is very interested in using the reconstruction to stabilize its position in the country. In the last weeks much has been written on how Moscow’s victory in Syria shouldn’t make the international community forget how difficult it is to rein Assad. Beyond the structural reasons for opposing Russian proposals of decentralization, the more victories the regime scores, the less important the air campaign waged by the Russian airforce become. On the other hand, the massive presence of Hezbollah and Iranian Revolutionary Guards with boots on the ground contribute to shifting the balance of political influence from Russia to Iran. Without trivializing Moscow’s influence over Assad, Russian credibility is tied to its capacity of ship resources to the so-called “Axis of resistance”, be it under form of weapon deliveries or economic aid. This use of economic power is particularly difficult to master for the presidential administration, as Russia’s economic toolbox is vastly more limited when compared to similar western countries. While its contribution to food aid to Syria amounts to 0.23% of the total share (against the 25% German contribution), Moscow can use the leverage it has in the field of weapon manufacturing and gas/oil extraction. The deployment of S-400 Triumph anti-aircraft systems around Russian bases and in the Hama governorate are a crucial component of the regime’s ability to deter airborne threats – be it from the Coalition, Turkish or Israel. Aside increasing the importance of Russian forces in the regime’s security architecture, Syria has also shifted from being an historically unreliable weapons purchaser to a grimly efficient showcase for the Russian weapon industry, boosting its sales by an estimated $7bn. This kind of relation is especially important for a pariah of the global community such as the Syrian Arab Republic, but also for Iran, whose return to the world economy risks being jeopardized by the Trump administration. The ban of European produce after the Crimean annexation for example has lead to an increase of agricultural imports from Iran, while the sale of S-300 antiair systems (and possible acquisition of Su-30SM fighters) make Russia an important trade and military partner for Teheran, thus giving the Kremlin some influence over the actions of Iranian proxies such as Hezbollah. This is especially important if one believes the consensus on the Kremlin’s overtures to , interpreted both as attempts to lure high-tech investments to the country and to have its position as a supposedly neutral intermediary recognized.

Syrian exports, 2012.
Macroeconomic stabilization

Going back to the topic of reconstruction, it’s also safe to assume that Rosneft, Russia’s state-owned oil enterprise, will play a significant role in providing funds and knowhow to rebuild Syria’s Crude oil and natural gas infrastructure. Despite representing a smaller portion of the nation’s GDP before the war, it was nevertheless important enough to prompt the government to seek alternatives to the rapidly falling oil prices on the global market. The destruction of infrastructure has led to the collapse of the sector, with the revenues falling by almost 60% during the war. Rosneft has already shown interest in the region by investing in Kurdish-held pipelines in Iraq, an area where a war between the Kurdish Peshmerga and the Iraqi government has been looming for a while. The presence of oil and the “Resource Curse”, has historically been a great way to extract and distribute resources among ruling factions, so it’s reasonable to expect that Rosneft-controlled oil would play a pivotal role in the reconstruction strategy. It would certainly play to Russia’s strengths and provide glaring political advantages, as it would directly include Kremlin-appointed officials in the management of the rents-flow from the sector towards sympathetic members of the Syrian elite.

Similar actions are expected to be taken by Iranian companies and other non-western businesses with other infrastructural investments, although the “pointiness” of natural resources allows for the fruition of oil despite the absence of conditions necessary to restart other parts of the economy. The control of local extraction capabilities will probably become a priority of the Russian-backed forces also in order to cut the lifeline to local militias – even if reports indicate that priorities should be located elsewhere, as “Syria no longer produces sufficient cement, steel, or other inputs necessary for construction. Beyond simply procuring inputs and services as available, aid ought to encourage the creation of new businesses and recovery and importation of machinery”.

That said, there are doubts regarding the capacity of the Russian economy to come to Syria’s aid. With the country out of the recession thanks to a growth in non-tradable goods, export of machinery and other non-oil goods have been anemic or receding. Additionally, recent turmoil in the Russian banking system and difficulties in deleveraging hardly make the federation a reliable source of foreign currency to keep inflation under control and provide high-risk, free credit.

Moscow’s bluff

Seven years into the civil war it has become clear that Syria will probably never go back being the unitary state we once knew. Divergent interests and a complex situation on the ground have led to the involved parties to start draw up plans to rebuild the country after the model of its patrons. The Russian way, focused mainly on stabilizing the platform from which it will be able to project power in the Mediterranean and wider middle east, will possibly be based on a strategy of cooption and rent-seeking not unlike the approach adopted in Chechnya. This will neither address the root causes of the civil war nor will be feasible in the long term given Russian macroeconomic trends. Russian officials have been outspoken about how Europe and the West should contribute to rebuilding regime-held areas. As argued by other analysts, this would be a great error, not only because of the normalization of Assad’s rule this would entail, but also because much of it would get lost in the system of corruption and cronyism of Damascus. Europe in particular should not fall into the trap of believing economic aid will provide leverage on Assad, a tyrant hostage of its own ruling coalition. As Moscow’s policy could become unsustainable in the long term, it’s essential for Europe to not fall for Putin’s delusions of a “Russian colonization” of Syria. Maybe Assad and the Kremlin will be able to counterweight economic mismanagement with the force of arms: but why not let them incur the full costs of a kleptocratic post-war order while backing the areas held by NATO’s allies?

All the articles by Michelangelo Freyrie.

Michelangelo Freyrie

All the articles by Michelangelo Freyrie.

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