As Iran continues to make efforts to expand its economic influence in Syria and increase its position in sovereign sectors, it has started to infiltrate a new sector in the Syrian economy, namely banking. This occurs after signing an agreement with the Syrian regime government, which provides for banking cooperation between the two countries’ central banks, as well as the establishment of a joint bank in the capital Damascus. This agreement was concluded during the visit of Iranian First Vice President, Eshaq Jahangiri, on Monday, January 28, who considered the agreement as being of “great importance.”

On Tuesday 29 January, President of the Central Bank of Iran, Abdul Nasser Hamati, announced the signing of an agreement with the Governor of the Central Bank of Syria, Hazem Karfoul, on the creation, development, and establishment of banking mediation relations between the two countries and the issuance of a license to establish a joint bank between Iran and Syria in Damascus. Hamati stressed through his Instagram account that “the two central banks in both countries will start opening a banking exchange account on the basis of the national currency of each country, and providing the possibility of using bank cards between Tehran and Damascus.”

For its part, the Central Bank of Syria, said in a statement on its official website, on Wednesday 30 January, that the agreement is aimed at strengthening cooperation and coordination between the two countries to serve the stability and development of the banking sector, contribute to the facilitation of trade exchange, promote investment and strengthen the joint economic relations.

Not a new idea

The establishing of a joint bank is not a new idea. It dates back to 2009, when the Syrian cabinet approved of the establishment of a joint Syrian-Iranian bank in the form of a joint stock company called Al-Aman Bank with a capital of one billion and 500 million Syrian liras, with a 49% for Iran, distributed to Bank Saderat Iran (BSI) with 25% of the capital, Ghadir Investment Company with 16%, SAIPA company with 8% , while 51% were for Syrian businessmen, most notably the Syrian agent of Iran Khodro automaker company, Khalil Sultan al-Abed, who was murdered in May 2010 by a gang of six people, including his son, according to the local website Aliqtisadi.

After the murder of al-Abed, the Syrian businessmen announced their withdrawal from the establishment process of the bank, and Iran remained in control of its share while the remaining share of the capital was left for public subscription. The shares were scheduled to be publicly traded in September 2011. However, this did not happen, and the project was completely suspended in 2012 because of European sanctions on the Central Bank of Syria and the Commercial Bank of Syria. The idea of establishing the joint bank has been raised again several times during the previous years, most recently in June 2018, during the visit of an economic delegation of the Syrian regime’s government to Tehran, headed by Syrian Minister of Economy and Foreign Trade Mohammad Samer al-Khalil.

A base enabling Iran to transfer its funds elsewhere

Many questions have been raised over the past few days about Iran’s goals of entering the banking sector in Syria. Economic analyst Manaf Qouman attributed this to Iran’s attempt to penetrate and economically manipulate Syria, as that this cannot be carried out without the lines and tools of the banking industry in the country.

In an interview with Enab Baladi, Qouman outlined Iran’s goals of entering the Syrian banks to use them as a base for transferring funds to Lebanon and other countries, especially as these banks offer flexibility and freedom of money transfer from and to anywhere. In addition, these banks have a great role in the financing operations of projects and thus owning them. Moreover, Syria will start the reconstruction process at some point, and banks are an integral part in this stage.

The other reason is related to future goals that consist of undermining the Iranian presence in Syria. Thus, the establishment of a joint bank or the acquisition of bank deposits in Syria will guarantee the establishment of Iranian financial roots that will allow Iran to exist and move inside Syria.

Regarding the exchange of local currency between the two countries, Qouman explained that any country that is sanctioned or has a problem with the United States (and its dollar) decides to trade using local currencies. He pointed out that this kind of transactions does not lead to positive results on the economies of both countries, as the Syrian and Iranian currencies are not stable and have no demand. To express it differently, the exchange rate of the Syrian pound against the US dollar is 530 Syrian pounds, while the exchange rate of the Iranian rial against the US dollar is 110.000 riyals per dollar.

Qouman predicted that there would be no economic profit to gain from this measure because of the atmosphere of war, sanctions, and economic instability in both countries.

Samer Fawz enters the bank sector with might

The new Iranian move towards the banking sector in Syria coincided with the entry of Syrian businessman Samer Fawz to the same field. Fawz, who is considered as one of the most prominent businessmen in Syria, is currently accused of being an accomplice with Iran, due to his sudden appearance in the business world in Syria after making gigantic deals, starting companies and buying tourist resorts, most significantly al-waleed Bin Talal’s share at the Four Seasons Hotel.

Fawz has sealed prominent deals at banks through his company Aman Holding, which was founded in May, 2017 with a capital of 600 million Syrian pounds. The company held three deals during the past two months with the Syria International Islamic Bank. In the first transaction, Fawz bought 7.949.842 shares in the bank for more than 7.35 billion Syrian pounds. The second deal was established by the purchasing of a million shares, worth 947.2 million pounds. The third deal was sealed on 17 January, when Fawz’s company bought an additional 1.5 million shares, i.e. 7.63 per cent of the total number of shares.

In addition, Aman Holding concluded a deal with Al Baraka Bank on December 31, buying 592,250 shares worth 841 million Syrian Pounds. Thus, Fawz became the owner of the bank after the transaction. Fawz’s share is 1.18 percent of the total number of shares, according to Damascus Securities Exchange.

Qouman considered that “with Fawz’s significant closeness to Iran, there is no doubt that these deals will be beneficial to Iranians in one way or another. Perhaps the Aman Holding’s funds come from Iran and thus the ownership of the aforementioned shares from Syrian banks may go back to Iran”. Qouman added that each country involved in Syria has its own businessmen, who make moves and deals which can be clearly linked to the interests of the state they serve.

Are Iran’s agreements a response to Russian dominance?

During an Iranian official’s visit, Iran and the Syrian regime signed 11 agreements, memorandums of understanding, as well as an executive program to enhance cooperation between the two countries in the economic, scientific, cultural, infrastructure, services, investment and housing sectors, in addition to previous agreements signed between both sides in several fields, namely, industry, oil, communications and energy. This may be considered as clear economic concessions made by the regime to Iran in exchange for Iranians’ political, military, and financial support over the past years.

Iran is trying to strengthen its role in the Syrian economy by signing agreements and contracts with the Syrian regime in various sectors as the Russian dominance in Syria is going further. According to economic analyst Manaf Qouman, Iran is getting more aware of the increased competition with Russia in Syria. Qouman considered that in light of Russia’s indirect mission to undermine Iranian interests in Syria by inciting Israeli attacks at times and following the US strategy at others, Tehran launched its own plan to further adjust its position in Syria.