Why are Iran and Russia grappling on “thwarted” investments in Syria?
Enab Baladi – Ali Darwish
Both Russia and Iran announce investment projects in Syria, but these projects have not yet entered into force, shown their economic feasibility, nor supported the torpid Syrian economy. This opens the door to more significant questions about the goals that the two countries want from the accelerated pace of announcements of these projects.
The President of the Syrian regime, Bashar al-Assad, spoke of his intention to make Russian investment projects successful in Syria, during a high-level Russian delegation’s visit to Damascus, on 7 September.
Of these, Russian investment projects in oil fields outside the control of the Syrian regime have already been announced in addition to the investment project in operating Qamishli Airport, which also has not been implemented yet.
These projects are similar to the Iranian government’s announcement of a project to build an oil refinery near Homs in 2017 and build 200,000 housing units in 2019, and both projects did not see the light of day.
According to a study by the Syrian researcher at the “Middle East Institute” in Washington, Dr.Karam Shaar, of the 118 projects approved by the Syrian Investment Agency in 2018, only 46 percent will enter into the implementation phase in earnest, describing the other investment projects as “pro-forma.”
The Iranian regime signed many agreements for carrying out investment projects in 2017. However, it turned out later, according to some officials’ statements, that they were memorandums of understanding, and the Syrian regime did not sign the agreements definitively, which means that the investment is not applicable, economic analyst, and researcher Younes al-Karim told Enab Baladi.
Race in announcing projects … What is the goal?
Russia and Iran, through the announcements of numerous investment projects in Syria, seek to “throw dust in the eyes,” according to researcher Karam Shaar, who said that the governments supporting the Syrian regime show their people that they are getting economic outputs for their expenses incurred by protecting the “al-Assad regime.”
Iran does not have any investments with a significant economic return in Syria to this day, despite all the talk in the media about its investments.
Although Russia obtained higher returns from Iran, its returns remain limited to the commercial Port of Tartous, phosphate fields in the Syrian Badia, an operating contract for the Homs-based General Fertilizers Company, and a contract for oil and gas exploration in Syria’s regional waters in the Mediterranean basin, according to Shaar. In his speech to Enab Baladi, researcher and economic analyst Younes al-Karim believes that the repeated announcement of economic projects suggests several points, which are:
- Delivering a message to the international community that the announced projects belong to the two countries: Russia and Iran.
- Confirming that these projects are legit and agreed with the Syrian government and that the Syrian government signed them freely.
- Sending a message to investors that these projects are for Tehran and Moscow and will not give up on them. And if there is a desire to obtain these projects, one must trade or negotiate with these two countries.
And suppose that the Russians and Iranians are in the region to protect their economic interests and projects, and this is an international right for them on the one hand. On the other hand, they are in Syria with the approval of al-Assad government, which is the “legitimate” government according to the standards of the United Nations. Thus their presence is “legitimate.”
A difference in investment strategy
Russia is “direct”… Iran adopts “poor households and supporters”
According to researcher Younes al-Karim, the two countries have different strategies in controlling investments, as the Russians depend on obtaining ready-to-invest projects directly. Therefore, there are no additional costs that the Russian government has to pay in preparation for their investment.
This is due to the “mafia” mentality, as al-Karim puts it. Russia now wants to acquire these investment projects, then sell unnecessary projects or projects that do not fall within its strategies to other countries, and barter them for other files. It is worth mentioning that many projects are not important now, such as the investment of the “M4” international highway, of strategic and economic importance. This project is not fundamentally significant to Russia, and it wants to negotiate and pressure Turkey through it with many files.
Besides, the project to control gas in the countryside of Homs is not essential to the Russians and the quantities used are not large. Still, they have great importance in negotiating with other countries and putting pressure on the Syrian political decision.
On the other hand, the Iranians adopt a strategy based on the formation of the popular base, mainly the poor, as a result of Russian expansion.
If any international party, whether Russia, the United States, Turkey, or even the Syrian regime, tries to remove Iran from the political equation, Iran will move its supporters against the Syrian government, and this leads to pressure on investors because investments are fragile and met with political chaos, thus forcing the government to make concessions. Furthermore, the popular base also becomes part of the political decision, such as what happened in the southern suburbs of Lebanon and the influence of the Houthis in Yemen and the followers of al-Sadr in Iraq, according to Younes al-Karim.
Struggle over investment projects
Younes al-Karim summed up the Russian-Iranian conflict over investments in Syria, via the transfer of energy, phosphate mines, and oil wells. As for the rest of the investments, there are no shared interests as much as they are an attempt to obtain investments to establish legitimacy and obtain part of the Syrian political decision.
However, the most prominent files that Russia and Iran are struggling over are the investments on the Mediterranean Sea, which is considered a gateway to global consumer markets. Furthermore, they struggle over investments of phosphate mines, wheat, gas, and oil in northeastern Syria.
Iran is wrestling over the M4 international highway as well because it is crucial for transferring Iranian trade to the Mediterranean basin, through the road which gas transmission lines pass (the Friendship Pipeline) in the Homs desert.
Reasons that prevented the improvement of the Syrian regime’s economy
The researcher, Karam Shaar, ruled out any real improvement in the Syrian economy in light of Western sanctions that target the reconstruction process.
It is too early to talk about the impact of the contracts announced by the head of the Syrian regime, on 7 September, the number of investment projects is estimated to be about 40, due to the lack of knowledge of their nature or details, according to Shaar.
The Syrian economy has become in a state of “chaos” due to “formal” investments, in which investors know upon signing contracts that these projects “will not achieve any progress” in the field of economic investment.
Researcher Younes Al-Karim explained that the investments did not lead to an improvement in the Syrian economy for several reasons, the first related to economic sanctions.
Sanctions prevent any project from being economically feasible for investment, especially with the failure to start reconstruction, the lack of adequate financial support, and the relationship with the outside world, making these investments costly.
Second, there is a rise in the exchange rate of the Syrian Pound (SYP) against other currencies, in addition to the low purchasing power of the Syrian citizen, which makes any investment directed to the Syrian interior economically unfeasible.
Syrian people cannot afford to purchase goods or services, and therefore these investments are paper-based and unenforceable because they are not economically feasible.
The continuing international and regional “armed conflict and hostilities” in Syria expose any investment to risks, such as destruction by other parties or pressure on investors in addition to the emergence of warlords, internal assassinations between each party and different currents, and the spread of corruption within the institutions of the Syrian state.
State ministries were used as a tool of war. For example, the Ministry of Finance was used as a tool of war via the precautionary seizure of the funds of many of the conflicting parties that are believed to be “little” aligned with the Russian and Iranian current in 2019 and 2020, and this impedes any of the parties from pumping money for investment.
The dilapidated legal structure of the Syrian economy also fails to jump-start the investments, as the regime has not proposed any change to the Syrian economic structure. On the contrary, several executive regulations were issued, which impeded development in the economic structure, such as preventing dealing in US dollars and preventing its exit and the transfer mechanism of foreign currencies between all governorates.
Other reasons impede these investments, including the need for very large funds that are not available now in the two countries which are suffering from an international economic blockade.
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