Enab Baladi – Khaled al-Jeratli

The Israeli confrontations with Hezbollah have taken a turn where Israel has targeted the economic supplies of the party, primarily in Syria, prompting a discussion about the impact of this Israeli policy on the Syrian economy.

On October 21, the Israeli army released a video recording that explained, through maps, how Hezbollah obtains funding through three methods: land, sea, and air.

The land route goes through the Syrian economy, as Iran sends oil via Iraq to Syria, which is sold to companies in Syria, some of which are connected to the Syrian regime and Hezbollah, and in turn, they remit the proceeds of these fuel sales to Hezbollah.

According to the Israeli army, the Quds Force linked to the Iranian Revolutionary Guard Corps (IRGC) oversees the transfer of oil to Syria, aiming to secure liquidity for Hezbollah.

It was noted that many Syrian companies buy Iranian oil in Syria, including the “B.S” company owned by the Qaterji family, while there are no estimates of the financial benefit that the Syrian market gains from this trade.

Intertwined financing with the Syrian economy

Hezbollah’s financing does not rely solely on oil; Iran has sought to secure funding methods that have eluded Israeli eyes over the years, leading the party to establish companies that generate profits for it in various countries, including Syria, Yemen, Turkey, and others.

Despite Iran’s efforts to conceal this pathway, Israel has targeted influential individuals in Hezbollah’s economic cycle, but these attacks recently seem to aim at cutting off Hezbollah’s economic lifeline rather than just weakening or limiting it.

The economic arm of Hezbollah in Syria is not limited to the oil sector; it extends to other sectors, including the money transfer sector, exemplified by al-Fadel company, one of the largest money transfer companies in Syria, which recently denied any connection to this financing.

On May 30, 2023, the US Treasury Department included three brothers who own al-Fadel company on the list of US sanctions for providing financial assistance to the Syrian regime, Hezbollah and the Quds Force.

Additionally, on October 16, the US imposed new sanctions on individuals and entities linked to the regime and Hezbollah due to their involvement in Captagon drug trafficking operations to fund Hezbollah.

The US Treasury stated at the time that the illicit trade of Captagon is valued at one billion dollars, managed by senior members of the Syrian regime.

Washington has also taken measures targeting oil smuggling for Hezbollah, including on January 31, 2024, and September 11, 2024, which targeted key elements in Hezbollah’s and the Quds Force’s network.

According to the US Treasury, this network generated estimated revenues of hundreds of millions of dollars through the sale of Iranian goods, including oil, most of which was sold to the “Syrian government.”

What’s the impact on Syria’s economy?

Israel targets individuals associated with Hezbollah almost daily, including those directly linked to the economic sector, most of them in the Syrian capital, Damascus, intending to put an end to the party’s economic activities intertwined with the Syrian economy.

Karam Shaar, director of the Syrian program at the Syrian Observatory of Political and Economic Networks and an economist, downplayed the impact of combating Hezbollah’s economic activities on the Syrian economy, considering that Iran financially supports three militia groups in Iraq, Lebanon, and Yemen, as well as the Syrian government.

Shaar noted to Enab Baladi that what fundamentally affects the Syrian economy is a decision from Tehran to stop funding the regime, which Israel is not currently targeting.

Shaar pointed out that the funding mechanisms for Hezbollah in Syria can always have alternatives, but what we currently see is a desire to curb the funding of the party more than curbing the funding directed to the Syrian regime from Iran.

Alongside organized support for Hezbollah, Iran has allocated credit lines and oil support for the Syrian regime to address recurring crises in the sector, and it has previously sent ships to Syria that bypassed US-Europe sanctions.

The largest money laundering operation

Despite the lack of consensus on whether Iran’s funding operations for its militias in Syria or elsewhere are legal, the recently announced funding operations for Hezbollah are considered the “largest money laundering operation in the Middle East in modern times,” according to Dr. Karam Shaar.

Shaar stated to Enab Baladi that this funding method is “very smart” because it launders sanctioned money through the Syrian people, implying that the Syrians are the “launderers.”

He pointed out that without oil shipments to Syria, it could have resulted in the complete collapse of the Syrian regime.

While Iranian military intervention alongside the regime was significant, economic intervention was even more crucial, especially in the fuel sector.

He noted that Iranian documents reference oil shipments to Syria, valued at over 11 billion dollars since 2012 to the present, categorizing them as debts, although they were essentially funding operations for the Hezbollah party.

He added that this figure exceeds multiples of the Syrian public budget, which ranges from two to three billion, indicating that it is an “immense” amount compared to what is known as the price of oil trade.

Iran’s debt

At the end of April, the Asharq Al-Awsat newspaper reported, citing sources it described as following up in Damascus, that Iran is trying to pressure the regime to recover its debts since the last visit made by former Iranian President Ibrahim Raisi to Damascus in May 2023.

The sources stated that Iran is pressuring the regime to recover debts amounting to 50 billion US dollars by obtaining investment projects, especially after the signing of a “Memorandum of Understanding for Strategic Cooperation” between the two parties during Raisi’s recent visit.

Tehran emphasizes the importance of putting the numerous agreements signed between the two countries into action to settle the debts, according to the sources.

On April 25, 2023, the Syrian-Iranian Economic Committee met, with participation from the Minister of Economy in the regime’s government, Mohammad Samer al-Khalil, the Iranian Minister of Roads, Mehrdad Bazrpash, and representatives from both sides in various sectors like economy, commerce, housing, oil, industry, electricity, transport, and insurance.

As a result of this meeting, eight specialized economic committees were formed in various sectors, with the eighth committee focused on monitoring debts and dues, in order to conduct a thorough investigation of the debt size after previous agreements regarding land as an alternative for these debts.

The Iranian Minister of Roads and Urban Development, Mehrdad Bazrpash, stated at that time that the Iranian side “is aware of Syria’s circumstances, but there are certain laws in Iran that need answers,” according to the Iranian minister’s statement to the Syrian Al-Watan newspaper.

Amid discussions of a debt of around 50 billion US dollars owed by the Syrian regime to Iran, Tehran proposed to al-Assad to offer land as an alternative to money for repayment.