Syria Emerges

Stephen DeAngelis

November 30, 2009

In August of last year, I wrote a post entitled The Politics and Economics of Peace for Syria. In that blog, I wrote: “As a country’s economy becomes more free market oriented and a sustainable middle class emerges, increased civil liberties and deeper calls for more democratic institutions are never too far behind. This may well be the path that Syria, one of world’s pariah states, may soon be taking.” Over the past year, Syria has continued to make progress. By March of this year, analysts were willing to declare that Syria’s isolation as a pariah was over [“With Isolation Over, Syria Is Happy to Talk,” by Robert F. Worth, New York Times, 26 March 2009]. Worth reported:

“Only a year ago, this country’s government was being vilified as a dangerous pariah. The United States and its Arab allies mounted a vigorous campaign to isolate Syria, which they accused of sowing chaos and violence throughout the region through its support for militant groups like Hezbollah and Hamas. Today, Syria seems to be coming in from the cold. A flurry of diplomatic openings with the West and Arab neighbors has raised hopes of a chastened and newly flexible Syrian leadership that could help stabilize the region. But Syria has its own priorities, and a series of upheavals here — including Israel’s recent war in Gaza — make it difficult to say where this new dialogue will lead.”

Worth noted that heads of state, such as King Abdullah of Saudi Arabia and President Nicolas Sarkozy of France, have visited Damascus and received warm welcomes. This was a big change for the Saudi King who, according to Worth, “was said to be furious at the Syrian president, Bashar al-Assad.” Worth noted that one reason Saudi Arabia and other countries were warming up to Syria was because they were trying to drive a wedge between Syria and Iran. The very fact that those ties brought leaders to Damascus, however, makes Syrian leaders believe “that their ties with Iran are in fact useful, and accord them an indispensable role as a regional broker.” While European countries are moving to embrace Syria, “American officials are moving slowly, and have been careful to tamp down any expectations of sudden or significant change.” Worth continued:

“A number of Syrian analysts have sounded a triumphant note, … suggesting that after emerging intact from the deep freeze of the Bush years, Syria has more power to dictate the terms of its new relationship with Washington. … Nevertheless, there may be real opportunities for diplomatic progress, in part because some of the issues that divided Syria and the United States in recent years appear to have subsided. … In Iraq, Syria’s goals are now similar to those of the United States, analysts say. Despite its history of enabling jihadists to fight American troops in Iraq, Syria is now contemplating an imminent American withdrawal and is keenly aware that it might itself become a jihadist target, especially if it concludes any sort of peace deal with Israel.”

In fact, five months after Worth wrote his article Syria agreed to help monitor its border with Iraq [“Damascus Agrees to Help Monitor Iraqi Border,” by Jay Solomon and Julien Barnes-Dacey, Wall Street Journal, 19 August 2009]. Solomon and Barnes-Dacey reported:

“The Obama administration and Damascus tentatively agreed to establish a tripartite committee, with Baghdad, to better monitor the Syrian-Iraqi border as the Pentagon draws down American troops from Iraq in coming months, said senior U.S. officials. The proposed three-way border-control assessments could boost Iraqi security and patch one of the region’s most volatile fault lines. The initiative was made by a team of U.S. Central Command officers and their Syrian counterparts.”

Iraqi leaders were miffed at the agreement because they weren’t included in the negotiations. But they realize that Iraqi security requires closer cooperation with Syria. To prove its intentions were sincere, Syria reported “it has detained more than 1,700 militants, blocked potential combatants from passing through the country en route to Iraq and imposed stricter border policing. Syria also appears to have cracked down on former members of Saddam Hussein’s Baathist regime who fled to Damascus after the Iraqi invasion.” Syria’s full emergence from isolation will only be seen when it concludes a peace deal with Israel. But, according to Worth, that could take some time.

“The top priority for the Syrians is a peace deal that would return to them the Golan Heights, occupied by Israel since 1967. … That is a tall order, and any resulting peace deal would require Syria to cut off its support for Hamas and Hezbollah, among other things. Starting such talks may be more difficult after the ascent of Benjamin Netanyahu as Israel’s prime minister. But the Syrians do not seem to be in any hurry. For the moment, they are happy enough with their changed circumstances.”

Those “changed circumstances” are starting to pay economic dividends [“Damascus Revels in Its New Allure to Investors,” by Chip Cummins, Wall Street Journal, 17 November 2009]. Cummins reports:

“From the corridors of Syria’s stately central bank to the capital’s winding, barrel-vaulted souk in the heart of the Old City, it is hard to remember that 18 months ago Syria was a diplomatic and economic pariah state. Growth is expected to come in this year at a respectable 3%, despite a big knock from the global financial crisis. European tourists spill out of recently renovated boutique hotels in the capital’s Old City. American accents boom across the dining room of the Four Seasons. In the tony Maliki neighborhood nearby, tourists, foreign businessmen and fashionably dressed Damascenes sip $4 lattes at one of several bustling cafes.”

The biggest change, however, is that Syria has begun to attract foreign direct investment, which provides a firm foundation for developing a sustainable economy. Cummins continues:

“Central-bank chief Adib Mayaleh is practically giddy about Syria’s new allure to foreign investors. Amid warming ties between the West and Syria, executives from two French banks recently dropped by his office to talk about opening branches here. The same French bankers ‘previously said they would have nothing to do with me,’ he says, gloating. … In fact, Syria’s still-isolated economy protected it from the worst of the global financial crisis. Banks here haven’t been hit by defaults. Tourism receipts dipped but are recovering again. A recent private-sector-led investment boom in real estate shows no signs of the bust felt in other regional markets like Dubai. Earlier this year, real-estate adviser Cushman & Wakefield listed Damascus office space as the eighth most expensive in the world. That is behind Paris and two spots ahead of midtown Manhattan. … On top of all that, the West’s recent embrace of Syrian President Bashar Assad is translating into a booster shot of economic optimism.”

Of course a country doesn’t move from pariah to prosperity in eighteen months. Cummins notes that “it has been a long road, with plenty of obstacles still ahead.” One of those obstacles has been the government.

“When Mr. Assad took over here after his father’s death in 2000, he kept tight control of the state, suppressing dissent. But he also ushered in economic overhauls. Lower import tariffs allowed foreign goods from China and Europe to flow in. In 2003, banking reform opened the door to a handful of private lenders. The overhauls brought with them galloping inflation, but everyday Syrians embraced the new consumer culture. … Shortly after the U.S.-led invasion in Iraq, Washington accused Mr. Assad of allowing fighters across the border to battle Americans, and in 2004 imposed sanctions. In 2005, the U.S. held Syria accountable for the assassination of former Lebanese Prime Minister Rafik Hariri and pulled its ambassador. (Syria denies both allegations.) The sanctions didn’t directly affect much business here since American companies weren’t that active anyway. But U.S. Treasury officials suggested European firms risked being frozen out of the U.S. banking system if they didn’t play ball. ‘Foreign banks were intimidated by the American sanctions,’ says Mr. Mayaleh, the central banker.”

One benefit of having a single-party state headed by a leader for life is that it can change policies without much political repercussion. That is what happened in Syria.

“In what could be one of the most significant diplomatic rehabilitation acts in recent memory, Mr. Assad turned the tables. Last year, he agreed to indirect peace talks with Israel. He also helped to broker a deal between warring Lebanese politicians. Earlier this year, U.S. commanders traveled to Damascus to discuss Syria-Iraqi border security cooperation. French President Nicolas Sarkozy invited Mr. Assad to Paris in the summer of 2008 and flew to Damascus later that year. Mr. Assad traveled to France again [this month].”

Although the United States has continued to move slowly in its rapprochement with Syria, thawing has been sufficient to provide some western enterprises enough confidence to invest in Syria. Cummins concludes:

“The thaw has boosted confidence here, as shown by the sudden rush of Western bankers calling on Syrian officials. In an interview in his marble and wood office, Abdullah Dardari, Syria’s deputy prime minister for economic affairs, gestures to two business cards left on his coffee table by executives representing big U.S. financial firms. ‘Finally,’ he says, ‘we put Syria on the map for foreign investors.'”

Although circumstances are improving, Syria still has a long ways to go. Iraqi officials claim that Syria is responsible for 90% of the insurgent violence still wracking the country. There are still questions about Syria’s nuclear program. And while Israel’s prime minister would like to hold direct peace talks with Syria, President Assad wants to use Turkey as a mediator. Until these issues are dealt with, the U.S. is likely to remain sidelined rather than engaged with Syria. For its part, Syria is just happy not be a pariah any longer.

Postscript 2018: Unfortunately Syria never escaped its pariah status and found itself embroiled in a devastating civil war that witnessed President Assad gassing his own people and creating a huge humanitarian crisis.