The Politics and Economics of Peace for Syria

Stephen DeAngelis

August 22, 2008

My colleague Tom Barnett has, on more than one occasion, noted that politics follows economics. Most often his remarks have been in response to questions about U.S. dealings with a communist Chinese government that continues to thwart democracy and to quash human rights. 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 [“Syrians See an Economic Side to Peace,” by Nawara Mahfoud and Robert F. Worth, New York Times, 29 July 2008]. All roads to peace for Syria lead through Israel. This is problematic report Mahfoud and Worth, because Syrians have been raised on a steady diet of hate for more than a generation.

“Like most Syrians, Samer Zayat has no love for Israel. He was a little uneasy when Syria announced in late May that it was holding indirect talks on a peace settlement with its old nemesis. Yet Mr. Zayat, a 35-year-old television cinematographer, says he views a peace deal with Israel as necessary and inevitable — not just for political reasons, but because Syria’s vulnerable economy needs all the help it can get. … Prices soared here after the Syrian government cut fuel subsidies in May, deepening the gulf between rich and poor in this nominally socialist state. It had little choice. The oil reserves Syria has relied on for so long are rapidly disappearing. The hefty budget surpluses of a decade ago have turned into multibillion-dollar deficits. A country that could once afford to be serenely indifferent to Western sanctions is now being forced to liberalize and open its economy.”

Syrians, like most people, want hope in the future. They want to see a brighter tomorrow but have only seen storm clouds gathering on the distant horizon for more than a generation. When most oil producing countries in the region are prospering as never before, Syria is plunging into poverty. Lifting its pariah status is the first step on the path back to economic sustainability, but it won’t be easy.

“None of this has changed Syria’s conviction that any peace agreement must include the return of the Golan Heights, the area captured by Israel in 1967. But a profoundly uncertain economic future has created additional incentives for peace, which could help lure foreign investment by ending Syria’s pariah status in the West. A settlement with Israel ‘would lift a huge weight from our shoulders,’ said Ghimar Deeb, a Syrian lawyer and economist who works with the United Nations here. It would lead to the lifting of sanctions, which would give Syria access to new investment, high-tech supplies and training opportunities, he said.”

Deeb is right. Sustainable development requires foreign investment and investors are cowards when it comes to putting their money in places heading in the wrong economic direction. But, unfortunately that is exactly what’s happening in Syria.

“‘Poverty is increasing, inequality is increasing, and I believe the street is frustrated,’ Mr. Deeb said. ‘They need peace with all our neighbors.’ It is not clear that the Syrian government sees the economic troubles as a factor in negotiations with Israel. Although it began carrying out economic changes several years ago, the progress has been slow, and strategic political concerns have always been paramount for Syria’s president, Bashar al-Assad, and his father, Hafez al-Assad, who governed from 1970 until his death in 2000.”

To negotiate a lasting peace, however, there must be a commitment to the process on both sides. Even if the Syrian government were totally committed to the process (and that’s problematic), there would still be questions remaining on the Israeli side.

“Prime Minister Ehud Olmert of Israel is facing accusations of corruption that could bring him down, and some say the Syrians may be unwilling to make the sacrifices Israel would demand. This month, Mr. Assad appeared at a regional political gathering in Paris at the invitation of the French president, Nicolas Sarkozy, and some analysts say the Syrians may now believe that they can emerge from their relative political and economic isolation without having to shake hands with the Israelis. This is despite the fact that the Bush administration, which accuses Syria of supporting terrorism, has recently added sanctions on the government and its business associates.”

The Syrians are naive if they believe they can achieve sustainable development without achieving peace with Israel. That peace deal will be difficult because it involves security, territory, relations with Lebanon, relations with the Palestinians, relations with Hamas, and so on and so on and so on. Nevertheless, the fact remains that Syria’s economic future relies, in part, on making nice with Israel.

“Some analysts say they believe that Syria’s economic troubles must figure in the government’s calculations about regional peace. ‘The transformation they have in front of them now is enormous,’ said Andrew Tabler, a Damascus-based Syria analyst and consulting editor for the magazine Syria Today. ‘They must move from a state funded by oil revenues to one funded by taxation, and that has to play some role in their thinking.’ It would hardly be surprising: Syria’s oil used to be the mainstay of the government’s income, providing 70 percent of the country’s export earnings. Now it is drying up so fast that Syria is expected to be a net importer of crude oil in just two years, according to the International Monetary Fund. Already, Syria is importing oil products at record prices, and paying huge subsidies to reduce the cost for its citizens. That is why Syria finally started cutting its ruinous subsidies over the past year, causing prices to rise and resulting in a domino effect on food prices.”

If it wasn’t bad enough that Syria’s oil sector has bottomed out, its agricultural sector is also in crisis as a result of two bad harvests in Syria’s wheat-growing region. With growing national debt and sinking national prospects, the Syrian government has to look externally for help. Like all underdeveloped countries, Syria needs investment not aid. It needs jobs not dole. That means it must attract businesses.

“Efforts have been made to create a more business-friendly environment, including revised laws on intellectual property. Some of the new entrepreneurial activity is visible to any visitor to Syria, though mostly on the high end: dozens of restaurants and boutique hotels have opened in the capital over the past two years. ‘In the past 18 months, there has been a much faster liberalization,’ said Abdul-Salam Haykal, who leads the Syrian Young Entrepreneurs Association. ‘People are realizing that the government is not the only provider for them anymore.’ That new activity, Mr. Haykal adds, is creating a new incentive and constituency for a real result to the talks with Israel. ‘I think the biggest driver for peace is all this new business development,’ he said.”

Liberalization helps, but a lack of transparency in government and widespread corruption are still enormous obstacles for attracting investors to Syria. Without security, however, even eliminating those problems won’t be enough. As I noted at the beginning of this post, Syrians have been fed on a diet of hate for over a generation and it may take another generation beyond the conclusion of a peace deal for Syria to really reap the benefits of a peace pact. Although the article focused on Syria, I’m sure there are equally entrenched feelings about Syria brooding in the hearts of many Israelis. That’s the problem with hate. Once it sinks its claws into a person’s soul, it is almost impossible to get it to release. Hate must be replaced by hope. I don’t expect the Muslims and Jews to befriend one another any time soon (if ever), but they can learn to live together to each other’s mutual benefit. At least the optimist in me tells me that is possible. Hopefully, economics will be the key to setting the two countries on that path.