MESOP IN DEPTH : Salvaging Syria’s Economy
15 March 2016 – By David Butter – Associate Fellow, Middle East and North Africa Programme / CHATHAM HOUSE
While any meaningful reconstruction programme will require considerable external financial support, the reluctance of Western powers to challenge Assad has left his regime in a strong position to dictate terms, writes David Butter.
Summary – Economic activity under the continuing conflict conditions in Syria has been reduced to the imperatives of survival. The central government remains the most important state-like actor, paying salaries and pensions to an estimated 2 million people, but most Syrians depend in some measure on aid and the war economy.
- In the continued absence of a political solution to the conflict, ensuring that refugees and people in need within Syria are given adequate humanitarian support, including education, training and possibilities of employment, should be the priority for the international community.
- The majority of Syrians still living in the country reside in areas under the control of President Bashar al-Assad’s regime, which means that a significant portion of donor assistance goes through Damascus channels.
- Similarly, any meaningful post-conflict reconstruction programme will need to involve considerable external financial support to the Syrian government. Some of this could be forthcoming from Iran, Russia, the UN and, perhaps, China; but, for a genuine economic recovery to take hold, Western and Arab aid will be essential. While this provides leverage, the military intervention of Russia and the reluctance of Western powers to challenge Assad mean that his regime remains in a strong position to dictate terms for any reconstruction programme.
- If a political transition leaves the main elements of the regime in place, this would not amount to a credible settlement in the eyes of a significant portion of the Syrian population, both within the country and in exile. Such an arrangement would allow for some ramping up of UN aid efforts, but it would not provide a sufficient basis for planning a long-term reconstruction programme in which international financial institutions could play a substantive role.
- There is a risk that the West could become entangled in a web of political trade-offs in which economic aid is made conditional on concessions from Assad, while Assad seeks to make cooperation on the political settlement and in combating Islamic State of Iraq and Syria (ISIS) conditional on his receiving economic support. Western governments could come under increasing pressure to approve the channelling of reconstruction finance to the regime through multilateral agencies as a pragmatic means of providing humanitarian assistance and stemming the exodus of refugees.
- In the face of such pressures, Western powers should focus on setting clear benchmarks, including political inclusion and strict monitoring of ceasefires, before consenting to lift sanctions on the Syrian government. Provision of direct budgetary assistance to the Syrian government should be made contingent on a high degree of transparency in the management of the state’s financial accounts.
- These conditions must also include the right to offer economic support to communities that have established their own autonomous institutions in the course of the struggle against the regime. Otherwise there is a risk that the pre-2011 state structures will be reassembled in some mutated form.
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