Chronicle of the Middle East and North Africa

Russia’s Incursion into Syria’s Economy: A Multi-Purpose Monopoly

Russia's Incursion into Syria's Economy
A man sits in front of a poster depicting Syrian President Bashar al-Assad (L) and Russian President Vladimir Putin and reading in Arabic “Syria stands with the Russian Federation”, in Syria’s port city of Tartus on July 24, 2022. LOUAI BESHARA / AFP

Ali Noureddine

This article was translated from Arabic.

Russia was able to significantly tip the scales in favor of the Syrian regime when it began its extensive military operation in Syria in 2015.

Consequently, with the assistance of Iraqi, Iranian, and Lebanese militias that were fighting alongside them, the Russian army was able to secure essential strategic air cover, helping the regime’s forces to retake control of substantial portions of land in Syria.

Economic incursion and military presence

Due to direct military presence inside Syria, Russian officials’ influence within the formal and irregular military forces loyal to President Bashar Assad has grown.

Moscow also has the final word in regards to numerous sensitive security matters in various Syrian regions, in addition to its influence on the most basic political issues. Furthermore, Russia has needed to share this control with Iran, affording the latter equally formidable influence inside Syria.

In recent years, however, Russia has worked diligently to take advantage of this new military and political predominance, in order to expand its economic penetration across Syria. This expansion, which amounts to hegemony through soft power, has served the Russian agenda in numerous ways.

First, it has afforded Russian oligarchs close to Russian President Vladimir Putin the opportunity to make a quick profit by swiftly seizing natural resources, public utilities and available real estate thanks to the Russian regime’s influence on Syrian officials.

This economic incursion has also allowed Russian companies to expand into a new market in light of Western restrictions and sanctions that limit their ability to operate elsewhere.

This sheds light on the recent expansion of Russian investments in Syria following the outbreak of the war in Ukraine and the imposition of new sanctions on Russian companies.

In addition, the Russian regime benefits from the presence of Russian investments in sensitive Syrian sectors. It can transform Syria into a zone of ​​economic influence for Moscow on the eastern banks of the Mediterranean.

With the dominant countries and energy giants competing over the eastern Mediterranean to extract gas and lay pipelines, controlling Syria’s offshore gas fields has become an objective for Russia.

New tourism projects

Bringing this matter back into the limelight is the Syrian regime’s recent announcement that it has signed a 45-year investment contract with Russian businessmen close to President Vladimir Putin to establish tourism projects along the coast of the Latakia region.

Extending across an area of over 70 dunams (7 hectares), this project is expected to include chalets, hotels and swimming pools, in addition to playgrounds, offices, recreational services and physiotherapy centers.

These developments complement an extensive series of contracts that Russian tourism companies have obtained in recent years which have allowed them to seize famous beaches, landmarks and touristic sites on the Syrian coast such as the “Goal Jamal” site.

For decades Russian companies have had exclusive control over these attractive geographical areas thanks to these contracts, which prevent small and medium-sized Syrian companies from providing tourism services in these areas as they did previously.

What is most alarming is that once accessible to all Syrians, beaches and touristic sites are now restricted to segments of the population who can afford to pay the hefty prices demanded by these Russian enterprises.

This has led to questions regarding the modifications made to the investment models used by the Syrian government to promote its more popular tourist destinations, which have restricted access to these places rather than allowing room for small local institutions to offer inexpensive auxiliary services.

In addition to the harm that these contracts cause to local small and medium-sized tourism businesses and Syrian consumers, there are serious concerns about the transparency and integrity of these deals.

The Syrian Tourism Minister, Mohammad Martini, himself revealed in an official statement that the Syrian state had given precedence to awarding these projects to Russian and Iranian companies.

Thus, it is now evident that the Syrian regime is not managing the tourism industry in a way that benefits the Syrian people, but is instead awarding these deals to the businesses of allied nations. This is why the projects are currently restricted to Russian and Iranian corporations only.

Control of natural resources and the port of Tartous

Russia’s economic incursion has not only included investments in significant tourism attractions but also in all crucial industries that ensure profitability, particularly those related to oil, gas, and ports.

The offshore exploration and extraction activities in Block No. 1 were assigned by the Syrian government to the Russian firm “Capital” in 2021. Capital was founded just four years prior and does not usually partake in any oil and gas activities.

Subsequently, it was discovered that this company was merely a front for the Russian Wagner Group. Wagner is a security company connected to Putin. It has recently sent mercenary battalions to fight with Russian soldiers in Ukraine, Syria, and Africa.

In the meantime, the Russian company Soyuzneftegaz was granted the rights to conduct oil and gas exploration in a region covering more than 2,190 km2 that stretches from Tartus’ southern coast to the city of Banias.

Gennady Tymoshenko, the most well-known of Russian businessman close to Putin, is the owner of this corporation. Additionally, it received a contract to investigate the Qara area in the Homs countryside, which contains potentially significant natural gas fields.

Soyuzneftegaz is also expected to start extracting gas from offshore Block No. 2 next year after having recently completed exploration operations in the area. Thus, the company will be able to connect the gas extracted from this block to its production on land through pipelines, ensuring the economic feasibility of exports or sales within Syria.

Soyuzneftegaz’s contracts also go beyond the energy sector, and include obtaining the rights to extract phosphates from fields in Syria’s Palmyra region with 50-year contracts and a production volume of nearly 2.2 million tons a year.

The company also secured the rights to explore for minerals in the phosphate fields in the Badia region, east of Damascus. Syria possesses reserves of more than 1.95 billion tons of phosphate in these fields, the fourth largest in the world.

The Russian company has also obtained an investment contract to operate the Tartus port, Syria’s largest and most active in terms of import and export, with a total area of ​​about 3 million cubic meters.

Soyuzneftegaz’s primary areas of expertise are the extraction and production of energy resources. Therefore this contract has received a great deal of scrutiny for its acquisition of a significant sovereign facility.

These accusations are in fact supported by the corporation’s subpar port management. 3,600 workers were let go from the port not long after the enterprise seized control of it, which incensed the Syrian population.

Syria has not held open, competitive, or transparent competitions among interested parties in granting licenses for the operation of oil and gas fields, offshore blocks, or fields of minerals and natural resources.

Instead of granting contracts based on the offers that afford the highest profits to the Syrian state, transactions were made by Russian enterprises. This was driven by their proximity to Putin and their association with the billionaires surrounding the Russian president.

Furthermore, the Syrian government has chosen not to disclose these contracts or divulge their specifics. This ignores the need for transparency when dealing with natural resources.

Syria pays the price for Russian military intervention

Russian enterprises’ now dominate public facilities, tourist destinations, and natural resources. Their only competitors are Iranian companies looking to establish a minimal presence in these areas.

As a consequence, the Syrian people have been subject to unfair deals and pledges. This includes investments in tourist attractions, the Syrian state’s share of its natural resources, or the beneficiaries of economic activity in the country.

The war in Syria has so far inflicted damage that exceeds $530 billion, with military operations having destroyed more than 40% of the country’s infrastructure. It has also fueled Russia’s ambitions for further economic benefits in the future.

As Syria heads toward reconstruction activities, albeit slowly due to the limited available resources, Russian real estate developers are poised to benefit from this stage as well, which is exactly what the Russian regime has been preparing for.

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