Global Economy

The crisis in Syria is one of the most important elements of the policy in the Near East, as well as global economic processes. The problems of Syria focuses the attention of world powers, namely, the leading NATO countries, China, regional centers of power, such as Turkey, Iran, Israel, and neighboring Arab countries on the diverse reasons of the conflict. In fact, economists analyze Syrian crisis as part of the “Arab Spring” with specific features. The paper focuses on different internal and external economic factors that caused the Syrian crisis, such as the expansion of intervention in the Syrian economy and the growth of the internal Syrian problems with new political reforms.

Type of assignment
Writer level
Number of pages
Total price:


Serious structural internal problems in Syria began after the death of Hafez al-Assad in 2000. The thirtieth anniversary of his reign associated with "socialism with Arab face" was a combination of tight relationships of the dictatorship with the principles of social and economic justice (similar to the Nasser regime in Egypt, Gaddafi in Libya or Saddam Hussein in Iraq). As a result, Basile, the eldest son of Hafez al-Assad, had to become his successor, but he died in a car crash in 1994. Consequently, the youngest son Bashar al-Assad became the President of Syria. The younger Assad studied in a London residency that largely caused his economic policy, which based on the system's flirtation with the West. Immediately after Bashar became a president, the country suffered a setback from old principles in the field of economics and began classical neo-liberal reform within the sight of the International Monetary Fund and the World Bank. At the same time, a country government decided to embark on separation from Russia and Iran. Besides, the leaders of Syria planned to strengthen ties with Western countries, and accelerate the accession in the World Trade Organization. As a result, the young neoliberal reformers that studied in the West replaced the representatives of the "old guard" in the government. In the first place, the new government allowed operating the foreign banks in the country. The Arab, Euro-Arab and concessional banks, such as Saudi-French bank Bimo, Saudi-Islamic Bank, Jordan-Syrian Bank became the first allowed establishments. However, such big entities of the Western financial capital as Citigroup and HSBC came to Syria later. At the request of the IMF, the maximum share of foreign capital in Syrian banks increased from 49 to 60%. As a result, by 2006, Syria came in fourth place in the world among recipients of foreign direct investments (FDI). The total amount of foreign investments in Syria increased from 115 million dollars in 2001 to 1.6 billion in 2006. A few components prompted the exit of investors and financial arrays outside Syria. Despite the fact that the Syrian government forced confinements on taking finances outside the Syria, the aggregate sum of bank deposits continued decreasing as pressure raised and the financial assets in the country decreased correspondingly. In fact, deposits dropped by 38 percent before the end of 2012 and the aggregate sum of deposits came to 320 billion liras before the end of 2012 contrasted with 442 billion toward the begin of the contention. Such changes became operational after an announcement by the legislative leader of the Syrian Central Bank and the reports issued by the Bank until March 2011. In fact, Syria is a homeland to 11 private banks, seven outside banks, and three Islamic banks. The effect of the emergency differed with one bank to the next with losing of more than one quarter of their financial activities, while others needed to close down. Template neoliberal economic reforms have included an increase in the private sector at the expense of reductions in public spending, subsidies, and social guarantees. In fact, such changes led to the classic neoliberal results: a sharp rise in social disparities between large and medium cities and villages. The number of Syrians people who live below the poverty increased from 11% in 2000 to 35% in 2010 and amounted to 7 million people. Besides, in rural areas the poverty has reached 62%. In addition, the unemployment rate sharply rose to 20% and especially affected youth. Such situation was typical for the countries of southern Europe (Greece, Spain, Portugal), but in the Syrian conditions, it was supplemented by the fact that approximately 3.5 million people in rural areas generally left without income and actually lived for subsistence farming. Moreover, the Sunnis became the most successful capitalists and business leaders in the big cities, and not the country's ruling Alawite elite. Institutional contradictions reflected in the adoption of the relevant labor and tax laws, which together with oil revenues gradually led to the emergence of the "new middle class" that do not meet the size of their property and limited market opportunities. The new bourgeoisie sabotaged social programs and lobbying for foreign investment in exchange for the liberalization of social relations. By 2001, the income of the 30% of the richest population accounted for 83.6 % of total income in the country, while 30% of the poorest population possessed only 7.1%. In fact, such indicator of social inequality was similar to the one of Western capitalist countries. The logical development of the theme of domination and enrichment of the new bourgeoisie was the policy of privatization and liberalization of the economy performed under the leadership of President Khatami, who promoted the interests of the upper classes. Since 2003, corruption in Syria essentially raised from 49 to 81 on a scale of 100 as measured by the Corruptions Perceptions Index. Country leaders, such as Assad’s relatives and companions, have profited from the government’s central control over the Syrian economy and legal framework due to some extent of non-competitive contracts. In 2004, the Majlis banned the creation of new companies with state majority stake and began the legislative process of privatization of the remaining state-owned enterprises. In April 2004, the government decided to sell approximately 65% of the shares of major Iranian banks to the private sector. In the same month, the Article 44 of the Constitution was amended that restricted the ownership of television and radio channels, postal, and telegraph companies.

In general, the 85% of the Syria territory are deserts and semi-deserts. Despite such fact, the several major rivers flow through the country. The Euphrates flows in a southeastern direction through the center of Iraq. The Tiger flows over a small segment of the Syrian-Turkish border, and to Iraq. There are few minor rivers flowing in a southwesterly direction, and the 4-5 billion cubic meters of water is in underground aquifers. Consequently, Syrian situation in the water supply can be described as catastrophic. The acute problem is closely connected with Turkey, which controls the Euphrates and the depletion of aquifers in the city and province of Damascus. Syria has turned into a hostage of Ankara and not only in the field of water supply but also in agriculture, food, and electricity. Therefore, the most important economic branches were not under control of the Syrian leadership. Since 2007, due to the drought, Syria's population left more than 160 villages. The minimum of 250 thousand people moved to Damascus, Aleppo, and other cities. At the same time, Damascus, as well as other cities, could not take so many immigrants. Only in Damascus, workers dug 25,000 illegal wells, which resulted in lowering the level of water supply and sanitation. A real ecological disaster started after the first year of drought in 2006. As a result, 800 thousand farms were destroyed and approximately 3 million people were in a state of extreme poverty. While the government claimed that Syria could fully meet their needs for grain, the harvest in 2010 amounted to 3.3 million tons, which was 500 thousand less than the country needed. Therefore, between 2006 and 2011, a five-and-a-half year drought destroyed 85 percent of domesticated animals and 60 percent of agricultural land in a few districts, resulting in the rising cost and food shortages. The drought caused an influx of unemployment, while an estimated 800,000 rural agricultural laborers lost their occupations and affected relocation from rural to urban territories. Therefore, such economic issues became a part of a crisis causes.

As was previously mentioned, the introduction of the so-called “social market economy” with the new regime of subsidies negatively influenced the majority of the citizens of Syria. Expected prosperity level was not reached, and the measures aimed at positive outcome have pushed the middle class into poverty. In 2008, inflation was 17%, and then slightly declined. Nevertheless, the decline was short-term, and the inflation increased alongside with the sharp rise in global food prices. The income gap grew sharply, as well as unemployment, which reached the level of 20-25%. The government did not hold its promises regarding the creation of 250 thousand jobs per year. Even before the formal beginning of the liberalization, the 2 million people (11.4% of the population) lived below the official line of extreme poverty with incomes of less than 1458 pounds (32 dollars) per month. Besides, the 5.3 million people (30.1% of the population) were living in relative poverty, with less than 2250 pounds (49 dollars) per month. In 2007, already 12.7% of the population lived in extreme poverty, and 33% of the population lived in the relative poverty. In 2008, the government abolished fuel subsidies, and their prices increased to 300% for one day. In 2009, the global financial crisis sharply reduced the amount of remittances sent back for the Syrian workers employed abroad. In fact, Syrian GDP decreased during the 80's and stagnated over the 90s. Such trend briefly stopped with the “liberalization economic policy”, though the economic renaissance was still seen in Damascus and Aleppo. In any case, the relative prosperity brought by liberalization spread unevenly, and it was simply not enough to counterbalance the demographic and social tensions, that existed in provinces, such as Deraa and Dar az-Zaur.

The study of the Syrian crisis is a complex problem. The focus on individual aspects of the issue does not provide a complete understanding of what is actually occurring. The military-economic internal factor is one of the key factors of the crisis in Syria. The world economists cannot ignore that the conflict takes place in the region with rich natural resources and a complex energy infrastructure. Consequently, it follows that all the parties taking part in it have their economic interests. First, is necessary to mention the terrorist organization "Islamic State of Iraq and the Levant" (ISIL), which controls the oil fields and channels of energy transit on the territory of Syria. It is well-known fact that the smuggling of hydrocarbons is the main source of income in the "budget" of the ISIL. According to experts, due to the implementation of the stolen oil, militants receive approximately 50 million dollars monthly. Despite it, the oil money is not the only source of income for the ISIL. In second source of their profitability is agriculture. In fact, by controlling a third of the territory of Syria, the terrorists managed to establish the economic ties in the occupied areas. The militants capture the agricultural equipment and food supplies and then resell it in local markets. The above-mentioned illegal terrorist incomes caused the damage to the Syrian economy and became another Syrian crisis reason.

Apart from internal economic factors of a Syrian crisis, the external factors also played a sufficient role. The most obvious factor of the United States, European Union, NATO and all the neighboring states intervention in the Syrian economics was the promising routes of energy flows. In 2011, in the Iranian city of Bushehr, Iran, Iraq, and Syria signed a memorandum of intent to build a gas pipeline with a rich South Pars field in Iran through Iraq to Syria. The memorandum was signed with the prospect of further pads exploration on the bottom of the Mediterranean Sea to Greece and the construction of terminals for liquefied gas transportation. According to the agreement, the output points of the planned pipeline to the coast were Syrian Latakia and Tartous. Moreover, the EU introduced sanctions against Syria, despite the fact that legally elected Syrian president tried to perform the demands of the opposition and offered dialogue for joint reconstruction of the state. At the same time, Arab and Turkish television channels started the information war against the Syrian government and increased the internal conflict. Theoretically, Europe was against the Assad government because it is much more profitable to be the owner of the pipeline than simply the buyer of gas. As for the US, they were interested in weakening of Europe's dependence on Russian energy supplies and the control of alternative pipelines. Moreover, Israel, in addition to long-standing conflict with Syria due to the Golan Heights, has appeared as a direct rival for Damascus. After the announcement of large gas reserves in the Syrian province of Latakia, world mass media represented the news about the giant gas fields in the Mediterranean Sea off the Israel area. However, gas supplies from Israel to Europe do not meet the geo-economic trend due to the required simultaneous development of energy infrastructure in Asia, which was a pledge of further global economic development. Therefore, there was a struggle for government regimes in strategic ways. In this regard, Israel has had problems, since the direct energy transit had to go through unfriendly Muslim countries. Besides, Shiite “Hezbollah” was a problem to a creation of a possible hub in Lebanon. Therefore, the overthrow of the Syrian government, Syria’s split, and neutralization of gas supply competitors fully meet the vision of Israel politicians. In fact, such policy became a serious economic problem for the crisis in Syria. Finally, Syria's Muslim neighbors had their reasons to contribute to the destabilization of the situation in the country. In fact, the gas fields of the Arabian Peninsula are smaller in volume then the Iranian stocks, but they also could become the basis for deliveries to Europe. The route became alternative to the “Shiite pipeline” and could pass through Sunni countries, from Arabia via Jordan to Syria, to the Sunni town of Homs. After that, the branches of the pipeline moved to Latakia and Lebanon Tarabulus (Tripoli). The implementation of such plan required the overthrow of the Syrian government, Syria’s split, and neutralization of gas supply competitors. International sanctions additionally played a noteworthy part in the Syrian crisis owning to their astounding effect on the Syrian commercial parity with the drop in exports, particularly in oil. It made the Syrian government begin searching for different markets, since Arab and European nations had constituted 90 percent of Syrian exports in 2008, as indicated by the IMF report of 2009. At the same time, Syria was bolstered by Lebanon, imports from which increased by 18.8% to 50% in general at the beginning of 2012, and Iraq, exports to which was raised to 30 percent, according to the report issued by Global Insight on Syrian imports from Lebanon. As for the oil industry, economists analyze the decrease in the efficiency of the given Syrian economic field that elevated transportation expenses and international sanctions for the trade. Additionally, the European Union and the United States sanctions against oil fares evaluated to cost $400 million of losses every month in a period of 2009-2012.

The economists must pay particular attention to the position of Turkey as their economic policies also contributed to the crisis in Syria. The Government of the so-called “moderate Islamists” is not a single entity. In addition to the confrontation with the nationalist and left wing opposition, there are also contradictions within the ruling groups. At the same time, the Turkish government is fighting against separatism in the border areas with Syria. Under such circumstances, the Turkish authorities must ensure economic growth and expansion into new markets, otherwise the country can simply collapse. The basis for the Turkish domestic and foreign policy was the ideology of the “new Ottomanism”. Due to the bad relations with the ruling regimes in the Arab countries, Turkish authorities sympathetically apprehended “Arab Spring” and often supported the Islamist opposition. However, the open economic intervention of Turkey was made only in relation to Syria. Shortly before the beginning of the Syrian crisis, that time Prime Minister of Turkey Recep Tayyip Erdogan visited Damascus. Nevertheless, the economists did not know what he was trying to negotiate with the Syrian leadership, but apparently, he failed. Initially, the Turkish authorities’ aimed at gaining access to the energy flows in Syria.

Consequently, Syria has different economic reasons of crisis. One of them is President Bashar al-Assad, who accepted power in 2000 after the death of his father Hafez who had ruled Syria since 1970. After he occupied the position, Assad immediately started the reforms, as force remained concentrated in the ruling family, and the one-party system left few channels for political dispute. Careful change of the socialism leftovers gave a possibility to invite private investments, launching the appearance of consumerism among the urban upper-middle collar classes. Besides, such neoliberal reforms caused different internal factors, such as a financial assets decrease in the country, and the unemployment and inflation increase. The new bourgeoisie policy sabotaged social programs and lobbied foreign investment in exchange for the liberalization of social relations, which caused the decline in a development of the country. As for external factors, the intervention of Western Asia and Eastern Europe in the Syrian economics became other reason of the Syrian crisis. The most common purpose of the active foreign policy was the flows of energy resources. In fact, the implementation of their plan required the overthrows of the Syrian government, Syria’s split, and neutralization of gas supply competitors. Moreover, diverse sanctions damaged international relations and greatly worsened the economic situation in Syria. Besides, the military-economic aspect and the aggressive ISIL policy became the sufficient factor of the Syrian crisis. It is well-known fact that the smuggling of hydrocarbons is the main source of income of the ISIL that negatively influences weakened Syrian economy. Therefore, different internal and external economic factors became the general causes of the Syrian crisis.

Sep 24, 2019 in Economy
Same-Sex Marriage
The Evolution of International Trade Theory

Related essays