Iran’s ambitious post-war reconstruction in Syria

An Iranian construction official recently announced that Iran has signed a memorandum of understanding with the Syrian government to build “200,000 housing units” in Damascus. The agreement was made in the fourteenth Iran-Syria economic conference in late January, attended by Iran’s First Vice President Eshagh Jahangiri and the Syria Prime Minister Emad Khamis.

A 40-member delegation, including business executives from the private sector, and the Iranian Central Bank governor, Abdolnaser Hemmati, accompanied Jahangiri in his visit to Damascus. “One of the most important issues of interest is enabling direct exchanges and transfers between Iranian and Syrian banks outside of the international SWIFT system”, Jahangiri told the state-run news agency IRNA in the wake of the meeting. He also spoke of plans to construct a power plant in the Latakia province.

These are among the steps Tehran, President Bashar Al-Assad’s key backer throughout eight years of Syrian civil war, has taken towards playing a major role in the post-war reconstruction.

The policy seems to be aimed at translating the Islamic Republic’s predominantly security-military presence in Syria into active non-military engagement that would help sustain its influence on the ground after the war is completely over. It additionally seeks to foster a fertile ground for Tehran to reap the benefits of its costly support for the Assad government and compensate for the economic loss it has incurred as a result.

Syrian President Bashar Al-Assad (L) and Iranian President Hassan Rouhani in Tehran, Iran on 25 February 2019

A spokeswoman for the former UN Special Envoy to Syria, Staffan de Mistura, pointed out in a June 2015 interview that Iran was estimated to be spending $6 billion a year on supporting the Syrian government. Other estimates have put the expenditure, in terms of military and economic aid, between $15 and $20 billion annually. Nadim Shehadi, a Middle East scholar and Associate Fellow at the British think tank Chatham House, believes the Islamic Republic has spent some $105 billion in total in Syria.

In March 2017, Mohammad Ali Shahidi, the head of Iran’s Martyr Foundation, announced that since the outbreak of the civil war in early 2011, at least 2,100 “shrine defenders” – an official label reserved for Tehran-backed troops and paramilitary forces in Syria – had been killed. In January the same year, five memoranda of understanding were signed between the two regional allies during a visit by Syrian Prime Minister Khamis to Tehran, including contracts for mining phosphate, supplying mobile operation services, and installing oil and gas terminals.

Given that the Islamic Revolutionary Guards Corps (IRGC) controls the bulk of the telecommunications industry in Iran, it is expected to particularly benefit from the mobile network deal in Syria as well, which will also allow the group to keep a close tab on Syrian communications.

Iran eyes a key role in Syria’s post-war higher education sector as well. Last year, Ali Akbar Velayati, a top advisor to the Supreme Leader Ayatollah Ali Khamenei, told reporters about a directive issued by Bashar Al-Assad that permits Tehran to launch branches of the Islamic Azad University (IAU) – a vast semi-private network of universities and colleges across Iran – in “all Syrian cities”. Velayati is chairman of the IAU’s board of trustees.

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However, the Islamic Republic’s scramble for a suitable share in the Syrian post-conflict reconstruction faces formidable challenges.

For starters, Iran’s Syria strategy since the outbreak of the civil war has rarely been informed by long-term economic considerations, meaning that the necessary structures and mechanisms for lucrative cooperation – like the ones which exist between Iran and Iraq – are for the most part lacking. In November 2017, Hossein Selahvarzi, vice president of Iran’s Chamber of Commerce, revealed in a rare interview with ILNA news agency that despite a “preferential agreement” and the extension of credit lines worth billions of dollars to Syria, the Syrian government has set “a series of” limits on the import of Iranian products. “The Syrian market is currently satiated with contraband Turkish goods and Syrians prefer to consume those commodities,” he added.

The powerful presence of Russia is another key impediment to Iranian attempts at market penetration and economic activity in Syria. Given its “big power” status in international politics and established diplomatic ties with regional actors such as Turkey and Saudi Arabia, Moscow is comparably in a much more convenient position to win reconstruction contracts at the expense of Tehran. In fact, by inviting Russian military intervention in favour of the Assad government in September 2015, Iran largely forswore a potential dominant role in the post-conflict reconstruction, even though the former might not have emerged triumphant from the destructive war absent Russia’s air power. Today, competing for major economic gains seems to constitute a key part of the mostly silent rivalry between Moscow and Tehran in Syria.

Finally, perhaps the reimposition of comprehensive sanctions against Iran by the Trump administration in the wake of its withdrawal from the nuclear deal in May 2018, have prevented Syrian banks from opening “letters of credit” for Iranian businesses, according to banking officials in Tehran.

While the Islamic Republic has successfully managed to prop up its sole strategic ally in the region and develop, with the assistance of Lebanese group Hezbollah, an extra layer of deterrence against Israel on the Syrian territory, its intervention has arguably amounted to a great loss in economic terms. In spite of Tehran’s determination to stay in Syria for the long-haul, this structural failure does not augur well for a profitable post-war engagement.

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