Lengthy, arduous street to de-weaponizing Syria’s financial system

The collapse of the Syrian authorities led by Bashar al-Assad on December 8, 2024, marked a historic second within the Center East. It nonetheless stays to be absolutely understood how the insurgent coalition — a various meeting of political and ideological teams backed by regional powers — swiftly overpowered authorities forces.

What is obvious, nevertheless, is that a significant component within the regime’s downfall has been the persistent social and financial decay that has worsened all elements of Syrian life over the previous 13 years.

This deterioration was not solely brought on by the humanitarian disaster that displaced half of Syria’s inhabitants and destroyed the nation’s infrastructure but in addition by the weaponization of regional and world provide chains by means of financial sanctions.

Since 2011, a number of waves of sanctions have been imposed on Syria, geared toward draining authorities funds and devastating practically all the nation’s financial and social actions. The measures resulted in widespread deindustrialization and extreme financial deterioration.

Whether or not Syria — a rustic of strategic world significance — is on a path to lasting peace or one other extended interval of instability stays to be seen.

The roots of unrest

When disruptions — later often known as the Syrian Revolution — started in 2011, Syria was on a comparatively wholesome financial trajectory. Unemployment was at about 8% and the center class fashioned about 60% of the inhabitants.

Nonetheless, financial developments have been largely concentrated in city facilities, whereas rural areas — dwelling to most Syrians — lacked social and financial infrastructure.

Whereas small and medium-sized enterprises have been rising, authorities elites managed probably the most profitable enterprise actions in Syria. Corruption and paperwork have been pervasive throughout public establishments.

This disparity fuelled resentment and the agricultural inhabitants later turned a driving drive behind the early phases of the Syrian Revolution. The revolution finally ignited a sequence of occasions that spiraled into a fancy worldwide proxy battle.

Hundreds have been killed on each side, many have been imprisoned or disappeared, and numerous others fled to neighboring nations or sought refuge in Europe.

Because the battle dragged on, the state of affairs grew more and more dire. In 2024, the United Nations described the Syrian disaster as “one of many world’s most advanced emergencies.” A whole lot of hundreds of Syrians risked their lives looking for refuge in nations worldwide.

Syria’s financial collapse

Since 2011, Syria’s GDP has plummeted by 87%, its forex has misplaced greater than 99% of its worth and inflation on fundamental client items has soared past 300%.

The deteriorating financial and social circumstances in Syria, exacerbated by more and more stringent sanctions, have fully disconnected Syrian corporations from regional and world provide chains. Most companies needed to shut down, with only some managing to relocate to neighboring nations.

Companies that managed to outlive have devolved into zombie corporations — companies which might be now not economically viable, however which might be being sustained by means of different means, like authorities subsidies.

Unlawful financial actions flourished, secretive provide chains emerged and corruption turned deeply entrenched inside public organizations.

Insurgent coalition rule

Within the wake of the Syrian authorities’s collapse, analysts — although optimistic — stay skeptical in regards to the nation’s future.

The brand new ruling entity in Damascus is Hayat Tahrir al-Sham (HTS), a former department of al-Qaida and the foremost drive within the insurgent coalition. HTS beforehand competently ruled Idlib, a metropolis in northwestern Syria, counting on international help by way of Turkey to ship fundamental providers to residents.

Critics argued the HTS authorities in Idlib was “dictatorial” and “authoritarian” sufficient to spark protest earlier this 12 months. On December 9, HTS requested the Idlib authorities — which is completely made up of HTS loyalists — to manipulate Syria till March 2025. The group has not disclosed its plans past that date.

Managing the agricultural, conservative area of Idlib is way totally different from managing a fancy nation like Syria. However, regardless of rising considerations about HTS’s one-party interim authorities, the group is prone to capitalize on the general public’s reduction on the downfall of Assad’s regime and the top of 13 years of civil battle to determine short-term political stability.

Different opposition teams, many with violent histories, seem to assist HTS’s short-term plan, looking for to barter their position within the new political settlement. Nonetheless, early indicators counsel HTS, whereas adopting inclusive rhetoric, continues to stick to an authoritarian and totalitarian type of governance.

Challenges forward

HTS’s key backers, Turkey and Qatar, will doubtless present monetary help and funds to spice up public opinion within the brief time period. Nonetheless, long-term political stability in Syria hinges on sustained public assist, which is deeply tied to the nation’s financial state of affairs. The brand new rulers in Damascus face the daunting job of reviving the financial system.

A key prerequisite for reviving the Syrian financial system is the de-weaponization of regional and world provide chains, which entails greater than eradicating the imposed financial sanctions on Syria. It requires revitalizing small and medium-sized enterprises and rebuilding public organizations able to supporting home provide networks appropriate with regional and world provide chains.

That is simpler stated than finished; small and medium-sized enterprises and the center class have been decimated over 13 years of civil battle. Private and non-private organizations in Syria have already undergone the zombification processes, changing into closely reliant on help to outlive.

Zombie corporations sometimes exhibit sub-optimal manufacturing efficiency, low innovation and a unfavourable affect on financial exercise. As such, it’s doubtless that native organizations lack the present capability to take part and/or improve in regional and world worth chains. Rebuilding these capabilities would require establishing a robust innovation ecosystem and home provide chain governance.

Early indicators counsel that HTS will favor its loyalists to dominate financial and social actions. Such an method dangers recreating an Islamic model of Assad’s financial governance, lengthy characterised by a state-directed financial system, capital controls and cronyism. Key regional gamers, Arab states and worldwide gamers have already expressed considerations about participating with the Syrian financial system beneath the brand new Islamic regime in Syria.

All through the previous 13 years, the Assad regime emphasised a winner-takes-all method — a stance that HTS seems now to undertake. To revive the Syrian financial system and de-weaponize provide chains, HTS has no selection however to desert such a mindset. In any other case, the brand new ruler in Damascus will quickly face the identical challenges that led to the earlier regime’s collapse.

Hassan Wafai is affiliate professor, College of Administration, Royal Roads College

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