1996 DirectTalksBetweenSyriaandIsrael–Infitah:SyrianPolicyofOpeningupthe Economy–External:aCloudontheHorizon–AgriculturePerformsWell Syria’s geographical position, sandwiched between Lebanon, Israel and Jordan, continued to shape political developments in 1994 and 1995. The main issue re- mained the prospects of a bilateral peace agreement between Syria and Israel hanging on an Israeli withdrawal from Syrian territory on the Golan Heights, occupiedsince1967. President Hafez al-Assad is one of the Arab world’s longest serving leaders, and he has repeatedly shown his ability patiently to maintain pressure over a long time. Assad criticised the Palestine Liberation Organisation (PLO) and Jor- dan for making agreements with Israel in 1994, but he repeatedly emphasised thatSyriawillnotactivelyopposethem. US BrokeredTalks In a series of direct talks between Syria and Israel, brokered by the US, both sides failed to even approach a compromise on the peace issue, and instead de- cided to discuss possible security arrangements in the Golan Heights area if Is- rael withdrew. Damascus continued to insist that a demilitarised zone (DMZ) be the same size on both sides of any new frontier, while the Israelis insisted that the DMZ be nine times larger on the Syrian side due to its far greater terri- tory than Israel’s. The Israeli government also expressed fears over the future controlofthewatertableundertheHeights. In December 1994 General Ehud Barak of Israel and General Hikmat Shihabi of Syria held an unprecedented meeting to discuss mutual security concerns on the Golan Heights. This broke up without success as the Syrians reiterated their insistence that Israel adhere to UN Security Council Resolutions 242, 338 and 425 demanding Israeli withdrawal from the Golan Heights and from south Leb- anon. In January 1995 Israel and Syria resumed direct talks in Washington, though once again there was no progress. In April 1995 the US administration’s negotiator Dennis Ross held yet another round of talks with Syrian officials, and once again they were without progress. In June Damascus denied rumours that a deal on the Golan was imminent, underlining their view that while Syria wanted peace, and wanted the Israelis off the Golan, they were not under pres- sureoftimeandcouldaffordtowait. © koninklijke brill nv, leiden, ���9 | doi:�0.��63/978900439�533_0�� 1996 223 However, there was more progress in relations with other countries. In No- vember 1994 the Russian Foreign Minister visited Damascus, signalling a new phase in Syrian-Russian relations. Moscow hoped that it could regain some of its former influence in the Middle East by exerting its influence over Damascus in the sphere of the Middle East peace process. This was in part dictated by Syria’s US$2 billion debt to Russia, which will grow to US$10 billion by 2015. Meanwhile, relations with Europe improved when the European Union (EU) lifted its eight-year arms embargo on Syria in November 1994. However, short- ageoffinancepreventedanynewcontractsfrombeingsigned. DomesticScene President Assad showed no sign of loosening his tight grip on political life. In August 1994 Assad’s Ba’ath Party candidates won 167 of the 250 seats of the Peo- ple’s Assembly (parliament) up for election. Although the results were no sur- prise, the fact that 10 of the 13 independent candidates returned from Damas- cus were successful businessmen underlined the growing desire of Syria’s business community to adopt a more direct role in politics. This was principally to ensure that the government continues on its policy of infitah – opening up of theeconomy. SlowEconomicGains The economy performed relatively well in 1994 and early 1995 and there were no signs that Syria would be forced to apply International Monetary Fund (IMF) prescribed measures. Annual GDP growth recorded a very respectable 8 per cent in 1994, though this was down from 10 per cent the previous year. The gov- ernment managed to rein in inflation to 18 per cent, down from 25 per cent in 1993.Afurtherfallto12percentwasforecastfor1995. The private sector built on the successes of 1992 and 1993, but called for more liberalisation measures to allow further progress. The government managed to address problems in power generation, and investments over previous years in the telecommunications system showed fruit. Inward investment into the country had been impressive since the government passed the ground-break- ing Investment Law 10 in 1991. Most of the more than US$3 billion invested in power stations, a new telephone network and new sewage system originated amongSyrianemigrésbasedintheGulfandtheWest. However, Syria’s external debt remained a major cloud on the horizon. The country owed US$16.513 billion, a sum roughly equivalent to it’s GDP. Most of the debt – some US$12.456 billion – was owed to the former Soviet Union (FSU) coun- tries (mainly Russia), while around US$430 million was owed to the World Bank. Although Damascus didnot make any moves towards repayment to the Soviet.