Syria's Post-Conflict Economic Reconstruction: a Role of Russian FDI in the Syrian Energy Sector

FACULTY OF SOCIAL STUDIES

Syria’s Post-Conflict Economic Reconstruction: A Role of Russian FDI in the Syrian Energy Sector

Bachelor's Thesis

ELIZAVETA FILIPPOVA

Supervisor: Mgr. Martin Chovančík, Ph.D.

Department of International Relations and European Studies International Relations and European Politics

Brno 2021

SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

Bibliographic Record

Author: Elizaveta Filippova Faculty of Social Studies, Masaryk University Department of International Relations and Euro- pean Studies Title of Thesis: Syria’s Post-Conflict Economic Reconstruction: A Role of Russian FDI in the Syrian Energy Sector Degree Programme: International Relations and European Politics Supervisor: Mgr. Martin Chovančík, Ph.D. Academic Year: 2021 Number of Pages: 614 Keywords: Syria’s Civil War, Post-Conflict Economic Recon- struction, FDI, Rentier State, Russian Energy Stra- tegy, War Economy

1 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

Abstract

In this research paper, I will analyze Syria's post-conflict economic reconstruction. I will focus on the potential of Russian FDI in the Syrian energy sector. Russia is the largest investor in Syria over the last years, and one of its biggest investment sectors is oil and gas. Construction of the energy sector is vital for local economic development, as it is a main source of electricity for citizens, and it produces high- priced and demanded commodities for export. Therefore, the aim of my thesis is to determine preferable conditions of the Russian FDI for Syrian economy. This is crucial in order to avoid Dutch Disease and the infamous fate of turning into a rentier economy in the future, and to contribute to the economic recovery of the host country.

2 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

Statutory Declaration

I hereby declare that I have written the submitted Bachelor's Thesis concerning the topic of Syria’s Post-Conflict Economic Reconstruction: A Role of Russian FDI in the Syrian Energy Sector independently. All the sources used for the purpose of finishing this thesis have been adequately referenced and are listed in the Bibliography.

In Brno 18 May 2021

...... Elizaveta Filippova

SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

Acknowledgements

TABLE OF CONTENTS

Table of Contents

List of Images 7

List of Tables 8

List of Terms and Acronyms 9

1 Introduction 11

1.1 The Reasons to Examine Russia's Role in Syria's Energy Sector Reconstruction 13

1.1.1 Syria's Domestic Obstacles to Energy Sector Reconstruction 16

1.2 Hypothesis and Aim of the Research 17

2 Literature Review 19

2.1 Rentier State Theory 19

2.1.1 Theory on Russian Energy Strategy in OFDI 21

2.2 FDI in Post-Conflict States 22

3 Methodology 25

4 Analysis 27 4.1 Economic Policy of Syria in the Decade prior to 2011 Arab Spring: Economic Inequality, Rural Impoverishment, Food Insecurity, and Elite Capture 30 4.2 Domestic Politics of Syria in the Decade prior to 2011 Arab Spring: Political Authoritarianism and Institutional Decay 4.3 War Economy Tenets as Another Internal Obstacle to Reconstruction 32 4.4 Socio-Economic Consequences of the Civil War 34 4.5 A Role of the Energy Sector for Syria’s Economy 36

5 6 OBSAH

4.6 Russian Energy Strategy and Russian-Syrian Energy Partnership 38 4.7 Possession and Milieu Goals of Russian Interests in Syria’s Energy Sector with Reflection on “Narrow” and “Wide” Approach to Syria’s Reconstruction 41

5 Conclusion 48

Bibliography 50

6 LIST OF IMAGES 7

List of Images

7 8 LIST OF TABLES

List of Tables

Table 1

Source: The Financial Times, Retrieved from http://dhaman.net/en/wp-content/uploads/sites/3/2016/02/Syria.pdf

8 LIST OF TERMS AND ACRONYMS 9

List of Terms and Acronyms

B2B – Business to Business B2G – Business to Government CEO – Chief Executive Officer CIA – Central Intelligence Agency FDI – Foreign Direct Investment G2G – Government to Government GCC – Gulf Cooperation Countries GDP – Gross Domestic Product HDI – Human Development Index IFDI – Inward Foreign Direct Investment INA – Industrija Nafte ISIL – Islamic State of Iraq and the Levant MENA – Middle East and North Africa OFDI – Outward Foreign Direct Investment PPP – Private-Public Partnership

1 Introduction

In recent years, discussion about Syria’s reconstruction became more profound on the national level and promoted by the allied states.1 The major reason is the Bashar al-Assad regime and its military allies in face of Russia and Iran recapture of 70% of the Syrian territories, specifically after 2016- 2018 Aleppo,2 Deir ez-Zor,3 and Eastern Ghouta4 recapture from the terrorist and rebel forces. In 2019, the estimated cost of the Syrian reconstruction var- ied between $250 to $400 billion,5 whereas, in 2018, the state budget of Syria comprised $8.9 billion, and only $115 million share of it was aimed at reconstruction.6 While the financial engagement of third actors seems unavoidable in such economic conditions, it also has to be considered that Bashar al-Assad claimed that Syria will be rebuilt exclusively on its national and allies’ resources,7 including that of Russia, Iran, and China.

1 Agence France-Presse in Berlin. (August 18, 2018). Putin Urges Europe to Help Rebuild Syria So Refugees Can Return. The Guardian. Retrieved from https://www.theguardian.com/global/2018/aug/18/putin-urges-europe-to-help-rebuild-syria- so-refugees-can-return 2 BBC. (December 13, 2016). Aleppo Battle Ends as Syria Rebel Deal Reached. Retrieved from https://www.bbc.com/news/world-middle-east-38308883 3 Bassam, L. (November 8, 2017). Syrian Army, Allies, Tale Last IS Stronghold in Syria: Commander. Reuters. Retrieved from https://www.reuters.com/article/us-mideast-crisis-islamic-state/syrian-army-allies-take-last- is-stronghold-in-syria-commander-idUSKBN1D81NM 4 Reuters Staff. (March 22, 2018). Syria Rebels Depart Eastern Ghouta Town on Govern- ment Buses in First Surrender. Retrieved from https://www.reuters.com/article/uk-mideast-crisis-syria-ghouta/assad-closer-to-ghouta-victory-as-some-rebels-prepare-to-quit-idUKKBN1GY0XS?edition-redirect=uk 5 Hodali, D. (January 7, 2019). Rebuilding Syria. Who should foot the bill for Assad? Deutsche Welle 2018. Retrieved from https://en.qantara.de/content/rebuilding-syria-who-should-foot-the-bill-for-assad 6 Daher, J. (September 4, 2019). The Paradox of Syria’s Reconstruction. Carnegie Middle East Center. Retrieved from https://carnegie-mec.org/2019/09/04/paradox-of-syria-s-reconstruction-pub-79773 7 Sharifulin, V. (June 24, 2018). Syrians Will Reconstruct Country After War Themselves, Assad Says. TASS. Retrieved from

11 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

Before the outbreak of the civil war, in the period from 2000 to 2010, Syria’s economy has consistently experienced ambiguous effects of adopting over 1,000 economic neoliberal policies in absence of required institutional and political reforms.8 The state withdrew from various industrial and service economic sectors, but due to corruption and nepotism, this economic policy only enabled a handful of businessmen to take part in liberalization or to pri- vatize those industries. This led to the formation of a narrow economic circle closely connected to the ruling political regime and the deterioration of economic and social disparities among large strata of the population. The socioeconomic conditions of pre-conflict Syria lay in the foundation for grasping the ongoing reconstruction narratives and their threats.9 On the one hand, there is the established crony capitalist elite in Syria which has ties not only to the Assad regime but also to the security officials as a consequence of the war economy tenets.10 On the other hand, there is the established economic elite in Russia which is also close to the Putin political regime and protects its business interests in Syria through placing paramilitary units financed by its subsidiary companies.11

https://tass.com/world/1010788 8 Friberg Lyme, R. (2012-2013). Sanctioning Assad’s Syria. Mapping the Economic, Soci- oeconomic and Political Repercussions of the International Sanctions Imposed on Syria Since March 2011. Chapter 2, pp. 14-15. Retrieved from https://www.diis.dk/files/media/publications/import/extra/rp2012-13_sanctioning_as- sads_syria_web_1.pdf 9 Daher, J. (2018). The Political Economic Context of Syria's Reconstruction: a Prospective in Light of a Legacy of Unequal Development. European University Institute, Middle East Directions, Robert Schuman Centre for Advanced Studies. Retrieved from https://cadmus.eui.eu/bitstream/handle/1814/60112/MED_2018_05.pdf?sequence=4 10 Daher, J. (2018). Chapter 2. The Syrian economy in wartime. War profiteering: deepening pre-war practises. 11 Rondeaux, C. (2020). The Strategic Logic of Russian PMSC Operations in Syria. Chap- ter: Inquiry into the Murder of Hamdi Bouta and Wagner Group Operations at the Al-Shaer Gas Plant, Homs, Syria 2017. Pp. 17-26. Published by New America. Retrieved from https://www.jstor.org/stable/resrep25419.6

In this research paper, I will analyze Syria's post-conflict economic reconstruction from the angle of the history, potential, and threat of Russian FDI in the Syrian energy sector. Based on the literature covered below, there is a ground to expect that, at least, in the first years of reconstruction, Syria will experience the exploitative patterns of Russia’s FDI in its energy sector.

1.1 The Reasons to Examine Russia’s Role in Syria’s Energy Sector Reconstruction

Besides the conflict-poverty trap that resulted in the destruction of human and physical capital and low productivity, the Syrian reconstruction is also complicated by the territorial fragmentation that threatens security and stimulates unequal reconstruction, as well as by inefficient juridical system and unequal government participation opportunities.12 All of these factors may hinder the economic recovery of the country, which is pursued in the post-conflict societies as it ensures a stable supply of first need commodities, reconstruction of public services and industrial capa- bilities, and legal employment.13 Stable functioning of the energy sector, in particular, is vital for the local economic development of Syria, as it was a main source of electricity for citizens in the pre-war times, and it had a capacity to produce decently-priced commodities for sales and export.14

12 Dahi, O. (June, 2020). Conflict Economies in Syria: Roots, Dynamics, and Pathways for Change. Chapter 2.2 Syria’s Political Economy: Unbalanced Development, Elite Capture, and Institutional Decay. 2019 Syrian Center for Policy Research (SCPR). Retrieved from https://www.scpr-syria.org/conflict-economies-in-syria-roots-dynamics-and-pathways-for- change/ 13 A joint project of the Center for Strategic and International Studies (CSIS) and the Asso- ciation of the United States Army (AUSA). (May, 2002). Post-Conflict Reconstruction. So- cial & Economic Well-Being. Pp. 12-17. Retrieved from http://peacebuildingcentre.com/pbc_documents/post-conflict_reconstruction_task_force- framework.pdf 14 Britannica. Economy of Syria. Resources and Power.

13 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

The oil sales generated 25% of the government’s revenues15 and 24% of the national GDP before the outbreak of the civil war.16 Russia has been one of the largest investors in Syria over the last years,17 and one of its biggest investment sectors has been exactly oil and gas. Therefore, it is important to understand the Russian geostrategic and business interests in the Syrian economy to comprehend the dynamics of Syria's reconstruction. What is more, even though some Western investors were present in Syria’s energy sector at the end of the 20th century and beginning of the 2000s, they largely withdrew their actives after the 2005 U.S. sanctions against the Assad regime caused by the alleged Syrian leader’s engagement in the assassination of Prime Minister of Lebanon, Rafik Hariri; along with the series of European sanctions imposed after the 2011 brutal suppression by the government forces of the Arab Spring protesters.18 Meanwhile, Russian investments have been consistently entering the Syrian energy sector since the beginning of the 2000s, and the withdrawal of the Western enterprises from Syria has allowed Russian energy majority state-owned companies, including Gazprom and Stroytransgaz, to expand their shares in the Syrian oil and gas companies, which are also largely na- tionalized. This G2G partnership between Syria and Russia resulted in the launching of the Jordan–Syria part of the Arab Gas Pipeline, commissioning

15 IMF. (March 2010). Country Report №10/86. Syrian Arab Republic. Pp. 17. Retrieved from https://www.imf.org/external/pubs/ft/scr/2010/cr1086.pdf 16 U.S. Energy Information Administration (U.S. EIA). (June 24, 2015). Syria: International Energy Data and Analysis. Pp.1. Retrieved from https://www.eia.gov/international/ content/analysis/countries_long/Syria/syria.pdf 17 Mauritius Trade Easy. (Last updated in January, 2021). Syria: Investing. Retrieved from http://www.mauritiustrade.mu/en/market-survey/syria/investing 18 Rondeaux, C. (2020). The Strategic Logic of Russian PMSC Operations in Syria. Chap- ter: Inquiry into the Murder of Hamdi Bouta and Wagner Group Operations at the Al-Shaer Gas Plant, Homs, Syria 2017. Pp. 17-20.

of a new gas processing plant in Hayan Block, which is one of the most important Syria’s production sites, and other successful projects in oil- and gas- rich Palmyra and Homs regions in Syria.19 From the strategic view, the revenues from the functioning of the oil- and gas- production sites in the Northern and Central parts of Syria predominantly invested by Russian energy giants ensures, on the one side, Assad regime survival and, on the other side, serves business interests of the Russian economic elite close to Vladimir Putin.20 Due to the specifics of the G2G partnership, the protection of Assad’s political stability is in the economic interest of the Russian side, and there is information that, back to 2013, the Russian paramilitaries were placed in the Palmyra region to safeguard the strategic sites.21 Moreover, Russia is one of the largest arms exporters to the Assad’s regime.22 Russia’s 2015 military intervention in the course of the Syrian civil war resulted in regaining the Syrian government’s strength through restoring control over the Palmyra region after defeating ISIL. Recapture of the natural resources production plants was a turning point for Assad's power because the regime’s budget heavily relies on profits from the oil and gas sector.23 Hence, the economic and political interests of both sides are secured by Rus- sian military engagement, weakening Syria’s position in defending its FDI preferences in the energy sector.

19 Rondeaux, C. (2020). 20 Mammadov R. & Karasik T. (December 5, 2019). Russia’s Energy Interests in Syria. In- ternational Policy Digest. Retrieved from https://intpolicydigest.org/2019/05/12/russia-s-energy-interests-in-syria/ 21 Rondeaux, C. (2020). Pp. 22. 22 Trenin, D. (February 9, 2012). Why Russia Supports Assad. The New York Times. Re- trieved from https://www.nytimes.com/2012/02/10/opinion/why-russia-supports-assad.html?_r=2&partner=rss&emc=rss 23 Barnard, A. (November 21, 2017). Assad and Putin Meet, as Russia Pushes to End Syrian War. New York Times. Retrieved from https://www.nytimes.com/2017/11/21/world/middleeast/assad-putin-russia-syria.html

15 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

1.1.1 Syria’s Domestic Obstacles to Energy Sector Reconstruction Additionally, it is necessary to consider that the socioeconomic inequality that was one of the major reasons for the outbreak of the civil war and that sharpened during the war had a profound impact on Syria’s post-conflict reconstruction. Firstly, market forces and the profit-seeking nature of foreign investors in reconstruction exacerbate the existing inequalities by favoring the groups and the regions that were already wealthier.24 In the case of Syria, “the group” is the economic elite associated with the Assad’s regime, and “the regions” are resource-rich Homs-Palmyra area and seaside and geostrategi- cally crucial Latakia and Tartus cities under Assad control. Secondly, the given economic policy formed the structure of the Syrian economic elite that is going to receive and manage the incoming FDI.25 The Syrian patronal businessmen might have the same interests as the Russian businessmen do – to earn compensation for the war-induced economic losses as quickly as possible. It has to be considered that the percentage of the state revenues from the oil and gas sector was minimal even prior to the conflict, as most profits were spent on paying off the dividends.26 The same scenario may likely repeat un- less there are no economic and political reforms adopted by the Syrian ruling regime.

24 Langer, A. & Stewart, F., and Venugopal, R. (October 18, 2011). Horizontal Inequalities and Post-Conflict Development: Laying the Foundations for Durable Peace. https://www.researchgate.net/publication/285873686_Horizontal_inequalities_and_post- conflict_development_laying_the_foundations_for_durable_peace 25 Daher, J. (2018). Chapter 3. Wartime Reconstruction Plans. 26 Butter, D. (June, 2015). Syria’s Economy: Picking Up the Pieces. Chatham House. Pp.15-21. Retrieved from https:// www.chathamhouse.org/sites/default/files/field/ field_document/20150623Syri- aEconomyButter.pdf

1.2 Hypothesis and Aim of the Research

Thereby, Syria is highly constrained in choosing its FDI conditions and is risking to become a rentier economy of Russia largely due to the: 1) already established leading position of Russia in the Syrian oil and gas sector; 2) dependence of Assad’s regime on Russian active military engagement; and 3) Syria’s corrupt and cronyistic economic structure. To some extent, this could be, hypothetically, averted through Syrian government implementation of policies aimed at improving business and investment climate (e.g., pro- posed “Rebuild Syria” plan and recently reviewed new investment bill), pro- moting Public-Private Partnership (PPP) and B2G, B2B commercial deals, and establishing legal framework for regulating economic disputes. Theoret- ically, such economic reforms could lead to an increase in competition among FDI donors (e.g., Iran, China, GCC) interested in Syria and to the improvement of the FDI conditions offered to Syria. The aim of my thesis is, therefore, to define whether Syria fits the pattern of a rentier economic state by analyzing the internal and external risk factors. I will further demonstrate examples of exploitative agreements that Syria is already signing in the energy and interdependent with the energy sectors, while also representing the reconstruction-oriented projects. Eventually, I will outline the major challenges that prevent Syria from implementing effective economic reconstruction.

17 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

2 Literature Review

2.1 Rentier State Theory

The concept of the rentier state is fundamentally derived from the no- tion of rents, which were defined by Adam Smith in one of his most influen- tial books “The Wealth of Nations” as earnings that are not labored for but are rather gained as a consequence of possession of land or natural resources.27 Another classical economist, David Recardo referred to rents as compensation for the ownership of a specific resource,28 while Alfred Mar- shall later defined rents related to natural resources as revenues produced by “the gift of nature”.29 A distinctive feature of a rentier state is that the total income of its economy heavily depends on external rents paid by foreign actors.30 According to the modern-day founders of theories on rentier states,31 rentier economies generate income in an absence of domestic economic and political development and without an increase in the nation's productivity, which are foremost reflected in the state’s inability to tax more citizens and enterprises.32 The revenues generated from the export of oil are considered as one of the major forms of external rents. The oil rentier economies are

27 Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Chap- ter XI. 28 Ricardo, D. (1817). On the Principles of Political Economy and Taxation. Chapter III. 29 Marshall, A. (1920). Principles of Economics. Book II Chapter IV. 30 Mahdavy, H. (1970). Patterns and Problems of Economic Development in Rentier States. The Case of Iran". In M. A. Cook (ed.). Studies in the Economic History of the Middle East (1 ed.). London: Routledge. pp. 428–467. 31 Beblawi, H. & Luciani, G. (1987). The Rentier State. Published on December 12, 2016 by Routledge. 32 Beblawi, H. & Luciani, G. (1987).

inherent to the MENA region, to several Latin American states, and to such African countries as Angola, Uganda, and South Sudan, among others. Re- searching in particular on the rentier economies of the Middle Eastern region, Beblawi claimed that the population which mainly does not bear the load of taxes is less politicized and demanding, and an incentive for economic development of the nation is negated by the overwhelming rents from the natural resources.33 Rentier economy implies not only sales of natural resources but also such forms of rentierism as the rent of land for a foreign military base placement and foreign development and military aid referred to as “the strategic rents”;34 as well as transit fees and remittances.35 Considering that commonly in the Arab world the major recipient of the external rents is the government and its agencies are engaged in the distribution of this wealth among citizens, there is a so-called “rentier mentality” among the population.36 This challenges development of civil society and a process of democratization,37 as well as forms a theoretical explanation for the phenomenon of widespread authoritarian regimes in such rentier states.38 However, a range of scientists, including Michael Ross and Michael Herb, question the correlation between

33 Beblawi, H. (1987). The Rentier State in the Arab World. Arab Studies Quarterly, 9(4), pp. 383-398. Retrieved from http://www.jstor.org/stable/41857943 34 Moore, M. (2004). Revenues, State Formation, and the Quality of Governance in Devel- oping Countries. International Political Science Review, 25, pp. 297-319. 35 Beblawi, H. (1990). The Rentier State in the Arab World in Giacomo Luciani (ed.) The Arab State, London: Routledge, pp. 85-98. 36 Beblawi, H. (1987). 37 Schwarz, R. (2008). The Political Economy of State-formation in the Arab Middle East: Rentier States, Economic Reform, and Democratization. Review of International Political Economy, 15:4, pp. 599-621. 38 Beblawi, Hazem. (1987). Pp. 385-386.

19 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR rentierism and the presence of authoritarian political regimes, focusing rather on the negative influence of rentierism on development.39 When testing the application of Rentier State Theory (RST) to the case of Syria’s, it is also evident that a post-conflict Assad’s political regime is substantially dependent on the external rents from Russia’s government (e.g. rent of Syrian seaport in Tartus for Russian naval force placement and rent of land in Latakia for Russian air force deployment) and its majority-state owned enterprises (e.g. Gazprom, Stroytransgaz, etc.) investments in the natural resources-rich Hayan Block complex, the Arab Gas Pipeline, and extraction of minerals projects.40 The probability of Syria falling into the trap of rentierism depends on which strategy will be chosen by Russia’s side in Outward For- eign Direct Investment (OFDI) to the Syrian economy and specifically to its energy sector.41

2.1.1 Theory on Russian Energy Strategy in OFDI The major debate in the academic literature on the motives of Russian energy enterprises in implementing OFDI is built around contradistinction between: 1) promotion of Russian geostrategic and national interests through

39 Herb, Michael. (2005). No Representation Without Taxation? Rents, Development, and Democracy. Comparative Politics, 37(3), 297-316. Retrieved from https://www.jstor.org/stable/20072891?origin=crossref&seq=1 40 Afridi, M., & Jibran, A. (2018). Russian Response to Syrian Crisis: A Neorealist Per- spective. Strategic Studies, 38(2), 56-70. Retrieved from https://www.jstor.org/stable/48539137?seq=1 41 Matveev, I. A. (2019). Ed. by Ibrahim, A & Charles, A. Russian-Syrian Business Coop- eration: Challenges and Prospects. Syria Transition Challenges Project, Discussion Paper (1). Geneva Centre for Security Policy.

energy policy,42 sometimes mixed up with the interests of a political elite;43 or 2) profit-oriented incentives of the Russian energy companies;44 or 3) individual interests of top managers of energy transnational companies.45 When analyzing the motives of Russian OFDI to Syrian energy sectors, scholars take into account both facilitation of Russian state interests, as well as profit- seeking interests of Russian energy TNCs, and also personal motives of TNCs’ directors closely associated with a Russian political elite.46

2.2 FDI in Post-Conflict States

When FDI enters a post-conflict state it may have such favorable im- pacts on its economy as creation of jobs for citizens, transfer of modern tech- nologies and skills, reinforcing access of host country to global markets, and, overall, improving its economic productivity. However, the poor investment climate associated with insufficient judicial rules and economic and political instability in post-conflict countries makes them attractive to a few investors despite the potential for high returns on investments due to the low level of

42 Nosko, A., & Orbán, A. (2008). Power, Energy, and the New Russian Imperialism. Inter- national Issues & Slovak Foreign Policy Affairs, 17(4), pp. 95-98. Retrieved from https://www.jstor.org/stable/26591206 43 Shevtsova, L. (2005). Putin’s Russia. Washington DC. Carnegie Endowment for Interna- tional Peace. 44 Kuznetsov, A. (2007). Prospects of Various Types of Russian Transnational Corporations (TNCs). (2010). Industrial and Geographical Diversification of Russian Foreign Direct In- vestments. Electronic Publications of Pan-European Institute. 45 Tepavcevic, S. (December, 2015). The motives of Russian state-owned companies for outward foreign direct investment and its impact on state-company cooperation: Observa- tions concerning the energy sector. Transnational Corporations 23(1): pp. 29-58. Retrieved from https://www.researchgate.net/publication/292163375_The_motives_of_Russian_state- owned_companies_for_outward_foreign_direct_investment_and_its_impact_on_state-com- pany_cooperation_Observations_concerning_the_energy_sector 46 Afridi, M. & Jibran, A. (2018). Matveev, I. A. (2019). Rondeaux, C. (2020).

21 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR preconditions in post-conflict states.47 Those investors are predominantly interested in extractive sectors which are export-oriented and have significant potential for dividends generation. This poses a challenge of rentierism to a post-conflict host economy as natural resources and minerals sectors are limited in providing employment and improving local economic development and are dependent on external demand trends.48 However, there is yet little literature on whether Russia’s OFDI to the Syrian energy sector threatens to turn the Syrian economy into a rentierist condition, or is likely to contribute to the process of Syria’s post-conflict economic reconstruction. According to Igor Matveev, a head of the Trade and Economic Division of the Russian Embassy in the Syrian Arab Republic during 2014-2017, this depends on whether Russia’s side will choose a “narrow”, exploitative, or “wide”, oriented toward development, approach to Syria's post-conflict reconstruction.49 Although the latter approach would be more preferable for Syria, this is challenged by numerous factors: Russian limited material resources, un- willingness of the Western states to engage with Syria’s reconstruction before the political regime change takes place, and strategic interest of Russia in avoiding disturbance of the balance of power among the regional powers, e.g. Iran and Turkey, in the course of such an ambitious strategy.50 Besides the

47 Turner, N., & Aginam, O., and Popovski V. (2008). Foreign Direct Investment in Post- Conflict Countries: Opportunities and Challenges. United Nations University. ISBN 978- 92-808-3065-1 48 Jersen, L. (September, 2020). Foreign Direct Investment and Growth in Fragile and Con- flict-Affected Counties. UNDP Global Policy Network. USA: New York. Chapter 2. FDI in Fragile & Conflict-Affected Countries, pp. 10-16. Retrieved from https://reliefweb.int/sites/reliefweb.int/files/resources/wp_fdi_growth_fca_SEP_8.pdf 49 Matveev, I. A. (2019). 50 Ramani, S. (January 31, 2019). Russia’s Eye on Syrian Reconstruction. Carnegie Endow- ment for International Peace. Retrieved from https://carnegieendowment.org/sada/78261

external obstacles to Syria’s post-conflict economic reconstruction, scholars argue that unaddressed Syria’s structural and socio-economic inefficiencies could avert successful implementation of reconstruction.51 There is also a widespread argument that large economic inequality and consequent socioeconomic grievances52 became one of the major reasons for the civil uprising in 201153 and the consequent eruption of the civil war that formed the war economy. The war economy, in turn, became another internal obstacle to peacebuilding and efficient reconstruction.54

51 Daher, J. (2018). Daher, J. (2019). The Paradox of Syria’s Reconstruction. Carnegie Mid- dle East Center. Retrieved from https://carnegie-mec.org/2019/09/04/paradox-of-syria-s-reconstruction-pub-79773 52 Dahi, O., & Nasser, R., & Ismail, R., and Marzouk, N. (2019). Conflict Economics in Syria: Roots, Dynamics, and Pathways for Change. 2.2 Syria’s Political Economy: Unbal- anced Development, Elite Capture, and Institutional Decay. Syrian Center for Policy Re- search (SCPR). Retrieved from https://www.scpr-syria.org/conflict-economies-in-syria-roots-dynamics-and-pathways-for- change/ 53 Dahi, O., & Munif, Y. (2012). Revolts in Syria: Tracking the Convergence Between Au- thoritarianism and Neoliberalism. Journal of Asian and African Studies, No. 47, Vol. 323, 323-331 54 Abboud, S. (January 9, 2014). Syria’s War Economy. Carnegie Middle East Center. Re- trieved from https://carnegie-mec.org/diwan/54131

23 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

3 Methodology

This is an idiographic, also known as descriptive, theory-guided case study55 that aims to comprehend and interpret Syria's post-conflict economic reconstruction. It is focused on a limited number of events and conditions and their interrelationship56 in precipitating and consolidating rentier patterns in Syria’s reconstruction. The case study is divided into three stages: 1) retro- spective stage referred to the past – analysis of pre-war economic policy and state-civil relations; 2) prospective stage57 reflecting the present – comprehension of war economy tenets and socio-economic consequences of the war; 3) consecutive stage foreseeing the future of reconstruction based on exam- ining the history of Russian-Syrian energy partnership. The repercussions of the civil war on the Syrian economy and human capital productivity are quantitatively assessed. Secondly, data on the main sectors of the Syrian economy is described. Then, the inward investment in Syria before and after the outbreak of the war is compared by investor countries and sector allocation, deriving Russian percentage share in the Syrian FDI and its invested sectors. With the use of foreign policy analysis, Russian interests in the Syrian economy are formed into possession goals and milieu goals.58 This analysis

55 Levy, J. S. (2008). Case Studies: Types, Designs, and Logics of Inference. Peace Science Society (International). Conflict Management and Peace Science, 25:1–18. Retrieved from https://is.muni.cz/el/1423/jaro2013/MVZ453/um/Levy--Case_Studies-Types_De- signs_and_Logics_of_Inference.pdf 56 Yin, R. K. (2014). Case Study Research. Design and Methods. 5th ed. London, Thousand Oaks: Sage Publications. 57 Suresh M. D. (November 1, 2015). Case study: Research Method for Social Sciences. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2684644 58 Allison, G. T. (September, 1969). Conceptual Models and the Cuban Missile Crisis. The American Political Science Review, Vol. 63, № 3. Pp. 689-718.

contributes to describing Russia’s “broad” or long run oriented approach to Syria’s economic reconstruction through focusing on milieu goals, while a “narrow” approach is reflected through rather exploitative motives inherent to the possession goals of Russia.59 Then, a conceptualization of Russian and Syrian strategies in dealing with natural resources is reflected through analysis of the structural and political similarities of the two regimes and the framework of national interests of both states. The conceptualization helps to define the type of relationships between Russian and Syrian companies in Syria's energy sector. Furthermore, there is a description of business-military strategies of the Russian energy companies utilized since the beginning of the 2000s in increasing their influence in Syria's energy sector and its potential profit from it. The Syrian interest in Russian investments in the energy sector is dis- cussed in the framework of a decrease in Syria’s current natural gas and, especially, oil production capacity and their export constraints. All of the men- tioned data and conditions are considered in defining whether Russia is likely to choose the “wide” approach to Syria’s post-conflict economic reconstruction or the “narrow” approach aimed primarily at gaining the soonest possible compensation for its conflict-related losses.

59 Matveev, I. A. (2019). Ed. by Ibrahim, A & Charles, A. Russian-Syrian Business Coop- eration: Challenges and Prospects. Syria Transition Challenges Project, Discussion Paper (1). Geneva Centre for Security Policy.

25 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

4 Analysis

4.1 Economic Policy of Syria in the Decade prior to 2011 Arab Spring: Economic Inequality, Rural Impoverishment, Food Insecurity, and Elite Capture

Analyzing the potential and challenges in Syria’s post-conflict economic reconstruction requires first comprehension of Syria’s political economy and state-civil relations prior to the conflict and the way it affected war economy tenets. From 2000 until 2010, Syria had been continuously experiencing economic liberalization and privatization, adopting over 1,000 policies within this process.60 On the one side, in the period from 2000 until 2010, annual GDP growth reached approximately 4.3%61, and considering population growth metrics it was equal to about 2.6% per capita GDP growth.62 From 2005 to 2010, GDP increased by over 50%, rising from around $28 billion to about $60 billion.63 On the other side, the poverty rate grew from 14% during the 1990s to 33% in 2007, whereas 30% of Syrians were barely above the

60 Lyme, R. F. (2012). Sanctioning Assad’s Syria, Mapping the economic, socioeconomic and political repercussions of the international sanctions imposed on Syria since March 2011. Danish Institute for International Studies Report 2012:13. Retrieved from https://www.diis.dk/files/media/publications/import/extra/rp2012-13_sanctioning_as- sads_syria_web_1.pdf 61 The World Bank Group. (2017). The Toll of War: The Economic and Social Conse- quences of the Conflict in Syria. Retrieved from http://www.worldbank.org/en/country/syria/publication/the-toll-of-war-the-economic-and- social-consequences-of-the-conflict-in-syria 62 Syrian Center for Policy Research. (2016). Informal Labor in Syria: exploitation, lack of organization, and conflict. 63 The World Bank Group. (2017).

poverty line.64 The rising poverty was accompanied by two important phenomena: 1) stronger impoverishment of rural areas than that of cities – 62% of the poor resided in rural suburbs;65 and 2) widespread informal labor, especially within rural areas, where 48% of workers were informally employed, and among young people under 30 years old, who comprised over 50% of the informal workforce.66 Both phenomena are considered as risk factors for conflict outbreak, as the former induces mass migration from rural areas to cities potentially leading to clashes between rural and urban social groups, and the latter makes young people vulnerable to seek or agree on mercenary service.67 Despite the fact that tax evasion was a widespread issue in Syria reaching $2 billion in 2009, a series of tax liberalization policies still took place, including a reduction in corporate and individual taxes.68 At the same time, there was a reduction in state subsidies on the first need commodities such as energy services and vital products. As a result, the period from 2006 to 2010 was marked by the price increase of bread and cereal by over 50% and that of vegetables and meat by 23%, making essential commodities

64 Abu-Ismail K., & Abdel-Gadir A., and El-Laithy H. (October 15, 2012). Poverty and inequality in Syria (1997- 2007). Pp. 1-3. UNDP, Arab Development Challenges Report Back- ground Paper 2011/15. Retrieved from https://www.arabstates.undp.org/content/rbas/en/home/library/Sustainable_develop- ment/poverty-and-inequality-in-syria---1997--2007--.html 65 Abu-Ismail K., & Abdel-Gadir A., and El-Laithy H. (October 15, 2012). Pp. 3. 66 ILO. (2010). Gender, Employment and the Informal Economy in Syria. Policy Brief 8. Retrieved from https://www.ilo.org/wcmsp5/groups/public/---dgreports/---gender/documents/publication/wcms_144219.pdf 67 United Nations and World Bank. (2018). Pathways for Peace: Inclusive Approaches to Preventing Violent Conflict. Chapter 2: The Need for Prevention in an Interdependent World; Demographic Change and Populations on the Move, pp. 61-66. Chapter 4: Why People Fight: Inequality, Exclusion, and a Sense of Injustice; Youth Inclusion, pp. 119-124. Retrieved from https://openknowledge.worldbank.org/handle/10986/28337 68 Daher, J. (2018).

27 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR highly inaccessible for low-income households69 that constituted about 60% of the population. Food insecurity also increases the chance of conflict outbreak, especially if induced by growing prices, and it affects rural areas more profoundly since it is engaged in agricultural production.70 In the case of Syria, food insecurity was accompanied by overall impoverishment and informal labour in rural areas. Already prior to the conflict, in 2008-2009, 67% of Syria’s GDP was coming in the form of rents and profits, whereas the share of wages constituted only 33%. The percentage of national wages in GDP had been continuously declining since 1992, when it accounted for 48%, while economic growth had been becoming increasingly dependent on external rents and export of oil.71 Eventually, the political economy of Syria in the period from 2000 to 2010 resulted in the creation of new monopolies controlled by relatives of Assad, a narrow business elite, and by the political regime itself.72 A particularly demonstrative example is Assad’s cousin Rami Makhlouf who was in charge of over 50% of the Syrian economy before 2011.73 Businessmen engaged in elite capture in the 2000s were taking advantage of Syrian rentierism, as they were predominantly gaining profit from extractive industries, along with construction, telecommunication, and other service sectors; and

69 Abboud, S. (2015). Locating the “Social” in the Social Market Economy. Hinnebusch R. (ed.) Syria: From authoritarian upgrading to revolution? Syracuse: Syracuse University Press, p.55. 70 United Nations and World Bank. (2018). Chapter 1: A Surge and Expansion of Violent Conflict; Conflict, Famine, and Displacement, pp. 28-29. 71 Daher, J. (2018). 72 Daher, J. (2018). 73 Cornish, C., & Khattab, A. (October 3, 2019). The Men Making a Fortune from Syria’s War. Financial Times. Retrieved from https://www.ft.com/content/525ec4e4-e4a3-11e9-9743-db5a370481bc

these were the most attractive industries to foreign investors as well. Crony- ism and patronage networks became inherent to Syria’s political economy of that time, consolidating the interests of political and economic ruling groups.74

4.2 Domestic Politics of Syria in the Decade prior to 2011 Arab Spring: Political Authoritarianism and Institutional Decay

Following the death of President Hafiz Al-Asad, Syrian society had experienced a wave of politicization.75 That was marked by the period of Da- mascus Spring, in 2000-2001, when Syrian intellectuals met in so-called “sa- lons” to discuss social and political issues. They publicly promoted their democratization-oriented ideas by spreading the “Manifesto of the 99” which required abolishment of martial law and advocated for various political and civil liberties and universal economic rights for all Syria’s citizens.76 Initially, Bashar al-Assad undertook certain pro-democratization actions through re- leasing hundreds of political prisoners, allowing establishment and reemergence of political parties and civil organizations, and even advocating for separation of authorities and seeking sustainable growth, justice in public affairs, knowledge and infrastructure development.77 However, the “thaw”

74 Haddad, B. (2012). Business Networks in Syria: The Political Economy of Authoritarian Resilience. Stanford University Press. 75 Human Rights Watch. (October 16, 2007). No Room To Breathe. State Repression of Human Rights Activism in Syria. Chapter III. Background: The Emergence of a Human Rights Community in Syria. Retrieved from https://www.hrw.org/report/2007/10/16/no-room-breathe/state-repression-human-rights- activism-syria 76 Carnegie Middle East Center. (April 1, 2012). The Damascus Spring. Middle East In- sights from Carnegie. Retrieved from https://carnegie-mec.org/diwan/48516?lang=en 77 Dahi, O., & Nasser, R., & Ismail, R., and Marzouk, N. (2019).

29 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR came to an end as early as in 2002 when a new series of political repression took place and the rhetoric on national unity and stability came to dominate the state agenda.78 Along with the economic capture by the elite and failed democratization attempts, “institutional suffocation” was an inherent part of Syria's politics during the 2000s. As the Syrian Center for Policy Research claimed, Syria’s institutions had been continuously ignoring the growing expectations and demands of the citizens.79 Eventually, it led to the marginalization of large parts of the population who were deprived of socio-economic development and political participation. To summarize, the economic policy and domestic socio-political climate in Syria before the civil war were referred to by the Syrian Center for Policy Research as “three zones of exclusion”: 1) economic exclusion of the vast majority of Syrians from taking advantage of GDP growth induced my continuous contractionary economic policy that resulted in declining job opportunities and prevalent role of rents and profits in GDP structure; 2) social exclusion reflected in worsening HDI indicators; and 3) political and institutional exclusion as a result of authoritarianism at regional and state levels.80 These three variations of exclusion are important to consider not only for defining reasons of the Syrian civil war but are equally important for out- lining the internally produced challenges for the post-conflict economic reconstruction, more specifically, for the effective FDI management. Domestic

78 Amnesty International. (June 6, 2002). Syria. Smothering freedom of expression: the detention of peaceful critics. Retrieved from https://www.amnesty.org/download/Documents/120000/mde240072002en.pdf 79 Syrian Center for Policy Research. (2013). Socioeconomic Roots and Impact of the Syr- ian Crisis. Beirut: Syrian Center for Policy Research. Retrieved from https://www.scpr-syria.org/socioeconomic-roots-and-impact-of- the-syrian-crisis-2013/ 80 Syrian Center for Policy Research. (2013).

economic, social, and political exclusion are the factors that hinder the potential of any FDI entrance to the post-conflict state.81 Hence, it would also be considered as a local challenge while analyzing the potential of Russian FDI in the Syrian energy sector. Furthermore, the analysis of the political economy of Syria in the 2000-2010 period demonstrates that in the last pre-war years Syrian economy was already dependent on foreign assistance and the export of oil. According to Joseph Daher, the foreign countries that benefited the most from the new structure of the Syrian economy prior to the conflict were the Gulf Coopera- tion Countries and Turkey. This may be seen as a precondition to only a greater rentierism of Syria in the course of the post-conflict reconstruction, when the investment climate is even poorer and the need for external finance is unavoidable. In the case of Syrian post-conflict reconstruction, researchers highlight that Russia and Iran as foreign investors would benefit the most.82

4.3 War Economy Tenets as Another Internal Obstacle to Reconstruction

One of the major internal obstacles to effective reconstruction in Syria is an absence of absolute territorial integrity – pro-government forces control around 70-80% of the territory; and consequent development of various war economies within the borders of Syria. Moreover, third countries, including Turkey, the U.S., Iran, and Russia in the different parts of Syria, are involved in these war economies and have their vested interests in them.83

81 United Nations and World Bank. (2018). 82 Daher, J. (September 4, 2019). The Paradox of Syria’s Reconstruction. Carnegie Middle East Center. Retrieved from https://carnegie-mec.org/2019/09/04/paradox-of-syria-s-reconstruction-pub-79773 83 Balanche, F. (February 10, 2021). The Assad Regime Has Failed to Restore Full Sover- eignty Over Syria. The Washington University for Near East Policy. Retrieved from

31 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

Firstly, this could deprive approximately 5 million Syrians who live in the regions controlled by the opposition groups from benefiting from the reconstruction process, implying that reconstruction could further worsen the old-established inequalities within Syria. Secondly, the major characteristic of both pro-government and opposition-held war economies is cross-border and cross-regional smuggling in first need commodities due to destruction of agricultural and manufacturing industries. This illegal activity contributed to the formation of a group of war-profiteers both on the government’s and opposition’s sides. War profiteers in Syria have been accumulating profit via establishing checkpoints between regime-controlled and opposition-controlled territories and on the international borders and imposing fees on export and import of basic goods; as well as through smuggling commodities via tunnels that were dug during the sieges.84 For instance, one of the war profiteers, Ahrar al-Sham, had exclusive control during 2015-2016 over Syria's border crossing with Turkey, from which he earned on average $4.2 million each month.85 Importantly, Assad's regime controls only 15% of Syria's international borders,86 while the rest is divided between foreign countries involved in the internationalized Syrian civil war. Thus, the fundamental demand in import of food, water, medicine, and energy provision in absence of sufficient local production and investment created room for war profiteering activities. This is quite unrealistic to rely

https://www.washingtoninstitute.org/policy-analysis/assad-regime-has-failed-restore-full- sovereignty-over-syria 84 Daher, J. (2018). The Political Economic Context of Syria's Reconstruction: a Prospec- tive in Light of a Legacy of Unequal Development. War profiteering: deepening pre-war practises. 85 Tokmajyan, A. (2016). The War Economy in Northern Syria. The Aleppo Project, pp. 3. Retrieved from https://www.thealeppoproject.com/wp-content/uploads/2016/12/War-Economy.pdf 86 Balanche, F. (February 10, 2021).

on effective reconstruction when there is no legal and stable provision of first need commodities and little business and government initiative to address this issue. At the same time, agriculture and manufacturing are not the industries that attract foreign investors, especially in war-torn states. Hence, the state itself has to reinvest the money it receives, in the case of Syria, from natural resources and geostrategic rents into reconstruction of agricultural production and manufacturing of basic commodities. Diversification of the economy in such a way requires strong institutions and proper management, which are not inherent to corrupt and cronyistic Syria’s political economy. Another application of war economy analysis to reconstruction is a demonstrative correlation between those war-profiteers that act on the regime-controlled areas and the political regime, which grants such businessmen lucrative deals and government licences. Hence, the war economy further consolidated the interests of power and wealth holders, making the perspective of B2G partnership in reconstruction not that different from G2G partnership. Moreover, when taking into consideration the level of corruption and tax evasion in Syria, B2G partnership may pose a risk of little contribu- tion to the state budget, which, in turn, limits the possibilities of reinvestment of finance into agriculture and manufacturing sectors. Thus, the lack of proper macro- and microeconomic management and working institutions tentatively contribute to Syria's rentier status. This again highlights the necessity of domestic economic and socio-political reforms.

33 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

4.4 Socio-Economic Consequences of the Civil War

The economic functioning of Syria was undermined by destruction and substantial damage of almost one-third of Syria's physical capital87 and by death, disability, and emigration of large numbers of citizens, thus dimin- ishing Syria’s human capital. The scale of conflict-related casualties, according to different sources, reaches around 500,000 deaths; approximately half of the population of the pre-war size, accounting for more than 12.2 million of people, have fled Syria to neighboring Middle Eastern states like Lebanon, Turkey, Jordan, and the EU countries, or have been internally displaced.88 By 2015, the unemployment rate increased from around 15% in 2011 to 57.7%, leaving 3 million citizens without a job and depriving 12 million Syrians of the major source of income.89 According to the CIA estimation from 2014, 82.5% of Syrians lived below the poverty line.90 According to the same year report of the Syrian Center for Policy Research, 64.7% of Syria's population lived in extreme poverty and 30% of Syrians survived in the conditions of

87 World Bank. (July 10, 2017). The Toll of War: The Economic and Social Consequences of the Conflict in Syria. Retrieved from https://www.worldbank.org/en/country/syria/publication/the-toll-of-war-the-economic-and- social-consequences-of-the-conflict-in-syria 88 The UN Refugee Agency. Syria Emergency. Retrieved from https://www.unhcr.org/syria-emergency.html 89 Aljazeera. (March 12, 2015). Aid agencies slam UN Security Council over Syria. Re- trieved from https://www.aljazeera.com/news/2015/3/12/aid-agencies-slam-un-security-council-over- syria 90 CIA. (Latest Update: April 27, 2021). Middle East. Syria. Retrieved from https://www.cia.gov/the-world-factbook/countries/syria/

abject poverty.91 Furthermore, Syria experiences conflict-related hyperinfla- tion, and its inflation level is annually among the highest ones worldwide.92 According to the World Bank, since the outbreak of the civil war in 2011, the overall losses in GDP have accumulated $226 billion by 2016 and exceeded the last pre-war year GDP by four times. The crucial is that damage resulting from economic disruption induced by conflict is greater by a factor of 20 than the losses associated with physical destruction.93 The extractive industries of mining and hydrocarbon turned out to be the most devastated ones – its production suffered 94% loss since the civil war outbreak.94 The reasons are that the extractive industries' sites were the major targets of all opposition, rebellious, and terrorist organizations. Its seizure not only implied illegal sales of resources and as such self-maintenance, but also the high probability of Assad’s fall, since its regime and particularly army have been highly dependent on revenues from natural resources.

4.5 A Role of the Energy Sector for Syria’s Economy

Before the conflict outbreak, agriculture and oil were the two major sectors of Syria's economy that comprised approximately ½ of the Syrian GDP. Even though Syria is not a significant producer of oil within the Middle Eastern framework, making up only 0.5% of worldwide production, export

91 Syrian Center for Policy Research. (March, 2014). Syria. Alienation and Violence. Da- mascus, Syria. Retrieved from https://www.scpr-syria.org/download/alienation_violence_report/?v=1288 92 Macrotrends. Syrian Arab Republic Inflation Rate 1960-2021. Retrieved from https://www.macrotrends.net/countries/SYR/syrian-arab-republic/inflation-rate-cpi 93 The World Bank. (Last updated: October 1, 2020). The World Bank in Syrian Arab Re- public. Retrieved from https://www.worldbank.org/en/country/syria/overview 94 Gobat, J. & Kostial, K. (June, 2016). Syria’s Conflict Economy. IMF Working Paper 16/123, Middle East and Central Asia Department. Retrieved from https://www.imf.org/external/pubs/ft/wp/2016/wp16123.pdf

35 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR of oil was significant to the government, as it made up 25% of the Syrian state’s revenue in 2010.95 FDI consisted only 2.8% of the national GDP in the last pre-war year, thus foreign investors did not reach Syria often, and if they did, they were primarily interested in the export-oriented oil and gas sector that involved 87% of the stock FDI in 2010,96 in which coal and natural gas sectors accounted on average for 39% in the period from 2003 to 2015 (Table 1). Table 1

Source: The Financial Times, Retrieved from http://dhaman.net/en/wp-content/uploads/sites/3/2016/02/Syria.pdf However, since the outbreak of the civil war, Syria’s oil production suffered from the large economic sanctions that limited its trade with the EU, US, and the Arab League partners among others. FDI also largely decreased from $2.57 billion in 2009 to $804 million in 2012, and not only FDI inflows

95 The Syrian Consulting Bureau. (February 29, 2016). Foreign Direct Investment. Re- trieved from http://www.scbdi.com/en/Article48/Foreign-Direct-Investment-FDI 96 The Syrian Consulting Bureau study. Syria's 1st National FDI Report: From Resource- Seeking to Efficiency-Seeking FDI. Retrieved from http://sia.gov.sy/userfiles/reports/fdi-en.pdf

have been disrupted since the onset of the civil war, but also data collection. Only FDI of specifically interested countries came to Syria during the war, originating primarily from Russia and Iran. According to the Syrian Invest- ment Agency, Russia was the largest investor in Syria in the period from 2008 to 2014 (75.8%).97

4.6 Russian Energy Strategy and Russian-Syrian Energy Partnership

In 2000, when both Bashar al-Assad and Vladimir Putin came to power in Syria and Russia respectively, the energy sectors of both countries were leveraged by the U.S. and other Western countries’ capital (in Russia – British Petroleum, ExxonMobil, Chevron Texaco; in Syria – U.S. Marathon, Canada’s Sancor, Croatia’s INA) and constituted a crucial part of national GDP. In the early 2000s, Russia had been experiencing a transformation in its national oil strategy headed by the new president, who aspired to “liberate” the energy sector from the hands of oligarchs who built their fortune during 1990s privatization such as Mikhail Khodorkoscky (Yeltsin economic ad- viser, 2003 Deputy Minister of Fuel and Energy, and Yukos Oil Company owner), Roman Abramovich (2000-2008 governor of Chukotka Region and Sibneft, later Gazprom Neft, oil company leading shareholder), Michail Friedman (CEO of Tyumen Oil Company-British Petroleum and a member of numerous state institutions), among others, and from excessive foreign capital in the Russian energy sector. To eliminate the political influence of those oligarchs was of particular significance to newly formed Putin’s regime, as this economic elite gained power to regulate legislation on trade, taxation, and FDI through local and federal authorities and also acquired legitimacy on

97 Mauritius Trade Easy. (Latest Update: April, 2021). Syria: Investing. Retrieved from http://www.mauritiustrade.mu/en/market-survey/syria/investing

37 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR policies favorable to tycoons via media control. Consequently, Putin’s regime undertook a number of policies and ambiguous actions (e.g. demonstrative 2003 Yukos case and ever-continuous media restrictions) for re-organizing Russian oil and gas sector in order to secure Russia’s state leading position within the sector and acquire a strong lever of power on foreign countries through enhancing energy diplomacy.98 By 2016, oil and gas generated 36% of Russia’s state revenues, whereas the majority of state-owned Russian oil and gas companies invested in numerous international energy projects such as Yamal-Europe, Blue Stream, Nord Stream, Nord Stream 2, and Turk Stream, among others. Considering the recent shift of Russia’s foreign policy toward the Middle Eastern and North African region and energy diplomacy as its major tool, Syria definitely falls into the interests of Moscow. Yet, Syria is one of the smallest oil and gas producers in the region, it is potentially a very promising location for extraction of natural resources in the East Mediterranean basin, which plays a central role in the current competition for the waters of Syria’s neighbors, Lebanon and Israel, as well as that of Cyprus.99 According to the U.S. Geological Survey of 2010, there are natural gas reserves that amount up to 122 trillion cubic feet, along with 1.7 billion barrels of oil reserves located in the East Mediterranean basin.100

98 Brill Olcott, M. (2004). The Energy Dimension in Russian Global Strategy. Vladimir Putin and The Geopolitics of Oil. The James III Institute for Public Policy of Rice Univer- sity. Retrieved from https://www.russiamatters.org/analysis/five-years-after-russia-declared-victory-syria-what- has-been-won 99 Mammadov R. & Karasik T. (December 5, 2019). 100 U.S. Geological Survey. (March, 2010). Assessment of Undiscovered Oil and Gas Re- sources of the Levant Basin Province, Eastern Mediterranean. World Petroleum Resources Project. Fact Sheet 2010-3014. Retrieved from https://pubs.usgs.gov/fs/2010/3014/pdf/FS10-3014.pdf

During the early 2000s period, when Russia had been benefiting from an oil boom and its GDP had been continuously growing from 1999 until 2008 moving the Russian economy out of the 1990s recession, Syria had been undergoing political and economic isolation. This enabled Russian majority state-owned companies, particularly Gazprom and Stroytransgaz, to consoli- date their power in the Syrian energy sector. Stroytransgaz turned out to be the most effective company in contributing to Syrian oil and gas production in the Homs-Palmyra region, and it invested in the Syrian majority state- owned companies such as Syrian Petroleum Company, Ebla Gas Company, and Hayan Petroleum Company. After a decade of large Russian investment during the 2000s, Syria acquired a capacity of exporting approximately 580,000 barrels of oil per day.101 However, the national economic interests of Russia and Syria have been considerably damaged by the Western sanctions. Prior to the 2012 most serious U.S. and EU sanctions against Assad's regime, Europe was the largest oil importer for Syria. Thus, the Russian FDI in the energy sector, particularly in the Hayan Block, and the consequent sales of oil and gas to the European market represented the core of Assad's political regime maintenance. At the same time, the sanctions on Syria also posed a challenge to Russia’s return on investments. Later, the situation was worsened by the Western sanctions against the Russian large companies due to the 2014 Crimea annexation, further hurt- ing the business interests of the Russian economic elite. The suffering business interests are that of Gennady Timchenko, an owner of Stroytransgaz and a close friend of Vladimir Putin, and of Yevgeny Prigozhin, a close to the president businessman, who is linked to three companies providing services to Stroytransgaz in Syria – EvroPolis, Velada, and Merkury and to the

101 Rondeaux, C. (2020). The Strategic Logic of Russian PMSC Operations in Syria.

39 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR paramilitary organization, the Wagner Group, which has been operating in Syria.102 So, the Russian government and majority state-owned businesses involved in the Syrian economy are, at least, interested in compensating their losses incurred by sanctions and war. At most, Russian companies are sup- posed to strive for maximizing their profits with the use of its military protection. After the war, the probability of signing exploitative agreements without preconditions is high. The reasons are that re-commissioning of energy sites is vitally important for Assad’s regime, however, the investment climate and infrastructure are devastated by the war; while competition among investors is limited due to Assad’s regime “duty” to Russia after its active military involvement and financial assistance and also due to the international sanctions.

4.7 Possession and Milieu Goals of Russian Interests in Syria’s Energy Sector with Reflection on “Narrow” and “Wide” Approach to Syria’s Reconstruction

Possession goals are aimed at preserving or acquiring a specific “possession”, e.g., territory, scarce resources, trade preferences, etc. The objective of acquiring such “possessions” is the promotion of its relative regional and international power. Milieu goals are pursued in a wider geopolitical context, often beyond the national borders, and are aimed at the promotion of peace, security, and progress. Milieu goals may also be implemented with an objective to make the environment more favorable for acquiring possession goals, which is particularly relevant in the context of FDI in the energy sector.103

102 Rondeaux, C. (2020). 103 Allison, G. T. (September, 1969).

The experience of Russian oil and gas companies in Syria’s energy sector prior to the Syrian civil war is characterized by both pursuing possession goals such as extraction of resources, as well as enhancing some milieu goals, including commissioning industries interrelated with extractive production, investment in exploration and renovation projects and regional cross- national energy projects. For example, the possession goals of Russia may include: Stroytransgaz building and commissioning natural gas plants such as South Gas Processing Unit in Hayan and building a gas pipeline between major Syr- ian cities of Homs, Aleppo, and Idlib in cooperation with Syrian Gas Com- pany; and Tatneft extracting Syrian oil in partnership with Syrian Oil Com- pany.104 While milieu goals aimed at improving the Syrian environment for further extraction and enlargement of oil and gas sectors may be defined as following: Stroytransgaz commissioning of natural gas processing plant in the region of Raqqa and its involvement in “Northern Project” and “South Middle Area Gas Exploitation Project” gas refineries; supporting such international projects as commissioning Jordan-Syria part of Arab Gas Pipeline, enabling Egypt’s gas entering Syria; and Tatneft $12 million investment in exploration of oil wells near Syria’s border with Iraq. Overall, Russia's investments in Syria account for $20 billion.105 When discussing Russian companies' involvement in the Syrian energy sector during the war and within the reconstruction plans, it is first necessary to assess the losses that Russia had during the military intervention in

104 Khan Afridi, M. & Jibran, A. (Summer, 2018). Russian Response to Syrian Crisis. Stra- tegic Studies, Vol. 38, No. 2, pp. 56-70. Institute of Strategic Studies Islamabad. Retrieved from https://www.jstor.org/stable/pdf/48539137.pdf?refreqid=excel- sior%3A9945111949417a99509ddda41cf19625 105 Khan Afridi, M. & Jibran, A. (Summer, 2018).

41 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

Syria, as this could clarify to which extent Russia may have exploitative incentives in its FDI in order to compensate the war-incurred losses. According to different sources, Russian expenditure on the Syrian civil war was worth from $464 million to $664 million in the first year with average $2.4 million spendings per day,106 which could, eventually, account for $2.6 billion after 3 years of intensive warfare. These estimates are considered quite modest if compared to Russia’s annual defense budget equal to $50 billion in 2015 and, for example, to the U.S. expenditure in the 2003 Iraq War that reached approximately $125 billion annually.107 However, besides the military expenditure, the Russian investments in the energy sector have also been suffering from war-related destruction and the highly restricted possibility for export of the Syrian oil and gas, especially due to the EU sanctions, as European countries were the largest importer. These economic circumstances may be seen in the context of limited potential for oil and gas sales and, hence, an incentive to invest in other sectors of Syr- ian economy. The compensation for war-incurred losses can be implemented through Russian exclusive and highly profitable reconstruction-related agreements with Syria in the sectors of energy and construction, which induce Rus- sia to agree upon future investments in Syria without proper preconditions. This approach is reflected as the “narrow” one by Igor Matveev, a head of the Trade and Economic Division of the Russian Embassy in the Syrian Arab

106 Ellyatt, H. (October 21, 2015). This is how much Russia’s “war” in Syria costs. CNBC, Europe News. Retrieved from https://www.cnbc.com/2015/10/21/this-is-how-much-russias-war-in-syria-costs.html 107 Petkova, M. (October 1, 2020). What has Russia gained from five years of fighting in Syria? Aljazeera. Retrieved from https://www.aljazeera.com/features/2020/10/1/what-has-russia-gained-from-five-years-of- fighting-in-syria

Republic during 2014-2017, and tends to outsource the lucrative deals to a few Russian businesses with a successful experience in Syria before and in the course of the conflict, e.g., Stroytransgaz and its subsidiary company Stroytransgaz Logistic which, for instance, recently gained the right to extract Syrian phosphate reserves.108 Since the outbreak of the civil war, Russia turned toward a “possession” oriented approach not only in the Syrian energy sector, but in its economy as a whole – Russia signed three several decades lasting agreements with Syria in the energy sector, mineral industry, and in geostrategic cooperation. Firstly, Stroytransgaz signed a 25 years agreement valid from 2013 to 2038 on the right to explore Syrian oil and natural gas exactly on the promising 2190 square km coastline of the Mediterranean sea stretching from Tartus to Baniyas. Secondly, Stroytransgaz acquired a 50 years contract to develop the phosphate fields in Palmyra. Moreover, Russia secured its geostrategic interests in Syria by prolonging for 50 years the contract to expand and renovate seaport in Tartus, which is the only access of Russian naval forces to the Mediterranean sea, and by extending Khmeimim Air Base lease in Latakia for 49 years until 2066.109 While Syria receives 35% of the profit from renting Tartus port, and Russia plans to invest $500 million in its development;110 Syria’s government allows the rent of Latakia airbase free of charge in ex- change for Russian military protection.

108 Radio Freedom Organization. (September 2, 2019). Timchenko Wins Right to Export Phosphates from Syria. Retrieved from https://www.svoboda.org/a/30141969.html 109 The Moscow Times. (July 27, 2017). Russia Extends Syrian Airbase Lease by 49 Years. Retrieved from https://www.themoscowtimes.com/2017/07/27/russia-extends-syrian-airbase-lease-by-49- year-a58512 110 France 24. (June 12, 2019). Syria parliament okays Russian lease of Tartus port: state media. Retrieved from https://www.france24.com/en/20190612-syria-parliament-okays-russian-lease-tartus-port- state-media

43 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

The core of the accomplished possession goals of Russia in the Syrian energy sector is a bilateral treaty, which ensures exclusive rights of Russian companies to extract oil and natural gas on the territories controlled by the Assad regime. Right after Bashar al-Assad announced the intention, in 2016, to provide Russian companies with a preferential position in the energy sector, Stroytransgaz won contracts, in 2017, on renovating the largest Syrian refineries in the cities of Banias and Homs and renewed reconstruction of the gas processing plant in the Raqqa region.111 The data on the return on investments of Russian companies and their annual profits in each of the invested energy projects is not publicly available, and there are only some calculations of journalists that had investigations on this issue. For instance, it is presumed that the profit of EvroPolis (a company linked to Prigozhin that services Stroytransgaz in Syria) from the extraction of natural gas only from the Hayan block, storage of oil, gas, and gas conden- sates reached about $463 million in 2017. When comparing this sum of earnings in one company that operates in one particular region of Syria to the annual war-related expenditure of Russia in 2016 (ranges from $464 million to $664 million), it seems relevant to assume that Russian energy companies are capable of returning its money in the short period of time, and considering that they are majority state-owned companies, it implies that Russia’s state budget could have already acquired full compensation. Besides the energy sector associated with possession goals, middle to large Russian companies, some of which are subsidiaries of energy giants operating in Syria, are also signing lucrative agreements in construction and industrial sectors, such as building railways between Damascus Airport and

111 Rondeaux, C. (2020). The Strategic Logic of Russian PMSC Operations in Syria.

the city, building power generation plant projects in Homs, and other industrial projects.112 Thus, one may assume that Russia is attempting to secure its profit in the extractive industry through investing in the areas interdependent with the energy sector. However, the entrance of Chinese FDI in the Syrian industrial sector113 and, especially, tensioned competition between the Iranian and Russian businesses in the Syrian mineral sector114 might avert the exploitative nature of Russian FDI in these sectors and rather benefit the Syrian side. Moreover, Russian companies obtained contracts on building flour mills, as well as developing water-pumping stations. Notably, Russia invested $200 million in renovating the fertilizer sector in Syria.115 The engagement in the agricultural sector of post-conflict Syria could become a form of milieu goal of Russia in Syria that could help to alleviate poverty in rural areas by employing locals and reduce food insecurity within the whole country caused by war-related devastation of agricultural production, illegal trafficking, and overpriced products of first need. According to I. Matveev, the “wide” approach of Russia to the economic reconstruction of Syria implies Russian intention to assist Assad’s

112 Allen-Ebrahimian, B. (October 20, 2017). Syrian Reconstruction Spells Juicy Contracts for Russian, Iranian Firms. Foreign Policy. Retrieved from https://foreignpolicy.com/2017/10/20/syrian-reconstruction-spells-juicy-contracts-for-russian-iranian-firms-china-civil-war/ 113 Burton, G. (July 28, 2018). China and the Reconstruction of Syria. The Diplomat. Re- trieved from https://thediplomat.com/2018/07/china-and-the-reconstruction-of-syria/ 114 Sinjab, L. (February, 2018). Russia and Iran Are Increasingly Competitive in Syria. Chatam House. Retrieved from https://syria.chathamhouse.org/research/russia-and-iran-are-increasingly-competitive-in- syria 115 Scaffner, T. (March 18, 2021). Five Years After Russia Declared Victory in Syria: What Has Been Won? Russia Matters, Harvard Kennedy School, Belfer Center for Science and International Affairs. Retrieved from https://www.russiamatters.org/analysis/five-years-after-russia-declared-victory-syria-what- has-been-won

45 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR regime to accumulate $400 billion necessary for the implementation of the “Rebuild Syria” strategy. Russian side expresses its interest in Syrian post- conflict reconstruction through the support of reconnecting Syria with the world financial markets and its diplomatic talks with other states aimed at the promotion of cooperation with current Syria’s political regime.116 Naturally, there is self-interest for Russia in facilitating this agenda — it aims to benefit from the influx of foreign investments into Syria in the long-run perspective given its already dominating position in the Syrian economy. Additionally, the geostrategic location of Syria is also a crucial factor for the Russian side in advocating for the “wide” approach, as Syria is a neighbor of oil-rich Iraq and has territorial proximity to Europe and Gulf Cooperation Countries. This could allow Russia to expand its energy-related influence in the region and improve its access to local markets. Hence, it would enable Russia in the future to localize the production of its industrialist companies operating in Syria.

116 Gulf News World. (July 29, 2018). Russia and West spar over reconstruction of Syria. Retrieved from https://gulfnews.com/world/mena/russia-and-west-spar-over-reconstruction-of-syria- 1.2258382

5 Conclusion

To summarize, Syria had been experiencing patterns of rentier economy prior to the war and reconstruction – 1) Syria’s GDP heavily relied on external rents and export of oil and later natural gas, 2) the state’s profit from energy sector was anemic due to corrupt and cronyistic economic structure and lack of functioning institutions, 3) economic and socio-political exclusion deprived large parts of the population from benefiting from FDI-related GDP growth and from contributing to local economic development. The civil war and war economy tenets exacerbated the pre-existing rentier condition of the Syrian economy, as it became more dependent on Russia’s strategic rents, military involvement, arms export, and financial assistance that generated debt to Russia; while investment climate in Syria further deteriorated laying the ground for exploitative deals without preconditions. Since the regaining of the territories by the Assad regime and beginning of reconstruction, Russia turned to deepening its possession goals in Syria – signing several decades long deals in the energy sector and in geopolitical cooperation and gaining exclusive rights to extract oil and gas on the territories under Assad control. Nevertheless, the deep nature of Russian possession goals in Syrian energy sector also implies non-extractive activities, including development of interdependent industries such as refineries, investing in exploration projects and renovations, as well as contributing to the construction of regional energy projects. Meanwhile, milieu goals oriented toward reconstruction are promoted mainly through diplomacy. Whereas IFDI in the energy sector, agricultural and water-pumping industries might have “milieu effect” if properly managed. Milieu goals that reflect the broad approach of Russian OFDI rather aim to improve conditions in Syria for fur- thering Russian possession goals in the future. Russia’s domineering position

47 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR in the Syrian economy is already guaranteed, hence the reconstruction of Syria and the entrance of new FDI could only stimulate the prosperity of Rus- sian companies operating in Syria. Thus, the hypothesis that Syria is highly constrained in choosing its FDI conditions and that Syria has been experiencing the exploitative patterns of Russia’s FDI in its energy sector has proved to be valid. This research paper contributes to the versatile examination of a new and relevant topic on exploitative patterns of Russia’s FDI in the Syrian energy sector in the course of the post-conflict reconstruction. The major limi- tation of this research is the public unavailability of Russian and Syrian energy companies’ annual reports on profits and of original deals between those companies that define the percentage of dividends, so the hypothesis could have been statistically proven. The future research could further examine the socio-economic and political reforms that could contribute to the effective- ness of the reconstruction and improvement of investment climate, as well as proposing foreign policy options aimed at attracting other investors and over- coming sanctions.

Bibliography

1) A joint project of the Center for Strategic and International Studies (CSIS) and the Association of the United States Army (AUSA). (May, 2002). Post-Conflict Re- construction. Social & Economic Well-Being. Pp. 12-17. Retrieved from http://peacebuildingcentre.com/pbc_documents/post-conflict_reconstruc- tion_task_force-framework.pdf 2) Abboud, S. (January 9, 2014). Syria’s War Economy. Carnegie Middle East Cen- ter. Retrieved from https://carnegie-mec.org/diwan/54131 3) Abboud, S. (2015). Locating the “Social” in the Social Market Economy. Hinne- busch R. (ed.) Syria: From authoritarian upgrading to revolution? Syracuse: Syra- cuse University Press, p.55. 4) Abu-Ismail K., & Abdel-Gadir A., and El-Laithy H. (October 15, 2012). Poverty and inequality in Syria (1997- 2007). Pp. 1-3. UNDP, Arab Development Chal- lenges Report Background Paper 2011/15. Retrieved from https://www.arabstates.undp.org/content/rbas/en/home/library/Sustainable_devel- opment/poverty-and-inequality-in-syria---1997--2007--.html 5) Afridi, M., & Jibran, A. (2018). Russian Response to Syrian Crisis: A Neorealist Perspective. Strategic Studies, 38(2), 56-70. Retrieved from https://www.jstor.org/stable/48539137?seq=1 6) Agence France-Presse in Berlin. (August 18, 2018). Putin Urges Europe to Help Rebuild Syria So Refugees Can Return. The Guardian. Retrieved from https://www.theguardian.com/global/2018/aug/18/putin-urges-europe-to-help-rebuild-syria-so-refugees-can-return 7) Aljazeera. (March 12, 2015). Aid agencies slam UN Security Council over Syria. Retrieved from https://www.aljazeera.com/news/2015/3/12/aid-agencies-slam-un-security-council-over-syria 8) Allen-Ebrahimian, B. (October 20, 2017). Syrian Reconstruction Spells Juicy Contracts for Russian, Iranian Firms. Foreign Policy. Retrieved from https://foreignpolicy.com/2017/10/20/syrian-reconstruction-spells-juicy-contracts- for-russian-iranian-firms-china-civil-war/ 9) Allison, G. T. (September, 1969). Conceptual Models and the Cuban Missile Cri- sis. The American Political Science Review, Vol. 63, № 3. Pp. 689-718. 10) Amnesty International. (June 6, 2002). Syria. Smothering freedom of expression: the detention of peaceful critics. Retrieved from https://www.amnesty.org/download/Documents/120000/mde240072002en.pdf 11) Balanche, F. (February 10, 2021). The Assad Regime Has Failed to Restore Full Sovereignty Over Syria. The Washington University for Near East Policy. Re- trieved from https://www.washingtoninstitute.org/policy-analysis/assad-regime-has-failed-restore-full-sovereignty-over-syria 12) Barnard, A. (November 21, 2017). Assad and Putin Meet, as Russia Pushes to End Syrian War. New York Times. Retrieved from https://www.nytimes.com/2017/11/21/world/middleeast/assad-putin-russia- syria.html 13) Bassam, L. (November 8, 2017). Syrian Army, Allies, Tale Last IS Stronghold in Syria: Commander. Reuters. Retrieved from

49 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

https://www.reuters.com/article/us-mideast-crisis-islamic-state/syrian-army-allies- take-last-is-stronghold-in-syria-commander-idUSKBN1D81NM 14) BBC. (December 13, 2016). Aleppo Battle Ends as Syria Rebel Deal Reached. Re- trieved from https://www.bbc.com/news/world-middle-east-38308883 15) Beblawi, H. (1987). The Rentier State in the Arab World. Arab Studies Quarterly, 9(4), pp. 383-398. Retrieved from http://www.jstor.org/stable/41857943 16) Beblawi, H. & Luciani, G. (1987). The Rentier State. Published on December 12, 2016 by Routledge. 17) Beblawi, H. (1990). The Rentier State in the Arab World in Giacomo Luciani (ed.) The Arab State, London: Routledge, pp. 85-98. 18) Brill Olcott, M. (2004). The Energy Dimension in Russian Global Strategy. Vladi- mir Putin and The Geopolitics of Oil. The James III Institute for Public Policy of Rice University. Retrieved from https://www.russiamatters.org/analysis/five-years-after-russia-declared-victory- syria-what-has-been-won 19) Britannica. Economy of Syria. Resources and Power. 20) Burton, G. (July 28, 2018). China and the Reconstruction of Syria. The Diplomat. Retrieved from https://thediplomat.com/2018/07/china-and-the-reconstruction-of-syria/ 21) Butter, D. (June, 2015). Syria’s Economy: Picking Up the Pieces. Chatham House. Pp.15-21. Retrieved from https:// www.chathamhouse.org/sites/default/files/field/ field_docu- ment/20150623SyriaEconomyButter.pdf 22) Carnegie Middle East Center. (April 1, 2012). The Damascus Spring. Middle East Insights from Carnegie. Retrieved from https://carnegie-mec.org/diwan/48516?lang=en 23) CIA. (Latest Update: April 27, 2021). Middle East. Syria. Retrieved from https://www.cia.gov/the-world-factbook/countries/syria/ 24) Cornish, C., & Khattab, A. (October 3, 2019). The Men Making a Fortune from Syria’s War. Financial Times. Retrieved from https://www.ft.com/content/525ec4e4-e4a3-11e9-9743-db5a370481bc 25) Daher, J. (2018). The Political Economic Context of Syria's Reconstruction: a Pro- spective in Light of a Legacy of Unequal Development. European University Insti- tute, Middle East Directions, Robert Schuman Centre for Advanced Studies. Re- trieved from https://cadmus.eui.eu/bitstream/handle/1814/60112/MED_2018_05.pdf?sequence=4 26) Daher, J. (September 4, 2019). The Paradox of Syria’s Reconstruction. Carnegie Middle East Center. Retrieved from https://carnegie-mec.org/2019/09/04/paradox-of-syria-s-reconstruction-pub-79773 27) Dahi, O., & Munif, Y. (2012). Revolts in Syria: Tracking the Convergence Be- tween Authoritarianism and Neoliberalism. Journal of Asian and African Studies, No. 47, Vol. 323, 323-331. 28) Dahi, O., & Nasser, R., & Ismail, R., and Marzouk, N. (2019). Conflict Economics in Syria: Roots, Dynamics, and Pathways for Change. 2.2 Syria’s Political Econ- omy: Unbalanced Development, Elite Capture, and Institutional Decay. Syrian Center for Policy Research (SCPR). Retrieved from

https://www.scpr-syria.org/conflict-economies-in-syria-roots-dynamics-and-pathways-for-change/ 29) Dahi, O. (June, 2020). Conflict Economies in Syria: Roots, Dynamics, and Path- ways for Change. 2019 Syrian Center for Policy Research (SCPR). Retrieved from https://www.scpr-syria.org/conflict-economies-in-syria-roots-dynamics-and-pathways-for-change/ 30) Ellyatt, H. (October 21, 2015). This is how much Russia’s “war” in Syria costs. CNBC, Europe News. Retrieved from https://www.cnbc.com/2015/10/21/this-is-how-much-russias-war-in-syria- costs.html 31) France 24. (June 12, 2019). Syria parliament okays Russian lease of Tartus port: state media. Retrieved from https://www.france24.com/en/20190612-syria-parliament-okays-russian-lease-tartus-port-state-media 32) Friberg Lyme, R. (2012-2013). Sanctioning Assad’s Syria. Mapping the Eco- nomic, Socioeconomic and Political Repercussions of the International Sanctions Imposed on Syria Since March 2011. Chapter 2, pp. 14-15. Retrieved from https://www.diis.dk/files/media/publications/import/extra/rp2012-13_sanction- ing_assads_syria_web_1.pdf 33) Gobat, J. & Kostial, K. (June, 2016). Syria’s Conflict Economy. IMF Working Pa- per 16/123, Middle East and Central Asia Department. Retrieved from https://www.imf.org/external/pubs/ft/wp/2016/wp16123.pdf 34) Gulf News World. (July 29, 2018). Russia and West spar over reconstruction of Syria. Retrieved from https://gulfnews.com/world/mena/russia-and-west-spar-over-reconstruction-of- syria-1.225838 35) Haddad, B. (2012). Business Networks in Syria: The Political Economy of Au- thoritarian Resilience. Stanford University Press. 36) Herb, Michael. (2005). No Representation Without Taxation? Rents, Develop- ment, and Democracy. Comparative Politics, 37(3), 297-316. Retrieved from https://www.jstor.org/stable/20072891?origin=crossref&seq=1 37) Hodali, D. (January 7, 2019). Rebuilding Syria. Who should foot the bill for As- sad? Deutsche Welle 2018. Retrieved from https://en.qantara.de/content/rebuilding-syria-who-should-foot-the-bill-for-assad 38) Human Rights Watch. (October 16, 2007). No Room to Breathe. State Repression of Human Rights Activism in Syria. Chapter III. Background: The Emergence of a Human Rights Community in Syria. Retrieved from https://www.hrw.org/report/2007/10/16/no-room-breathe/state-repression-human- rights-activism-syria 39) ILO. (2010). Gender, Employment and the Informal Economy in Syria. Policy Brief 8. Retrieved from https://www.ilo.org/wcmsp5/groups/public/---dgreports/---gender/documents/publication/wcms_144219.pdf 40) IMF. (March 2010). Country Report №10/86. Syrian Arab Republic. Pp. 17. Re- trieved from https://www.imf.org/external/pubs/ft/scr/2010/cr1086.pdf 41) Jersen, L. (September, 2020). Foreign Direct Investment and Growth in Fragile and Conflict-Affected Counties. UNDP Global Policy Network. USA: New York. Chapter 2. FDI in Fragile & Conflict-Affected Countries, pp. 10-16. Retrieved from

51 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

https://reliefweb.int/sites/reliefweb.int/files/resources/wp_fdi_growth_fca_SEP_8.pdf 42) Khan Afridi, M. & Jibran, A. (Summer, 2018). Russian Response to Syrian Crisis. Strategic Studies, Vol. 38, No. 2, pp. 56-70. Institute of Strategic Studies Islama- bad. Retrieved from https://www.jstor.org/stable/pdf/48539137.pdf?refreqid=excel- sior%3A9945111949417a99509ddda41cf19625 43) Langer, A. & Stewart, F., and Venugopal, R. (October 18, 2011). Horizontal Ine- qualities and Post-Conflict Development: Laying the Foundations for Durable Peace. https://www.researchgate.net/publication/285873686_Horizontal_inequali- ties_and_post-conflict_development_laying_the_foundations_for_durable_peace 44) Levy, J. S. (2008). Case Studies: Types, Designs, and Logics of Inference. Peace Science Society (International). Conflict Management and Peace Science, 25:1– 18. Retrieved from https://is.muni.cz/el/1423/jaro2013/MVZ453/um/Levy--Case_Studies-Types_De- signs_and_Logics_of_Inference.pdf 45) Lyme, R. F. (2012). Sanctioning Assad’s Syria, Mapping the economic, socioeconomic and political repercussions of the international sanctions imposed on Syria since March 2011. Danish Institute for International Studies Report 2012:13. Re- trieved from https://www.diis.dk/files/media/publications/import/extra/rp2012-13_sanction- ing_assads_syria_web_1.pdf 46) Macrotrends. Syrian Arab Republic Inflation Rate 1960-2021. Retrieved from https://www.macrotrends.net/countries/SYR/syrian-arab-republic/inflation-rate-cpi 47) The World Bank. (Last updated: October 1, 2020). The World Bank in Syrian Arab Republic. Retrieved from https://www.worldbank.org/en/country/syria/overview 48) Mahdavy, H. (1970). Patterns and Problems of Economic Development in Rentier States. The Case of Iran". In M. A. Cook (ed.). Studies in the Economic History of the Middle East (1 ed.). London: Routledge. pp. 428–467. 49) Mammadov R. & Karasik T. (December 5, 2019). Russia’s Energy Interests in Syria. International Policy Digest. Retrieved from https://intpolicydigest.org/2019/05/12/russia-s-energy-interests-in-syria/ 50) Marshall, A. (1920). Principles of Economics. Book II Chapter IV. 51) Matveev, I. A. (2019). Ed. by Ibrahim, A & Charles, A. Russian-Syrian Business Cooperation: Challenges and Prospects. Syria Transition Challenges Project, Dis- cussion Paper (1). Geneva Centre for Security Policy. 52) Mauritius Trade Easy. (Last updated in January, 2021). Syria: Investing. Retrieved from http://www.mauritiustrade.mu/en/market-survey/syria/investing 53) Moore, M. (2004). Revenues, State Formation, and the Quality of Governance in Developing Countries. International Political Science Review, 25, pp. 297-319. 54) Nosko, A., & Orbán, A. (2008). Power, Energy, and the New Russian Imperial- ism. International Issues & Slovak Foreign Policy Affairs, 17(4), pp. 95-98. Re- trieved from https://www.jstor.org/stable/26591206 55) Petkova, M. (October 1, 2020). What has Russia gained from five years of fighting in Syria? Aljazeera. Retrieved from

https://www.aljazeera.com/features/2020/10/1/what-has-russia-gained-from-five- years-of-fighting-in-syria 56) Radio Freedom Organization. (September 2, 2019). Timchenko Wins Right to Ex- port Phosphates from Syria. Retrieved from https://www.svoboda.org/a/30141969.html 57) Ramani, S. (January 31, 2019). Russia’s Eye on Syrian Reconstruction. Carnegie Endowment for International Peace. Retrieved from https://carnegieendowment.org/sada/78261 58) Reuters Staff. (March 22, 2018). Syria Rebels Depart Eastern Ghouta Town on Government Buses in First Surrender. Retrieved from https://www.reuters.com/article/uk-mideast-crisis-syria-ghouta/assad-closer-to- ghouta-victory-as-some-rebels-prepare-to-quit-idUKKBN1GY0XS?edition-redirect=uk 59) Ricardo, D. (1817). On the Principles of Political Economy and Taxation. Chapter III. 60) Rondeaux, C. (2020). The Strategic Logic of Russian PMSC Operations in Syria. Chapter: Inquiry into the Murder of Hamdi Bouta and Wagner Group Operations at the Al-Shaer Gas Plant, Homs, Syria 2017. Pp. 17-26. Published by New Amer- ica. Retrieved from https://www.jstor.org/stable/resrep25419.6 61) Scaffner, T. (March 18, 2021). Five Years After Russia Declared Victory in Syria: What Has Been Won? Russia Matters, Harvard Kennedy School, Belfer Center for Science and International Affairs. Retrieved from https://www.russiamatters.org/analysis/five-years-after-russia-declared-victory- syria-what-has-been-won 62) Schwarz, R. (2008). The Political Economy of State-formation in the Arab Middle East: Rentier States, Economic Reform, and Democratization. Review of Interna- tional Political Economy, 15:4, pp. 599-621. 63) Sharifulin, V. (June 24, 2018). Syrians Will Reconstruct Country After War Themselves, Assad Says. TASS. Retrieved from https://tass.com/world/1010788 64) Shevtsova, L. (2005). Putin’s Russia. Washington DC. Carnegie Endowment for International Peace. 65) Sinjab, L. (February, 2018). Russia and Iran Are Increasingly Competitive in Syria. Chatam House. Retrieved from https://syria.chathamhouse.org/research/russia-and-iran-are-increasingly-competitive-in-syria 66) Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Chapter XI. 67) Suresh M. D. (November 1, 2015). Case study: Research Method for Social Sci- ences. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2684644 68) Syrian Center for Policy Research. (2013). Socioeconomic Roots and Impact of the Syrian Crisis. Beirut: Syrian Center for Policy Research. Retrieved from https://www.scpr-syria.org/socioeconomic-roots-and-impact-of- the-syrian-crisis- 2013/ 69) Syrian Center for Policy Research. (March, 2014). Syria. Alienation and Violence. Damascus, Syria. Retrieved from https://www.scpr-syria.org/download/alienation_violence_report/?v=1288ow

53 SYRIA’S POST-CONFLICT ECONOMIC RECONSTRUCTION: A ROLE OF RUSSIAN FDI IN THE SYRIAN ENERGY SECTOR

70) Syrian Center for Policy Research. (2016). Informal Labor in Syria: exploitation, lack of organization, and conflict. 71) The Moscow Times. (July 27, 2017). Russia Extends Syrian Airbase Lease by 49 Years. Retrieved from https://www.themoscowtimes.com/2017/07/27/russia-extends-syrian-airbase- lease-by-49-year-a58512 72) The Syrian Consulting Bureau. (February 29, 2016). Foreign Direct Investment. Retrieved from http://www.scbdi.com/en/Article48/Foreign-Direct-Investment-FDI 73) The Syrian Consulting Bureau study. Syria's 1st National FDI Report: From Re- source-Seeking to Efficiency-Seeking FDI. Retrieved from http://sia.gov.sy/userfiles/reports/fdi-en.pdf 74) The UN Refugee Agency. Syria Emergency. Retrieved from https://www.unhcr.org/syria-emergency.html 75) The World Bank Group. (2017). The Toll of War: The Economic and Social Con- sequences of the Conflict in Syria. Retrieved from http://www.worldbank.org/en/country/syria/publication/the-toll-of-war-the-economic-and- social-consequences-of-the-conflict-in-syria 76) Tokmajyan, A. (2016). The War Economy in Northern Syria. The Aleppo Project, pp. 3. Retrieved from https://www.thealeppoproject.com/wp-content/uploads/2016/12/War-Econ- omy.pdf 77) Trenin, D. (February 9, 2012). Why Russia Supports Assad. The New York Times. Retrieved from https://www.nytimes.com/2012/02/10/opinion/why-russia-supports-assad.html?_r=2&partner=rss&emc=rss 78) U.S. Energy Information Administration (U.S. EIA). (June 24, 2015). Syria: Inter- national Energy Data and Analysis. Pp.1. Retrieved from https://www.eia.gov/international/ content/analysis/countries_long/Syria/syria.pdf 79) U.S. Geological Survey. (March, 2010). Assessment of Undiscovered Oil and Gas Resources of the Levant Basin Province, Eastern Mediterranean. World Petroleum Resources Project. Fact Sheet 2010-3014. Retrieved from https://pubs.usgs.gov/fs/2010/3014/pdf/FS10-3014.pdf 80) United Nations and World Bank. (2018). Pathways for Peace: Inclusive Ap- proaches to Preventing Violent Conflict. Chapter 2: The Need for Prevention in an Interdependent World; Demographic Change and Populations on the Move, pp. 61-66. Chapter 4: Why People Fight: Inequality, Exclusion, and a Sense of Injus- tice; Youth Inclusion, pp. 119-124. Retrieved from https://openknowledge.worldbank.org/handle/10986/28337 81) Yin, R. K. (2014). Case Study Research. Design and Methods. 5th ed. London, Thousand Oaks: Sage Publications.