Iran tightens its financial grip over Syria at alarming pace

The Iranian footprint in Syria's economy has undeniably expanded since the uprising commenced in 2011. Tehran poured substantial resources into propping up the Assad regime, including extensive financial and economic aid, the provision of militias, and the supply of weaponry.

Leaked documents

In May 2023, confidential documents purportedly leaked from Iran's presidential office revealed the vast extent of Iran's financial support for the al-Assad regime.

These documents indicated that Iran had invested an estimated $50bn in supporting al-Assad throughout the Syrian war, a significantly higher figure than previously estimated by other sources at $20-30bn.

Facing financial constraints that prevented cash repayment, Iran attempted to recover these debts through project-based settlement agreements with the al-Assad regime.

Since 2017, Tehran has entered into numerous deals with Damascus, yet few materialised. Iran's frustrations were further compounded by the Syrian regime's decision to allocate the majority of business opportunities in the country to Russia.

After years of reluctance to escalate, Iran significantly increased pressure on Damascus, particularly since 2021, seeking to convert its substantial support into tangible economic benefits. Iran effectively secured economic concessions this year by employing strategic leverage in negotiations, including its control over oil shipments.

Solidified negotiations

Syria's dire economic circumstances, exacerbated by its ongoing conflict and compounded by Russia's preoccupation with the Ukraine crisis, further eroded the Syrian regime's negotiating position.

The negotiations were reportedly solidified during President Ibrahim Raisi's historic visit to Damascus in May, when an array of agreements spanning various sectors, including oil, agriculture, railways, and free trade zones, were inked.

Unlike previous agreements that typically involved protracted processes, these agreements swiftly transitioned from paper to action following intense shuttle negotiations.

This was evident in the imminent launch of Iran's mobile telecom operator, Wafa Telecom. Media reports confirmed that Iranian companies had supplied Syria with 500,000 SIM cards and 60 mobile telecom stations, indicating swift progress.

Iran's endeavour to establish a joint bank in Syria to facilitate cross-border transactions is another compelling development. This bank, anticipated to be the National Islamic Bank, was officially registered with the Central Bank of Syria on August 17, with operations expected to commence soon.

Complementing this initiative is establishing an insurance company affiliated with Iran's Al-Alborz Insurance, one of Iran's oldest and largest insurance companies. These two projects are strategically positioned to bolster private Iranian investments in Syria by mitigating risks associated with operating in the country, which have traditionally been high.

Consequently, they aim to diversify Iran's investments beyond the Iranian government and IRGC networks.

Influence over policy

Simultaneously, Iran has wielded its influence to shape Syria's trade and import policies. The outcome has been transformative, with the recent revival of Iran's car assembly plants in Syria, SIAMCO and SIVICO.

These plants had previously suspended operations due to the Syrian regime's stringent import policy, which prohibited the import of car parts.

Additionally, a noteworthy accomplishment is the zero-trade tariff agreement between Iran and Syria, unveiled in July. This landmark agreement paves the way for businesses, including car assembly plants, to engage in cross-border trade without tariffs.

The scope of strategic projects Iran has long aspired to undertake in Syria is extensive. It includes ambitious plans such as constructing a third oil refinery, connecting its railway to the Mediterranean port of Latakia, and acquiring control over critical assets like ports, airports, agricultural land, and oil fields, notably blocks 21 and 12.

Previously, these projects seemed like distant dreams. However, the unprecedented pace at which Iran has secured significant sovereign concessions from the al-Assad regime positions Iran closer than ever to consolidate its grip on Syria's economy for years to come.