Postage Stamps and Gunpowder: Syria and the Russian Economy

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Postage Stamps and Gunpowder: How Important Is Syria to the Russian Economy?
The Kremlin has been trying—unconvincingly—to repackage its military campaign in this devastated country as a long-term investment project. 
Yevgeny Karasyuk
Republic
February 27, 2019

The economy was probably the last thing on the Kremlin’s mind when it decided to get involved in a civil war in the heart of the Arab world. But now that Russian military forces have been in the region for several years, the Kremlin has been increasingly trying to spin its support for Bashar Assad’s regime as a sound investment, a contribution to a prosperous trading future between the two countries.

Russia has claimed it is willing to export to Syria anything it can offer in addition to weapons, from wheat to know-how for preventing extremism on the internet. Along with Iran, the country has big plans for taking part in the postwar restoration of Syrian cities and Syrian industry, including the energy sector. Russia’s governors speak touchingly of their readiness to go to Damascus at the drop of a hat to negotiate with the Syrian government.

“When the talk turns to Syria, I immediately catch myself thinking I need these meetings,  I need to see those people again and again, and I need to be useful,” Natalya Komarova, head of the Khanty-Mansiysk Autonomous District said at the Russian Investment Forum in Sochi two weeks ago.

The expenses Russia has incurred during the Syrian campaign are shrouded in mystery. Analysts at IHS Jane’s calculated in October 2015 that Russia could have been spending as much as $4 million a day.  In July 2017, the opposition Yabloko Democratic Party published its estimate of the overall bill: as much as 140 billion rubles [approx. 1.87 billion euros], but this total did not include associated costs, including humanitarian aid. In 2017, according to RANEPA, 84% of Russia’s official total of disbursed humanitarian aid ($19.6 million) went to Syria. What kind of economic cooperation could justify such figures?

It would be pointless even to try and find an answer in recent trade trends between the two countries. Its volumes are negligible. During the first nine months of 2018, Syria’s share of Russia’s exports was 0.09%, while Syria accounted for 0.002% of imports to Russia during the same period. This has always been more or less the case.

trade

“Trends in Russia’s trade with Syria (in billions of US dollars).” The pale violet line indicates Russia’s exports to Syria, while the blue line indicates Russia’s imports from Syria. The data for 2018 is only for the first nine months of the year. Source: Russian Federal Customs Service. Diagram courtesy of Republic

The largest transaction in the history of the economic partnership between the two countries was Moscow’s cancellation of $9.8 billion dollars in debt, 73% of what Syria had owed the Soviet Union. At the end of the 2005 meeting at which this matter was decided, Bashar Assad and Vladimir Putin also spoke publicly of the idea of establishing a free trade zone. Subsequently forgotten, the undertaking was mere camouflage for the political bargain reached by the two men, which was and remains support for the Syrian dictator’s regime in exchange for the dubious dividends the Kremlin has received by increasing its influence in the region. It is believed Russian strategic bomber saved Assad, who had already been written off by the west. But explanations of what Russia has ultimately won for its efforts and what its economic strategy might look like have been more muddled and contradictory than before.

In an October 2018 interview with Euronews, Russian Foreign Secretary Sergei Lavrov avoided directly answering a question about joint economic projects. During his tenure as head of the Russian Export Center, Pyotr Fradkov (not to be confused with his father former PM Mikhail Fradkov, the current head of the Russian Foreign Intelligence Service or SVR) talked about Russia’s potential involvement in developing the “high-tech segments of Syria’s economy.” A month ago, however, the selfsame Russian Export Center placed Syria at the bottom of its ranking of 189 countries in terms of their favorability for foreign trade.

The Syrian economy, in turn, can currently offer Russia even less. Mainly, its exports boil down to fruit, but in such small and unstable quantities that they cannot seriously compete with deliveries from Turkey. Russia has been promised priority access to the development of natural resource deposits in Syria, which are teeming with oil, natural gas, and phosphates. But the smoldering war and the lack of security guarantees for investments have hampered implementing these plans.

Russian experts pin their hopes on the surviving remnants of industry in the government-controlled areas of Latakia, Tartus, and Damascus. Based on the fact that “the level of production that survived has enabled Assad to almost fully provide himself [sic] with food during five years of war,” Grigory Lukyanov, a political scientist at the Higher School of Economics has concluded the Syrian government “depends on a well-developed business community.”

Syria, however, seemed like a nightmare for investors well before the country was turned into an open wound. “Only a crazy person would go into Syria at his own behest,” Vedomosti quoted a source at a major company that was involved in negotiations with the Syrian government in the summer of 2012. Suffering from international sanctions, Syria proposed that Russian companies take part in construction of a thermoelectric power station in Aleppo. Four years later, one of Syria’s largest cities had been turned into ruins by heavy bombardment.

The Rothschilds [sic], who made fortunes on wars, thought the best time to invest was when blood was flowing in the streets. Their approach might seem to resemble the Kremlin’s strategy. But let’s not kid ourselves: unlike the famed financiers, President Putin is completely devoid of insight when it comes to the economic consequences of his military escapades. Business plans are not his strong suit.

Photo courtesy of Mikhail Klementyev/AP and the Washington Post. Translated by the Russian Reader

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Grigorii Golosov: The Year 2020

DSCN6650Living it up with Russia’s shrinking “middle class.” Sulphur Island, St. Petersburg, 19 May 2018.  Photo by the Russian Reader

Grigorii Golosov
Facebook
February 5, 2019

Many people have been citing a 2008 article in Rossiiskaya gazeta.

“By 2020, Russians will be earning an average of $2,700 a month, a family of three will have no less than 100 square meters of living space, and the middle class will constitute over half of the population.”

This is a paraphrase of the “Social and Economic Development Strategy to 2020,” drafted at the time by the Russian Economic Development Ministry.

The article goes on.

“Experts have already dubbed the strategy a ‘breakthrough scenario’ that will see Russia establishing itself as a leading world power by 2020.”

The Economic Development Ministry was wrong, of course, but the experts were right. Russia has already established itself as a world power, albeit in roughly the same sense as North Korea and Iran. It has gone even farther. Iran and North Korea, at least, are not in everyone’s face all the time, while Russia butts in everywhere nowadays.

We should look for the root of the Economic Development Ministry’s mistake in the machinations of Russia’s enemies, of course, although the reason Russia has so many enemies is to be sought in the circumstances that also explain its promotion to the same league as North Korea and Iran.

That is the intriguing dialectic at work here.

Translated by the Russian Reader