Faultlines have emerged between the Syrian regime's allies Moscow and Tehran as their economic interests have begun to clash in the region. Can Assad maintain ties with both sides while accumulating a massive war debt?
At a time when Syrian regime was at its weakest in 2011, Iran was quick to come to the rescue of its leader Bashar al Assad and four years later in 2015 Russia also put its weight behind the embattled autocrat. The two powers worked hand in hand to crush the anti-Assad armed resistance, with Tehran sending militias to the ground and Moscow launching aerial warfare.
Since the regime has managed to wrest back control of most of the lost territories, Assad’s war allies now appear to be caught in a race to shape the country’s economic future.
Prominent military analyst Navvar Saban told TRT World that the faultlines between Iran and Russia have existed in a dormant form for a long time, but with the war nearing its end, the differences are likely to grow and put Assad in a tight spot in which favouring one ally would mean going against the other.
Saban, who's currently associated with the Istanbul-based think tank Omran Center for Strategic Studies (OCSS), said that with Russia and Iran wrangling for business influence, Assad is treading cautiously and strategically, segregating the role of his allies to maintain his grip on power.
“He needs both – Iran and Russia – and cannot choose one over another. He takes the best from both and uses one against each other when it is necessary,” Alexey Khlebnikov, a Russian foreign policy analyst who works at think tank the Russian Council tells TRT World.
“This is exactly what Assad has been doing for years,” he said.
The Russian air strikes against the Syrian opposition helped turn the tide in favour of the Assad regime but the air campaign came at a whopping cost of around $4 million per day.
After four years of Russian support of Assad's war efforts, the Syrian regime owes Moscow at least $3 billion. Moscow hasn't shied away from exerting pressure on Assad, asking him to foot the bill.
Iran, on the other hand, has had the upper hand on Syria with the help of its Shia militias. Tehran's immediate and unflinching support to the regime proved costly as more than a thousand members of Iran-backed militias have died while defending the regime. Aware of the human cost of Assad's war, Tehran has gained on the economic front by expanding business ties with the regime.
“In Syria, there is only one front and they are trying to come up with a political solution through Astana on Sochi,” said Saban, the Middle East expert at OCSS. He was referring to peace talks led by Russia, Iran and Turkey.
“That will give more time and more space to Iran and Russia in post-conflict Syria. We will witness the competition more visibly, not directly between them but between their local actors,” he said.
A conflict playing on the local businessman
In Syria today, the country’s business elite who have stood by Assad since the beginning of the war have more influence in shaping the economic future of the country than its politicians do.
"We will not go out, leave on our boat, go gambling, you know,” said Rami Makhlouf, Assad’s wealthy cousin who almost single-handedly monopolised post-war Syrian markets, in a 2011 interview.
“We will sit here. We call it a fight until the end. They should know when we suffer, we will not suffer alone," he said when The New York Times interviewed him at his plush, wood-panelled headquarters in Damascus.
But now Makhlouf seems to be suffering, not at the hands of the waning opposition fighters but because of his own cousin Assad. In early September, the Syrian regime announced measures against several Syrian business families and Makhlouf's companies also came under its stranglehold. Makhlouf is now reportedly barred from leaving the country.
If the reports about Makhlouf's troubles with the regime are true, said Russian analyst Khlebnikov, it indicates growing cracks within the country's business elites and how extremely cash-strapped Assad is.
But before Assad tightened the screws on his own cousin, the Syrian regime was reportedly putting pressure on several pro-Assad businessmen, asking them to fill up the empty state coffers. Instead of giving in, they have turned against the regime as the economy worsens.
Khlebnikov said the move also indicates a certain struggle within the regime, as it's fast approaching the point where it will have to “limit Iran's influence” in light of “Russia's increasing pressure on Damascus”.
Makhlouf and other elite businessmen, including Samer Foz, were sanctioned by the US and the European Union facing accusations of bankrolling the regime. But, the 2008 measures against him didn’t stop Makhlouf from amassing his wealth and expanding his business empire ranging from telecommunications, oil, gas and real estate to banking, airlines, retail and construction of several private schools.
He put his eggs in different baskets, including the Gulf countries, particularly in Iran, while the war was raging in Syria.
“In the previous years, Makhlouf was able to build a relationship with the Iranian government and help their affiliated businessmen in Syria to take some contracts,” Saban said.
“By putting pressure on Makhlouf, Russia is trying to limit the expanding presence of Iran-affiliated business as much as they can. These are some big projects on the table.”
Managing the allies
Assad has displayed an astute skill in separating the business interests of his allies from his war policy. In 2016, a year after Russia came in support of the regime, Assad promised that Russian firms would be given a priority in rebuilding the country's broken infrastructure. But a year later in 2017, it provided Iran a key access to large phosphate reserves and continued striking major business deals with Tehran, ranging from telecommunications, mining and big reconstruction projects that it had promised Russia.
A recent Russian media report in August said Iran was planning to establish a multi-purpose port in the south of Tartous, near the Lebanese border.
The growing business clout of Iran in Syria is not a good sign for Russia. In July last year, Russian President Vladimir Putin signalled efforts to remove Iran from Syria after Israel told Moscow they won't accept the prolonged presence of Tehran-backed militias in Syria.
Saban, who conducted research on private construction firms in Syria, says the Russian President stepped up actualising this aim, as a handful of Iranian projects have been blocked by Russia ever since.
As a protective measure, he says, Iran is now mainly navigating its business through businessmen from Lebanon, where Iran’s proxy force Hezbollah has a major influence, and focusing on reconstruction on a smaller scale, mostly housing.
According to a July report by the Omran, the Syrian Ministry of Internal Trade and Consumer Protection approved the establishment of at least 297 private companies, including the firms owned by Lebanese businessman.
Mouaz Moustafa, the Executive Director for the Syrian Emergency Task Force (SETF) tells TRT World that Assad’s efforts to manage the conflict in the way he wants is likely to fail.
“Assad has little choice and little leverage on Iran and Russia. The reconstruction stage and the massive debt he has to both countries will keep Syria owned by Russia and Iran,” Moustafa, who previously worked for the US Congress, says.
“Although they both agree on keeping the Assad regime in power, Russia and Iran have always had different objectives and interests in Syria. In post war Syria, it’s logical to assume that Russia and Iran will continue to clash on certain points and increase their differences on the ground.” he says.
But the Russian Council’s Khlebnikov differs from that point of view, saying the common objective of Assad and his allies is strong enough to prevent a “Russia-Iran divorce”.
On the military front, Assad seems to be comfortable with Iranian expansion. A report in early September said the Iranian military was building a new base on the Syria-Iraq border, despite Israel's military intimidation and Russia's promise to reduce Tehran's role in Syrian war theatre.
“In the end, Damascus will need to accommodate the interests of both actors and so far it succeeds in doing it,” Khlebnikov said.