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Iran and Turkey’s energy game in the Gulf and the Caspian basin

Nargiz Hajiyeva

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[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] T [/yt_dropcap]he two major non-Arab countries Iran and Turkey have the significant and most populated geographical locations in the region. From a historical perspective, it is clear that both of them have long shared similarities and differences regarding religion, national identity, populations, energy factor and etc.

Both of them have a strong sense of national identity and also were the homeland of different historical civilizations. The one of the major difference is that since the 1979 Islamic Revolution, “velayat e-faqih” as a prominent doctrine has been implemented in the government system of Iran. On the other hand, Iran is a predominantly Shia majority and Turkey is major Sunni-based country. Another major difference between them is based on energy factor. Today, the crucial aspect of Turkey and Iran relations is energy factor. Since the beginning of the relations in energy in the 1990s, the glaring differences between them in the energy sector have influenced their relations and resulted in the close cooperation between them. Apparently, the relations in the field of energy commenced in 1996 with the signing of the agreement on natural gas amid the Welfare Party Leader of Turkey Necmettin Erbakan’ visit to Tehran. The natural gas agreement envisaged the export of 4 bcm of natural gas in 2002 and of 10 bcm in 2007 from Iran to Turkey within the period of 25 years. However, this volume was never reached to the capacity of 10 bcm due to different kinds of reasons, especially the coercive diplomacy of the U.S, the economic sanctions lessened the export of natural gas to Turkey at the expected volume and only 6 bcm of natural gas was delivered to Turkey during the sanction period. To date, Iranian gas has been really important for Turkey in terms of economic development, its domestic needs, and energy demands. Because of the fact that Iran has sufficiently proven crude oil and gas resources in the Gulf region, in contrary, Turkey holds limited number of oil and gas reservoirs and these resources are not able to provide the both economic and domestic demands of Turkey adequately and thus, heavily depends on foreign supplies.* Therefore, Iranian gas is really meaningful for industry and for residential heating in Eastern Anatolia.

Apart from the oil and gas sectors, the electricity trade between them is really important. Iran and Turkey have agreed to develop their electricity generation sufficiently. For instance, in 2014, Iran exported 2,252 GWH electricity to Turkey that constituted 1,1% of that year’s total electricity source. Energy as a solid rock of economic relations between Turkey and Iran exhibits itself as the main provider of economic growth. The relations between Turkey and Iran can be characterized in some reasons:

1.The role of Turkey as a transit route between North and South, East and West. The main role of Turkey would be really important for the rational and secure transportation of Iran’s natural oil and gas resources to Europe via Turkey;*

2.The growing massive dependence of Europe on natural gas resources force the European countries to seek for new alternative energy supplies and countries and strives to decrease its natural gas dependency on Russia . In this case, the West has pivotal interests regarding Southern Gas Corridor which links the one side of Asia with Europe. Here, Iran is eager to export its energy resources to Europe at affordable prices and wants to acquire the Westward transportation of its natural gas. This is one of the main reasons why Iran holds close relations with Turkey;

3.Turkey is the main consumer of Iran’s oil and natural gas resources, although there have been some challenges regarding security, sanctions, and disagreement over high prices;

4.Despite having massive resources Iran is not a major player in the global gas market, it only exports gas to Turkey, Armenia, and Azerbaijan and therefore, it is not ready to lose its reliable consumer like Turkey in international energy market;

5.The main aim of Iran is to gain broad access to flexible LNG export capability. However, Iran does not have terminals, technical expertise and required funds due to the sanctions. In fact, Turkey as an economic savior offers commercial and investment opportunities to Iran in order to build terminals and possess newly generated technologies to export LNG;

6.The one of the major reasons is the growing Turkish investments in the country. Turkey has long invested in Iran’s energy products in order to boost mutual trade between them in the energy sector.

Consequently, the emergence of cooperation between Turkey and Iran stems from the energy factor. The resources-rich Iran has an adequate capability to export its natural gas and oil products not only to Turkey but also the European market. Turkey as a stable consumer of its energy products try to diversify its energy supplies and source countries, at the same time, it is importantly in need to maintain its both domestic and foreign economic growth. As a result, it can be said that the continuing of a balanced relationship between Tehran and Ankara can be beneficial for the maintenance of the West’s energy security by diversifying its energy supplies and source countries.

Competition between Turkey and Iran

In XXI century, energy factor has caused to gain both a partner and a rivalry among states. In terms of a partnership, the nation-states try to show “win-win” position in order to meet their domestic demands and develop economic growth with mutual trade agreements. In contrary, in the position of rivalry, the states strive to acquire access to much more energy resources, and source- rich countries by imposing grand energy projects and sets of rules, at the same time, want to prevent the influence of rival states over energy-rich regions. It can be shown in the example of the relationship between Turkey and Iran. Currently, there are pivotal reasons why Iran does not have in mind to digest the geopolitical and economic positions of Turkey in energy-rich regions.

On the other hand, the rivalry in some cases, tensions can be observed in the ongoing process of Syrian Civil War. The severe civil war which caused loads of humanitarian crisis and calamity led to the misperceptions and different positions between major regional power including the U.S, Russia, Turkey, Iran and Saudi Arabia. Since the beginning of the conflict, Russia and Iran has been the main supporter of Bashar-Al-Assad regime. In the contrary, Turkey is opposed to the Assad regime in the country. These different positions have caused the clash of interests between the two regional powers regarding Syrian Civil War.

Moreover, after the 2015 nuclear deal, Iran seeks alternative methods to export its natural gas products to European market via Turkey. However, Iran well understands that Turkey as a transit country is really significant for the multi-sided transportation of energy products, especially its natural gas resources. The anti-western position of Iran compels it to strengthen relations with Russia. Both of them are opposed to the Western-backed economic projects in the Caspian region.

To a large extent, after the completion of impressive projects in the South Caucasus, it is difficult to Iran to see Turkey will turn to be a grand power in the Southern Gas Corridor. In this case, Iran is afraid of being marginalized from the political and economic processes taking place in the Caspian region. The implementation of necessary energy-efficient projects in this region will lead to the dominant position of Turkey. Therefore, If Iran’s natural gas is transported to Europe via Turkey, this will give it a powerful bargaining chip against Iran. In fact, Iran never wants to give empowerment to Turkey against itself. Another reason is that Iran wants to keep the regional balance of power in energy. Therefore, the emergence of Turkey as an authoritative power will deprive Iran of the economic and political perks in the region. The transit role of Turkey in Southern Gas Corridor will lead to the realization of Turkish Stream. Because of the fact that the construction of Turkish Stream along with Trans-Anatolian Natural Gas Pipeline (TANAP) and the Iraq-Turkey gas pipeline, will give Turkey the powerful authorization over major pipelines in the future. As a result, Turkey as an energy hub will be able to control the flow of energy supplies from Russia, Azerbaijan, Turkmenistan and Iraq. Today, Iran wants to provide its flexible LNG export. Therefore, in order to attain the goal, Iran tends to boost cooperation with China. In fact, China possesses novel energy infrastructure and technologies that will be able to help Iran to build LNG terminals.

However, it is undeniable fact that the emergence of terrorist organizations, (Islamic State, ISIS or ISIL, PKK), extremist movements, sectarian tensions, and the Kurdish problem put the major pipelines in jeopardy along with the Middle East region and Turkey. These arduous situations can be the favor of Iran because the construction of all major projects and an emergence of Turkey as energy commander will take a long time. The animosity and tensions in the Middle East region give the chance for the extremist and terrorist groups to take the major pipelines under their control as a source of revenue. (See annex No.5)

All in all, in any cases, the collaboration is much more beneficial than the competition. Collaboration stands on the “win-win” proposition and is inclined to the mutual perceptions of the parties. However, the competition mainly focuses on the success of only one party and does not give a chance to another one. Therefore, the relationship between Turkey and Iran should have to be characterized from the prism of the collaboration rather than competition, because both of them have a huge potential in order to participate in and get “win-win” position in the energy game.

Conclusions

The deep analysis of research revealed the following consequences:

1. As a result of the analysis, it was perceived that energy security forms a unity within the circle of national security and foreign policy. In today’s globalized world, the growing demands for energy, interests of nation states regarding alternative energy resources, in particular, the export of energy products at affordable prices to the international energy market create a competitive environment among states. Thus, it is undeniable fact that energy closely relates with the national power of states. The broad access to well-off energy resources, the secure transportation and rational utilization of them mainly depend on the relations between or within states. Therefore, energy as a guarantor of national security is important for states’ survival and well-being. However, it is clear that the acts of states sometimes evoke some problems and obstacles in global level, for example, the over- exploitation of energy resources causes the huge environmental problems, and today the climate change issue as a result of irrational overutilization of energy products should force all states to take active and accommodative actions in order to solve this problem at international level.

2. The research showed that like other major states, both Turkey and Iran have their own goals and geostrategic interests in the energy spectrum. According to Turkey, the pivotal goal stands on the diversification of energy supplies in conjunction with source countries. At the same time, it strives to gain an authoritative power over major grand energy projects in the energy-based regions; the Caspian Basin and the Gulf region. For today, the South Caucasus gives a huge chance to Turkey to be a future energy hub in the region. The implementation of future grand energy projects is able to open a successful way with which Turkey as a key transit country will be able to import energy products at affordable prices. However, in the Gulf region, basically the Middle East, the emergence of extremist movements, the Kurdish problems, the risk of İSİS and PKK, ongoing severe Syrian crisis and other problems challenge the situation in the region that engender barriers in the face of Turkey.

3. It is obvious that similar to Turkey, Iran has also geo-energetic and political interests in the energy game in the following countries. Amid the period of sanctions, the West put many restrictions on Iran. Therefore, Iran was not able to export its products to the international energy market. Upon the lifting economic sanction, Iran strives to gain more access to foreign markets in order export its energy products adequately. At the same time, Iran offers reasonable prices for its products in order to gain access to European markets. Although Iran holds affluent energy deposits, it has a limited number of consumers importing its products and Iran would have never wanted to be isolated from the economic and political processes taking place in the Caspian Basin and the Gulf region. On behalf of a regional partnership, it tries to strengthen the energy-based cooperation with other countries including China, India, Brazil, and mainly, Russia.

4. The development of the relationship between Turkey and Iran chiefly related with energy. Today, Iran has adequate energy assets in order to export them to international energy markets. Turkey is a stable and reliable consumer of Iran’s energy products because of its scarce oil and gas deposits. Iran well realizes that Turkey would be a reliable provider for the transportation of its energy products to the European market. Therefore, Iran strives to be one of the main parts of Southern Gas Corridor in the South Caucasus region, in which Turkey as a pivotal trade bridge provides the secure shipment of Iran’s gas products directly to Europe. Iran’s such an approach toward Turkey gives both of them to benefit from the economic processes in the region that create “win-win” position between them. However, the situation in the Gulf region is not as the same as the Caspian region. The movements of radical Islamists, hostility, fear of proxy war regarding Syrian Civil War, force both Turkey and Iran to take another stance regarding the problems in the region.

5. The research emphasized that the relationship between Turkey and Iran can be characterized from the prism of both collaboration and competition. Both of them have varied goals and interests in the energy game and strive to keep their influences in the following regions. Turkey as a stable consumer of Iran’s products is a reliable partner, but when it comes to competitive relations, Iran sees Turkey as an important rival in the region. Since last decades, these have been many difficulties in the relations between them regarding the disagreement over prices, sanctions, and the various stances on Syrian Civil War. At the same time, today Iran can not digest the growing role of Turkey in the following regions. The main reason is that the future application of energy pipelines will give Turkey empowerment and bargaining chip against Iran. Therefore, Iran on the one side does not want to see as a winner in the energy game, on the other side, it does not have in mind to lose its trade partner in the energy field. However, it is difficult for Iran to take radical actions against Turkey and tries to set up accommodative approach toward Turkey. Hence, both of them realize that going into mutual bargaining is much more beneficial rather than competition.

Ms. Nargiz Hajiyeva is an independent researcher from Azerbaijan. She is an honored graduate student of Vytautas Magnus University and Institute D'etudes de Politique de Grenoble, Sciences PO. She got a Bachelor degree with the distinction diploma at Baku State University from International Relations and Diplomacy programme. Her main research fields concern on international security and foreign policy issues, energy security, cultural and political history, global political economy and international public law. She worked as an independent researcher at Corvinus University of Budapest, Cold War History Research Center. She is a successful participator of International Student Essay Contest, Stimson Institute, titled “how to prevent the proliferation of the world's most dangerous weapons”, held by Harvard University, Harvard Kennedy School and an honored alumnus of European Academy of Diplomacy in Warsaw Poland. Between 2014 and 2015, she worked as a Chief Adviser and First Responsible Chairman in International and Legal Affairs at the Executive Power of Ganja. At that time, she was defined to the position of Chief Economist at the Heydar Aliyev Center. In 2017, Ms. Hajiyeva has worked as an independent diplomatic researcher at International Relations Institute of Prague under the Czech Ministry of Foreign Affairs in the Czech Republic. Currently, she is pursuing her doctoral studies in Political Sciences and International Relations programme in Istanbul, Turkey.

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Middle East

Syrian Coup de Grâce

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The Middle Eastern land has a diverse blend of history with conflicts and developments in knowledge. Where on one hand Baghdad was considered as the realm of knowledge on the other hand Constantinople was a symbol of power and domination. But now it seems that all has been shattered completely with conflicts.

The Middle Eastern landscape is facing its worst time ever: a phase of instability and misery. The oil ridden land is now becoming conflict ridden, from Euphrates to Persian Gulf; every inch seems to be blood stained nowadays.  The region became more like a chess board where kings are not kings but pawns and with each move someone is getting close to checkmate.

Starting from the spring which brought autumn in the Middle Eastern environment, now the curse is on Assyrian land where blood is being spilled, screams have took over the skies. The multi facet conflict has caused more than 400,000 deaths and 5 million seeking refuge abroad whereas 6 million displaced internally.

What began with a mere peaceful civil uprising, has now become a world stage with multiplayers on it. Tehran and Moscow are playing their own mantra by showing romance with Assad while Washington has its own way of gambling with kings in their hand. Involvement of catchy caliphate from 2014 is worsening the complexities of the Syrian saga. The deck is getting hot and becoming more and more mess, chemical strikes, tomahawk show, carpet bombing, stealth jets and many more, Syrian lands is now a market to sell the products exhibiting fine examples of military industrial complex. While to some, Syrian stage seems to be a mere regional proxy war, in reality it seems like a black hole taking whole region into its curse. One by one every inch of the country is turned into altar as the consequence of war. A country is now ripped into different territories with different claimants, but the question still remains as “Syria belongs to whom?”

The saga of Syrian dusk has its long roots in past and with each passing moment it is becoming a spiral of destruction. What is being witnessed in current scenario is just a glimpse of that spiral. It has already winded the region into it and if not resolve properly and maturely it can spread like a contagious disease that can take whole Middle East into its chakra.

With recent development in Iran nuclear deal which left whole world into shock; and house of Sauds forming strong bond with western power brokers and Israel, to counter Tehran (because kings of holy desert have so much engraved hatred towards shiaits, that they prefer to shake hands with Jews and establish an unholy alliance) is making matters worse. This all has the potential to push the region into further more sectarian rifts. With Syrian stage already set. The delicacy of the situation is not secluded from the palette of the world.

Despite the condemnations from across the globe, humanitarian watch remains blind and failed to address the issues in Syria leaving Syrians in long lasting agony and despair The symphony of pain and suffering continues in the Middle Eastern region while world watches like a vicious sadist, the region becomes a playground for major powers as ‘Uncle Sam” has their own interests in engaging, Kremlin have their own concerns same goes for every single actor who is party to the conflict.

The panacea to the Arabian pain is simple “a sincere determined approach” to the disease. Even if every party with draws from the conflict the situation can get worse due to the generated power vacuum and can make Syria a replica of Iraq. The Syrian grieve needs to be addressed through proper management skills, if not the curse is upon whole region.

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The battle for leadership of the Muslim world: Turkey plants its flag in Christchurch

Dr. James M. Dorsey

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When Turkish vice-president Fuat Oktay and foreign minister Mevlut Cavusoglu became this weekend the first high-level foreign government delegation to travel  to Christchurch they were doing more than expressing solidarity with New Zealand’s grieving Muslim community.

Messrs. Oktay and Cavusoglu were planting Turkey’s flag far and wide in a global effort to expand beyond the Turkic and former Ottoman world support for President Recep Tayyip Erdogan’s style of religiously-packaged authoritarian rule, a marriage of Islam and Turkish nationalism.

Showing footage of the rampage in Christchurch at a rally in advance of March 31 local elections, Mr. Erdogan declared that “there is a benefit in watching this on the screen. Remnants of the Crusaders cannot prevent Turkey’s rise.”

Mr. Erdogan went on to say that “we have been here for 1,000 years and God willing we will be until doomsday. You will not be able to make Istanbul Constantinople. Your ancestors came and saw that we were here. Some of them returned on foot and some returned in coffins. If you come with the same intent, we will be waiting for you too.”

Mr. Erdogan was responding to an assertion by Brenton Tarrant, the white supremacist perpetrator of the Christchurch attacks in which 49 people were killed in two mosques, that Turks were “ethnic soldiers currently occupying Europe.”

Messrs. Oktay and Cavusoglu’s visit, two days after the attacks, is one more facet of a Turkish campaign that employs religious as well as traditional diplomatic tools.

The campaign aims to establish Turkey as a leader of the Muslim world in competition with Saudi Arabia, the United Arab Emirates, and to a lesser degree Morocco.

As part of the campaign, Turkey has positioned itself as a cheerleader for Muslim causes such as Jerusalem and the Rohingya at a moment that Saudi Arabia, the UAE and other Muslim nations are taking a step back.

Although cautious not to rupture relations with Beijing, Turkey has also breached the wall of silence maintained by the vast majority of Muslim countries by speaking out against China’s brutal crackdown on Turkic Muslims in the troubled north-western province of Xinjiang.

Mr. Erdogan’s religious and traditional diplomatic effort has seen Turkey build grand mosques and/or cultural centres across the globe in the United States, the Caribbean, Europe, Africa and Asia, finance religious education and restore Ottoman heritage sites.

It has pressured governments in Africa and Asia to hand over schools operated by the Hizmet movement led by exiled preacher Fethullah Gulen. Mr. Erdogan holds Mr. Gulen responsible for the failed military coup in Turkey in 2016.

On the diplomatic front, Turkey has in recent years opened at least 26 embassies in Africa, expanded the Turkish Airlines network to 55 destinations in Africa, established military bases in Somalia and Qatar, and negotiated a long-term lease for Sudan’s Suakin Island in the Red Sea.

The Turkish religious campaign takes a leaf out of Saudi Arabia’s four decade long, USD 100 billion effort to globally propagate ultra-conservative Sunni Islam

Like the Saudis, Turkey’s Directorate of Religious Affairs (Diyanet) provides services to Muslim communities, organizes pilgrimages to Mecca, trains religious personnel, publishes religious literature, translates the Qur’an into local languages and funds students from across the world to study Islam at Turkish institutions.

Turkish Muslim NGOs provide humanitarian assistance in former parts of the Ottoman empire, the Middle East and Africa much like the Saudi-led World Muslim League and other Saudi governmental -non-governmental organizations, many of which have been shut down since the 9/11 attacks on New York and Washington.

Saudi Arabia, since the rise of crown prince Mohammed bin Salman in 2015, has significantly reduced global funding for ultra-conservatism.

Nonetheless, Turkey is at loggerheads with Saudi Arabia as well as the UAE over the killing of journalist Jamal Khashoggi; Turkish support for Qatar in its dispute with the Saudis and Emiratis; differences over Libya, Syria and the Kurds; and Ankara’s activist foreign policy. Turkey is seeking to position itself as an Islamic alternative.

Decades of Saudi funding has left the kingdom’s imprint on the global Muslim community. Yet, Turkey’s current struggles with Saudi Arabia are more geopolitical than ideological.

While Turkey competes geopolitically with the UAE in the Horn of Africa, Libya and Syria, ideologically the two countries’ rivalry is between the UAE’s effort to establish itself as a centre of a quietist, apolitical Islam as opposed to Turkey’s activist approach and its support for the Muslim Brotherhood.

In contrast to Saudi Arabia that adheres to Wahhabism, an austere ultra-conservative interpretation of the faith, the UAE projects itself and its religiosity as far more modern, tolerant and forward looking.

The UAE’s projection goes beyond Prince Mohammed’s attempt to shave off the raw edges of Wahhabism in an attempt to present himself as a proponent of what he has termed moderate Islam.

The UAE scored a significant success with the first ever papal visit in February by Pope Francis I during which he signed a Document on Human Fraternity with Sheikh Ahmad al-Tayeb, the grand imam of Egypt’s Al-Azhar, the revered 1,000-year-old seat of Sunni Muslim learning.

The signing was the result of UAE-funded efforts of Egyptian general-turned-president Abdel Fattah Al-Sisi to depoliticize Islam and gain control of Al Azhar that Sheikh Al-Tayeb resisted despite supporting Mr. Al-Sisi’s 2013 military coup.

To enhance its influence within Al Azhar and counter that of Saudi Araba, the UAE has funded  Egyptian universities and hospitals and has encouraged Al Azhar to open a branch in the UAE.

The UAE effort paid off when the pope, in a public address, thanked Egyptian judge Mohamed Abdel Salam, an advisor to Sheikh Al-Tayeb who is believed to be close to both the Emiratis and Mr. Al-Sisi, for drafting the declaration.

“Abdel Salam enabled Al-Sisi to outmanoeuvre Al Azhar in the struggle for reform,” said an influential activist.

The Turkey-UAE rivalry has spilt from the geopolitical and ideological into competing versions of Islamic history.

Turkey last year renamed the street on which the UAE embassy in Ankara is located after an Ottoman general that was at the centre of a Twitter spat between Mr. Erdogan and UAE foreign minister Abdullah bin Zayed al-Nahyan..

Mr. Erdogan responded angrily to the tweet that accused Fahreddin Pasha, who defended the holy city of Medina against the British in the early 20th century, of abusing the local Arab population and stealing their property as well as sacred relics from the Prophet Muhammad’s tomb,. The tweet described the general as one of Mr. Erdogan’s ancestors.

“When my ancestors were defending Medina, you impudent (man), where were yours? Some impertinent man sinks low and goes as far as accusing our ancestors of thievery. What spoiled this man? He was spoiled by oil, by the money he has,” Mr. Erdogan retorted, referring to Mr. Al-Nahyan.

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Who Will Rebuild Syria: Extremely Loud & Incredibly Close

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After raging for eight years, the violent phase of the Syrian civil war seems to be reaching its final stages, with Idlib as the last holdout. Recently, leaders of Russia, Iran and Turkey held talks in Sochi to discuss securing peace in Syria and preventing a large-scale military assault on Idlib, Syria’s last rebel enclave. World leaders have also discussed the the reconstruction of the war-torn country. Russian President Vladimir Putin urged European Union countries to help rebuild Syria, arguing that it would lead to a faster return of refugees from Europe to their country. His efforts have so far been unsuccessful as EU countries refuse to participate in a rebuilding process that involves Bashar Al-Assad. Arab states are considering readmitting Syria into the Arab League and have shown interest in investing in the country’s reconstruction. However, the United States is pressuring the Gulf states to hold back on restoring relations with Syria and investing in its reconstruction. As such, it seems that in addition to Russia, China, Iran, and India are best poised to invest in and benefit from the country’s rebuilding. Former United Nations Special Envoy to Syria, Staffan de Mistura estimates the cost of Syria’s reconstruction to be 250 billion USD, while the Syrian government estimates the number to be 400 billion USD. Either way, the cost is too high for the Syrian government to finance on its own without the help of its leading businessmen and international partners and allies.

How the Civil War Changed Syria’s Economic Environment

However, during the eight years of ongoing civil war, some prominent faces in Syria’s economic arena have disappeared, giving way to new actors who have positioned themselves and their businesses to benefit from the vacuum created by the civil war and, therefore, became highly influential, obtaining access to Al-Assad’s ‘inner circle’. Some of Bashar Al-Assad’s inner circle members were forced to flee the country, defect to the opposition, or remain neutral—thus losing their favourable position in this inner circle. This applies not only to the decision-making process, but also to the country’s internal economic process. The International Crisis Group’s Peter Harling argues that the war “forced large families to exile or to shut their businesses down and allowed a new generation of wheeler-dealers to emerge.” However, most of these actors and their assets have been sanctioned by the West due to their relationship with, and involvement in projects linked to the Syrian government. This creates a hurdle on the way to Syria’s reconstruction as many businessmen find their own funds—as well as international funds, companies and suppliers—inaccessible.

Economic Sanctions as an Obstacle

Economic sanctions have been successful in limiting the activity of Syria’s economic actors. It didn’t put them out of business as they have developed methods to bypass sanctions. Among those is establishing a close relationship with the Syrian government based on a system of ‘favors’, in which businessmen provide the government with some financial services in return for access to lucrative projects across the country. This poses several obstacles in the face of the country’s reconstruction. How independent are these businessmen from the government as economic actors best poised in terms of access and financial resources to rebuild the country? Given their proximate relationship to the Assad government, it is unlikely that they will gain access to foreign funds needed for the country’s rebuilding. Moreover, do their interests lay in rebuilding infrastructure and improving citizens’ living standards? Or will they rather pursue lucrative projects that are not entirely related to infrastructure, and therefore, will not bring significant benefit to the majority of the population? Furthermore, given the nature of the political and economic process in Syria, foreign companies will need to partner with local Syrian actors who have close ties to the government to be able to effectively invest and participate in the rebuilding process. However, these partnerships are restricted due to economic sanctions. As such, it is important to identify these local actors, their relation to the Syrian government and what initiatives towards rebuilding the country they have taken thus far. The most prominent and currently active businessmen in Syria can be divided into two groups: the ‘old guard’ who have been able to withstand local and external pressures and remain operable, and the ‘new guard’, who saw in the civil war the opportunities to gain access to financially beneficial economic sectors and projects.

Syria’s Most Prominent ‘Old Guards’

Rami Makhlouf is at the top of the ‘old guard’ list. Even under Western sanctions, he is still successfully operating in the country. This is in great part due to his relation to Al-Assad: he is a cousin from mother’s side. Following the outbreak of the war, Makhlouf stated that he would turn to charity and no longer pursue projects that can generate personal gain. However, Makhlouf still has close ties with leading businessmen in the country and is active in several economic sectors, including telecommunications (he owns mobile network company Syriatel), import/export, natural resources, and finance. Moreover, the Makhlouf empire has branches in some European countries, and a team of lawyers creating shell companies and bank accounts to bypass economic sanctions. Therefore, even if at times he is not the face of projects, it is highly likely that Makhlouf is somehow still benefiting from his relations with other businessmen and his numerous shell companies.

Mohammad Hamsho is another infamous old guard who currently serves as Secretary of the Damascus Chamber of Commerce, Secretary of the Federation of Syrian Chambers of Commerce and member of the People’s Assembly for Damascus. In 2018, Hamsho visited Tehran and met with Secretary General of Tehran Chamber of Commerce, Dr. Bahman Eshghi. During the meeting, both sides affirmed their determination to work on improving their economic relation, and signed a memorandum of understanding on cooperation between the two countries in various economic, trade, investment and production sectors. However, given that both countries are under sanctions, the magnitude of their economic cooperation is still hard to predict. Hamsho has been subject to US sanctions since 2011, but has been successful in having European sanctions lifted in 2014 on the grounds that there was insufficient evidence of his involvement with the regime. Two prominent Syrian businessmen who landed on the EU’s latest list of sanctioned individuals, published on January 21, 2019, are Nader Qalei and Khaled Al-Zubaidi. The two are leading actors operating in Syria with investments in the construction industry. One of their most significant investments is in the construction of Grand Town, a luxury tourist project. The Syrian government has granted Qalei and Al-Zubaidi a 45-year agreement for this project in exchange for approximately 20% return on revenue. According to the Council of the EU, Qalei and Al-Zubaidi benefit from and/or support the regime through their business activities, in particular through their stake in the Grand Town development. One of the most prominent actors in the country’s media sector is Majd Sleiman, otherwise known as the ‘intelligence boy’, son of Hafez Al-Assad’s cousin. Sleiman is currently the chief executive director of Alwaseet Group, one of the largest media groups in the Middle East and North Africa region. At the age of 25, he was already running several businesses and had established regional and international connections in the Middle East, Africa, East Asia, Europe and the United States. Even though Sleiman is active in the media and publishing sector, which is considered unprofitable, his companies received significant amounts of money from British accounts. This could be indicative of potential money laundering for the Syrian regime through British banks, via Sleiman.

Syria’s Most Prominent ‘New Guards’

With some families falling out of Al-Assad’s favors, and others exiled or unable to operate due to economic sanctions, a few savvy businessmen found an opportunity to fill the newly created vacuum and establish ties with the Al-Assad government by providing it with much needed services. Most prominent among these ‘new guards’ is Samer Foz, a leading Syrian businessman, known for his ruthlessness in conducting business. In fact, in 2013, Foz served a six month jail sentence for killing a Ukrainian/Egyptian businessman in Istanbul, Turkey. Foz is involved in multiple sectors of Syria’s economy, including brokering grain deals, and a stake in a regime-backed joint venture involved in the development of Marota City—a luxury residential and commercial development project. After several of Al-Assad’s former business allies found themselves unable to continue their business activities, Al-Assad welcomed Foz to his inner circle. Moreover, after being heavily affected by the war, Syria’s agricultural industry suffered, and Foz positioned himself as one of the few businessmen with the ability to broker grain deals. As a result, he received access to commercial opportunities through the wheat trade. Through his investments in the food industry and some reconstruction projects, Foz made his way into the inner circle by providing financial and other support to the regime, including funding the Military Security Shield Forces. Notably, Foz maintains very close ties with Iran, as well as Russia and other Western and Arab countries such as Italy, the United Arab Emirates (UAE) and Lebanon.

Another relatively new name to the arena of businessmen in Syria is Mazen Al Tarazi. Al Tarazi resides in Kuwait and has launched several campaigns in an attempt to get into Al-Assad’s inner circle. One of his campaigns was named “Returning to Syria” in which he pledged to bear the cost of Syrians wanting to return to their country. Moreover, in 2014, he assigned a plane at his own expense to transfer Syrians from Kuwait to Damascus, and back to Kuwait so they can cast their votes in the Presidential election. In 2017, his attempts proved successful and he was granted an investment license for a private airline in Syria, as well as other projects including a deal with Damascus Cham Holdings for a 320 USD million investment in the construction of Marota City. The Syrian Palestinian businessman benefited from his public support of the Assad government. In fact, according to Syrian media, Al Tarazi’s investment in Marota City is the first investment in Syria in which the investor’s share is greater than that of the public sector (51% of the project was owned by Al Tarazi and 49% by the Damascus Holding Company of the Damascus governorate). This investment, as well as his outspoken support for Al-Assad landed him on the EU’s latest list of sanctioned persons. The final businessman on the ‘new guards’ list is Samir Hassan, owner and agent of several companies in Syria, including Nokia and Nikon. After bad harvests due to war, he invested in imports of food supplies, in particular wheat, rice, sugar, and tea, and developed a close relationship with the Al-Assad family. During the civil war and against the background of improved relations with Russia, Hassan was named the Chairman of the Syrian-Russian Business Council, quite a prestigious position given the special relationship between Russia and Syria. Hassan’s investments in the food industry will also be vital during the reconstruction of Syria where he will be able to provide materials and products needed for reviving the agricultural sector, one of the greatest contributors to Syria’s Gross Domestic Product (GDP).

Trends in investments of Syria’s Businessmen

In general, businessmen involved in the Marota City and Grand Town projects have found themselves under Western economic sanctions. Most of Syria’s prominent businessmen have invested in these projects thanks to their connections with the government. In addition to some of the figures mentioned above, Anas Talas, Nazir Ahmad Jamal Eddine, Khaldoun Al-Zoubi, Hayan Mohammad, Nazem Qaddour, Maen Rizk Allah Haykal and Bashar Mohammad Assi have been recently sanctioned primarily due to their participation in the construction of Marota City. The Marota City and Grand Town projects are not essential for the country’s reconstruction, as they represent luxury residential and commercial projects and do not contribute to rebuilding the damaged infrastructure. However, several of the mentioned businessmen have been investing in infrastructure-related industries, such as the metal and steel industry, as well as the electrical and food industries. Recently, Hamsho bought “Al Sewedy Cables” factory, previously owned by Egyptian businessman Ahmad Al Sewedy, which produces electrical cables, towers, columns, transformers and circuit breakers, as well as a foundry (metal melting) factory that produces material for construction. Hamsho was able to acquire Al Sewedy’s company after it defaulted on loans given to it by the Islamic Bank of Syria and was sold in an auction. Foz has also been investing in former businessmen’s assets as he secured the ‘empires’ of two Syrian millionaires previously in Al-Assad’s inner circle. Emad Hamisho, previously known as the “economic shark” of Syria, and his family were sanctioned by the Syrian Ministry of Finance in 2013 after defaulting on a loan of 3.8 million Syrian Pounds he had borrowed from the real estate bank. In 2014, the sanctions were lifted without any clarifications on whether Hamisho had settled his account with the ministry or not. In 2018, the Ministry of Finance issued a new decision to sanction the assets of “Hamisho Minerals.” Foz saw an opportunity in it and swooped in. He entered into a partnership with Hamisho and created a new company where he heads the board of directors. Moreover, after a series of tightening measures initiated against him by the Syrian government in the early phases of the civil war, Imad Ghreiwaty decided to gradually transfer his investments abroad and resign from his position as the head of the Union of Chambers of Industry. His assets included a cables company, “Syria Modern Cables”, which Foz bought in 2017. Notwithstanding the manner of purchase, these initiatives are important for the country’s rebuilding, and are profitable for the investors, as they will provide construction material necessary for the reconstruction phase.

Financing Syria’s reconstruction

It is evident that rebuilding Syria will be largely controlled by Al-Assad’s inner circle of businessmen who have preferential access to investments and are best positioned to receive projects and tenders in the upcoming period. However, a few businessmen will not be able to rebuild the country on their own, and even the country’s most prominent and richest businessmen will find themselves limited in their activities due to imposed economic sanctions. While Syria’s allies are willing to help, and have already begun cultivating and consolidating relationships with local actors to gain access to the Syrian market, they are also facing certain limitations. Iran and Russia are constrained by economic sanctions of their own, whereas India and China are reluctant to invest unless they receive security guarantees to insure and protect their investments in Syria. Therefore, while both local and external actors are willing and seek to invest in the lucrative industry of Syria’s rebuilding, they are faced with many obstacles, including economic sanctions. The irony of the matter is that actors who have access and finances to invest in rebuilding Syria cannot do so since their access depends on their relationship with Al-Assad—a relationship that has provided them with opportunities and finances, and landed them on international economic sanctions lists that now restrict their ability to operate at their full capacity. With the United States and European Union unwilling to foot the bill, it remains to see whether the Gulf States will overcome Western pressures, restore ties with Al-Assad and invest in rebuilding Syria.

First published in our partner RIAC

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