Three years into a conflict that is estimated to have killed at least 140,000 people, the Syrian economy lies in ruins. Assets and infrastructure have been destroyed, half of the population lives below the poverty line, and the human development index has fallen back to where it stood 37 years ago. It is estimated that even with average annual growth rate of 5 percent it would take nearly 30 years to recover Syria’s 2010 GDP value.
In a new ECFR policy brief, “Syria’s war economy”, Visiting Fellow Jihad Yazigi argues that against the backdrop of armed conflict we see the spread of a war economy, which both feeds directly off the violence and incentivises continued fighting.
– The Syrian economy has witnessed four stages of decline provoked by the outbreak of the conflict, the imposition of sanctions, the expansion of fighting into the country’s economic powerhouses and the opposition seizure of the resource-rich northeast. Nonetheless, regime-controlled areas remain resilient particularly because of the critical support provided by domestic and international allies.
- The expansion of the war economy in opposition-controlled areas has been fuelled by the intra-rebel fight for lucrative resources such as oil fields and grain stores, but the rise of state militias and the impact of sanctions have also created powerful new networks on the regime side. A growing number of groups on both sides of the divide now reap significant material benefit from the conflict, which gives them a powerful incentive to prolong the fight.
- The relative autonomy gained by local stakeholders is creating new power centres that are likely to clash with any future central government. The entrenched fragmentation of the economy means that areas controlled by the regime and the opposition have become increasingly disconnected.
- However, the fragmentation of the economy could also be part of a solution to the crisis: Europeans and other international actors should consider an approach built around a decentralised political system as a way of appeasing the fears of all sides and providing a means of working towards a new national consensus from the bottom up.
“As security has collapsed, an informal economy comprising looting, kidnapping, and smuggling has become an important source of income. Entirely new business networks, often illicit, are emerging and new groups and individuals are being empowered at the expense of the traditional business class.” – Jihad Yazigi
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