Analysis

In Syria, Russia and Iran Watch as New Players Step Into the Arena

While Saudi Arabia seeks a foothold in the oil-rich region, Assad says he has offered China investment opportunities in his country – where Russia, Iran and Turkey already operate

A former farmer working at a primitive refinery making crude oil into diesel and other products, Rmeilan, Syria, April 6, 2018.
Hussein Mall / AP

A big uproar swirled in Syria this week following the publication of a short video showing Hussam Katerji, an MP and one of the country’s most prominent businessmen, getting off his private plane and stepping into an SUV with his armed escorts. The vehicle was flanked by two columns of Syrian soldiers saluting him.

“Even the president doesn’t get such a convoy,” someone wrote in the comment thread under the video. “There are MPs who don’t even have a car and have to take the bus to work,” someone added.

In parliament, too, tempers flared “at a time when the country is in an economic crisis and people are being killed,” as one MP put it. Katerji got the message and announced that he was ready to apologize to the nation, the president and parliament.

Katerji, 37, is the head of the Katerji Group of about a dozen companies in industries such as construction, textiles and petroleum.  The son of a poor tailor who opened a textile factory in Raqqa, Katerji is estimated to be worth more than a billion dollars.

Two of the tailor’s sons, Baraa as well as Hussam, went into real estate, and thanks to their ties with the Assad family and ties they built with tribal leaders around Raqqa (which later become the Islamic State’s “capital” in Syria), their business flourished. They were able to take control of historical sites and obtained illegal permits for construction there. They also appropriated buildings and land that they sold for a tidy profit.

When the civil uprising began in Syria in 2011 and a flour shortage took hold, the Katerji brothers seized the opportunity and signed deals to buy wheat and flour from the Kurds who controlled the northern provinces, the country’s breadbasket. When the Islamic State took over part of this region, the Katerji Group continued with its grain acquisition deals, this time with the Islamic State. Later, it also did deals with the terror group to acquire oil from the large fields that were under ISIS control.

Three years ago, the U.S. administration imposed sanctions on Katerji and his companies, but this didn’t stop the businessman from going on to import goods from Turkey and other countries via Turkey. Now that the Islamic State has been defeated and the Kurdish militias have taken their place at the oil fields and border crossings, Katerji has switched suppliers and buys Kurdish oil for the Syrian regime.

Mazloum Abdi, the commander of the Kurdish militias, has confirmed that his organization, which controls the large oil fields including Al-Omar, Syria’s largest, is selling oil to the regime despite the U.S. sanctions that prohibit oil exports to Syria. The Americans evidently have no problem with the Kurds selling oil to Bashar Assad, because if they wanted, the U.S. forces stationed near the fields could block this trade, a major source of revenue for the Kurds.

The Kurds and the Katerji Group could now find themselves facing competition from several other powerful players that have their eyes on Syria’s oil. Saudi Arabia recently hosted a delegation of Kurds in Riyadh for “a support and get-to-know-each-other meeting,” as the Syrian Kurdish media described it.

The Kurds and Saudi Arabia don’t really need to get to know each other. Last year, Riyadh announced a donation of nearly $100 million to the Kurdish forces, and in the last few years, top Saudi officials have visited the Kurdish areas. The Saudi aid didn't stem from some sudden philanthropic impulse; it was a “gesture” at the request of the Trump administration, but it now appears to be a wise financial investment.

Paving Riyadh's way

As part of the U.S. aid to the Kurds, the administration wants to explore the possibility of Saudi Aramco opening Kurdish oil fields. But even if Aramco takes on this task, it will have to sell the oil to someone, and right now the Syrian regime looks like the most realistic customer; after all, these are Syrian fields that will be transferred to the regime the day a diplomatic solution is achieved.

Since such a solution still isn’t anywhere on the horizon, especially now that the meetings of the Syrian constitutional committee in Geneva yielded nothing but contention, Saudi Arabia is looking for ways to repair its relations with Syria. According to media reports (that have been denied by Riyadh), Saudi Arabia intends to reopen its embassy in Damascus now that the United Arab Emirates, Bahrain and Sudan have resumed relations and reopened consulates in the Syrian capital.

The Saudi oil drilling in Syria isn’t the great economic promise that the kingdom longs for, but a foothold at the oil fields could pave Riyadh’s way into the diplomatic arena where Turkey, Iran and Russia are now the sole players. It was no coincidence when King Salman declared in November that “Turkey is violating Syria’s sovereignty” and that the solution in Syria is for all Iranian forces to leave. Husam Louka, the head of Syrian intelligence, recently visited Riyadh, and a delegation of Syrian journalists visited Saudi Arabia and met with Saudi journalists, though not with any government officials.

Saudi Arabia, which opposes the Turkish invasion of the Kurdish provinces, considers Turkey a very hostile country, especially due to its close ties with Qatar, where Turkey has a military base. As part of Riyadh’s conditions for reconciliation with Qatar, it’s demanding the removal of the base. Qatar, which owes Turkey for rescuing it with aid two years ago when three Gulf states – Saudi Arabia, Bahrain and the UAE – plus Egypt blockaded it, has said it has no intention of harming its relations with Turkey.

But the latest attempts at reconciliation could exact a diplomatic price from Qatar. Russia, which holds most of the concessions for developing Syria’s oil fields, wasn’t pleased by the Saudi intervention. It sees the concessions as part of its reward for its massive aid to Syria that was crucial to let Assad retake most of the territory seized by the rebels.

Russia recently announced that it plans to invest $700 million in Syria over the next four years, including $500 million for developing and expanding the port at Tartus that’s used as a Russian naval base. The other $200 million is for building a fertilizer plant. An investment of this size shows that Moscow plans to keep using Syria as a forward base in the Middle East and the Mediterranean, while the expansion of the port is apparently also meant to turn it into a logistics center for Russian trade.

In this photo released on November 9, 2019, Syrian President Bashar Assad speaks with Italy's Rai News 24 in Damascus.
SANA via AP

Russia’s economic takeover of Syria pushed Iran to the fringes of the economic projects it hoped to claim in return for its sacrifice of lives as well as military and civilian investment. Syria received from Iran credit lines topping $7 billion, but its colossal debt to Tehran is estimated at $34 billion. Not only does Syria not have any way to repay, it has also stalled Iran with promises to hand it projects like building a third cellular network and a power grid. Contracts and memorandums of understanding were signed between the two countries during the war, but very few have been implemented.

Iran holds agreements to open branches of Iranian banks in Syria and a Syrian commitment to grant Iranian companies land and permits to build tens of thousands of apartments. Assad recently told his ministries to award projects to Iranian companies without a bidding process. But given Iran’s dire economic situation, it’s unlikely that Tehran has the wherewithal to open new Iranian banks or do massive construction.

Baiting Beijing

Meanwhile, a new player has appeared on the Syrian economic scene. This week, Bashar Assad told China’s Phoenix Television that he offered China six investment projects as part of its Belt and Road Initiative that involves billions of dollars in infrastructure projects. According to Assad, China promised to decide which of the proposals best suit its strategy, even though Syria isn’t geographically on the Belt and Road map.

China’s presence is only at the exploration stage, and traditionally China doesn’t invest in regions and countries that are at war (save for arms sales). But the publicity that Assad has given to his talks with the Chinese is meant for Russian and American ears – if Washington thinks it can punish Assad with sanctions, he might have a friend to help him get around these measures. And if Russia thinks Assad is completely dependent on it, well, here’s a potential strong competitor.

But Assad’s ability to maneuver between China and Russia, and between Saudi Arabia and Iran, could be brought to a screeching halt by the law passed Tuesday by the U.S. Senate (after approval by the House). The administration may now impose sanctions on anyone involved in the harming of Syrian civilians.

The law is known as the Caesar Syria Civilian Protection Act, borrowing from the code name for a Syrian police officer who deserted in 2013 and revealed 50,000 photographs depicting war crimes in Syria. The law lets the administration impose sanctions on foreign companies and countries that have helped the Syrian regime in its operations against civilians.

Now it will be interesting to see how Donald Trump reconciles the law with the Kurdish oil sales to the Assad regime, and whether he’ll confront Russia over its investments in Syria or demand that China forgo its embrace of the country.