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Thriving war economy

Tamsin Walker
May 10, 2014

With the Syrian conflict in its fourth year and sanctions still in place, the formal economy has collapsed. Analysts say the war economies that have emerged in its place could ultimately prove an impediment to peace.

Aftermath of a bomb attack on Aleppo
Three years of devastating violence have crippled the Syrian economyImage: Reuters

One lesser discussed outcome of the relentless fighting that has killed an estimated 140,000 people on both sides of the Syrian conflict is the economy. In a Catch-22 type scenario, its virtual collapse has led to the emergence of a host of micro war economies that are serving some groups, individuals and militias very well. Rather too well, according to European Council on Foreign Relations visiting fellow Jihad Yazigi.

In a policy brief on Syria’s war economy, he describes a scenario of depleted assets, failing economic output, absent investors, extortionate inflation rates and dwindling reserves. Yet for all that, he talks of a war economy that is becoming entrenched across the country and is "creating significant new economic networks and business activities that feed off the violence."

Among those benefitting from the devastation of the war are businessmen who have stepped into the shoes of entrepreneurs under sanction, armed groups who control roads, oil fields and checkpoints, and brigades involved in looting, smuggling and kidnapping. For many, there is a new-found sense of empowerment.

"There are people in rebel-held areas who were almost nothing prior to the revolution, but now with weapons in their hands, they have influence and wealth," Yazigi told DW. "An end to the conflict would mean the potential risk of a return to a more or less normal life situation, so they objectively have an interest in its continuation."

Oil to the enemy

An oil field
The majority of oil fields are outside regime control, and subject to intra-rebel conflictImage: picture-alliance/dpa

The analyst, who is also founder and editor of The Syria Report, an online bulletin covering Syrian economic affairs, says the extensive agricultural and energy resources in the rebel-controlled north-east have ensured the region "an economic life of its own."

Ninety percent of producing oil fields are based in areas outside the command of the central government, and although production has fallen dramatically compared to pre-revolution levels, crude still serves as a reliable source of income for the disparate groups controlling the wells. And some of it, Yazigi says, is even sold to Assad-affiliated militias or the regime itself.

"This is relatively common in terms of civil war dynamics," he said, adding it is not entirely surprising to see the regime doing business with al-Qaeda-linked group Jabbhat Al-Nusra. He likens it to reports of soldiers selling their arms to rebel groups. "The opposition buys the arms and use them against the army."

A mosaic of war economies

In a landscape where anything of value can and will be sold to generate income, there are various opposition and rebel groups fighting for control of oil fields, roads, checkpoints, grain storehouses and so on. Samer Abboud, visiting scholar at the Carnegie Middle East Center, describes it as a mosaic of war economies, of fiefdoms that oversee smuggling and distribution networks.

Smoke and fire in the war-devastated city of Aleppo
Ongoing violence has led to the creation of war economiesImage: Reuters

"One of the problems Syria has now is that there is very little way to finance administration and services in the rebel areas," Abboud told DW. "That partially explains the emergence of these radical armed groups, because they control the financial benefits of the war economy and are able to devote them to things like courts and salaries."

So what happens to these economies in a post-war scenario? The traditional model in post-conflict peace agreements is to find ways to incorporate those who have acquired power during the fighting, but Abboud has his doubts about such a strategy for Syria.

"Many of the brigades that exist in the north-west now were previously smuggling networks that have been enriched by the conflict, both financially and politically," he said, adding that they would have little incentive to disarm or pull back.

"Smuggling has been going on through Iran and Turkey for a long time, and while we used to just call them smugglers, we now call them rebels and are supposed to give them a say in the future of the country."

Creating a sustainable future

Blown out buildngs
However the war finally ends, it is going to take decades to rebuild the economyImage: STR/AFP/Getty Images

That said, the expert stresses the importance of acknowledging criminality during the process of planning for a post-conflict state.

"You have to accept that smuggling and informality will exist," he said. "Any attempt to suppress all informality could have negative social effects, because that is often how people access resources, especially in rural areas."

In order to come up with a workable blueprint for the future of the country, he says post-conflict planners need to take a long, hard look at the specific patterns of Syria’s war economy.

"Any peace deal has to take the economic needs seriously," he said. "You can’t separate them, and you can’t ignore the fundamental role that economic health plays in sustaining post-war agreements."