The Assad Regime’s Financial Viability

Matt Brodsky

4 year ago

August 14, 2018

The regime of Bashar al-Assad in Syria is a menace to the people of Syria and its neighbors in the region. As an enabler of Iranian expansion and Russian force projection it also presents problems for the United States and our allies. Conventional wisdom seems to be that Assad’s final victory is close at hand and will be accompanied by a return to business as usual. The Security Studies Group examined what kept the regime financially afloat in order to identify future non-kinetic pressure points that can impact the behavior of the regime and its sponsors if necessary.

Security Studies Group Senior Fellow Matthew RJ Brodsky examined the major sources of revenue, both internal and from outside patrons, and its economic structure. The Executive Summary of his report follows, and the full document can be viewed here:

The Assad Regime’s Financial Viability – SSG Monograph (PDF, 16 pages, 1.5MB)

Executive Summary

The Syrian civil war destroyed three-quarters of the national economy and wreaked havoc on all sectors, but the regime of Bashar al-Assad was able to weather the storm. While Iran and Russia secured his rule and turned the tide of the war in his favor, Assad managed to remain financially afloat by taking several actions, beginning with exhausting Syria’s cash reserves. To that end, Syria’s foreign exchange reserves declined from $21 billion in 2010 to less than $1 billion by 2015. Current estimates put this number at around $1.3 billion.

The regime also abused and stole international humanitarian aid:

  • The Assad regime either impedes or entirely blocks aid to opposition areas. That means the U.S. government is subsidizing the Assad regime through the UN.
  • Corrupt international organizations have cut deals with Assad’s associates worth millions of dollars. In most cases, the Syrians involved are under U.S. and EU sanctions.

Assad relied on Iranian shipments of oil and other goods:

  • Syria’s energy sector was hardest hit with oil GDP declining by 93% from 2010-16.
  • Iran supplies the Assad regime through its expanding air, land, and sea routes.
  • There are frequent Iranian deliveries of oil shipped by naval vessels.
  • Fighters, military equipment, and other cargo reach Syria through numerous airlifts.
  • Iran is further securing the land corridors that run from Iran, through Iraq, and into Syria.

Assad also benefited from Iran’s financial windfall as a result of the implementation of the JCPOA, which translated into a marked increase in Iranian defense spending and the funding of its foreign military campaigns:

  • As a result of the Iran deal, $30 billion of Iranian assets were released, on top of $12.6 billion after the Geneva interim agreement, and the $400 million in cash the Obama administration paid to Iranian officials in exchange for the release of American hostages.
  • Iran’s military spending ballooned to $23 billion in 2017 representing 22% of government spending compared to 17% in 2014.
  • Iran spends $15-$16 billion per year to maintain the Assad regime and has extended a credit line of between $6.6 billion to $9 billion drawn on the state-run Export Development Bank of Iran. The regime in Tehran spends billions more financing its various regional proxies.

Since Bashar al-Assad lacks the financial means to directly pay for the support he receives from Iran and Russia, he has turned to offering them business and resource development contracts, deals on expanded basing rights, and lucrative land leasing opportunities. For Russia, these deals that help solidify its permanent presence in Syria include:

  • Mineral and resource extraction agreements and deals in the hydrocarbon sector that benefits private Russian security firms and Russian business conglomerates tied to Putin.
  • Granting lucrative terms on the expansion of Russia’s naval base at Tartous and the Khmeimim air base near Latakia.

For Iran, these agreements include contracts in the telecommunications sector, the leasing of tracts of land primed for agricultural development. More importantly, however, the quid pro quo with Assad includes his general acquiescence in the Iranian entrenchment enterprise in the form of Iran’s socio-political meddling, its economic involvement, proxy building, and the development of military capabilities on Syrian and Lebanese soil. This enterprise further involves:

  • Joint basing rights agreements.
  • The construction of military bases and camps exclusively for the IRGC and its proxy militias.
  • The creation of arms manufacturing facilities and other permanent infrastructure.
  • Iran’s repopulation schemes along its land corridors using the families of Shi’a militia members and others loyal to Iran.

Iran and Russia may have won the civil war for Bashar al-Assad but they lack the means to finance Syria’s reconstruction. As Assad regains degrees of control over additional swaths of territory, his patrons are banking on the understanding that those who stood by him and his regime militarily will be rewarded the most financially through reconstruction contracts worth billions of dollars that only he can guarantee.

Russia has been able to secure a larger share of Syrian resources, in part, because Assad recognizes that that Russian President Vladimir Putin represents the proverbial adult in the room when it comes to securing international financing for reconstruction. With the return of sanctions against key individuals of the Iranian regime and large sectors of its economy, Iran’s enhanced public profile inside Syria will likely dampen international enthusiasm for the funding of reconstruction projects.

For now, Moscow requires stability in Syria while Tehran looks to continue the peaceful imposition of an Iranian post-war order on the country. They are both counting on the normalization of the Assad regime in the eyes of the international community and they view the withdrawal of U.S. forces as an imperative. Indeed, America’s absence will help facilitate these goals. In the meantime, there is no reason to believe that any foreign aid that touches Bashar al-Assad, or reconstruction funds that reach the regime, will do anything but improve the lot of regime loyalists, not those worst impacted by the conflict.

The full report can be viewed here:
The Assad Regime’s Financial Viability – SSG Monograph (PDF, 16 pages, 1.5MB)

About the Author

Matt Brodsky

Matthew RJ Brodsky is a Senior Fellow at the Security Studies Group. Previously, he served as the Director of Policy for the Washington, DC-based think tank, the Jewish Policy Center and as the Editor of its journal, inFOCUS Quarterly. Prior to that he was a Legacy Heritage Fellow at the American Foreign Policy Council. Brodsky is a frequent contributor to the National Review, Weekly Standard, Jerusalem Post, National Interest, the Federalist, and the Hill, and is frequently interviewed as a Middle East subject expert in newspapers internationally, on television news outlets, and nationally syndicated radio shows. A specialist in Middle East affairs, Arab politics, and political Islam, he graduated with magna cum laude honors with a Master of Arts degree in Middle East History from Tel Aviv University. His website is