meed-logo

line1 line2 line3
SIGN IN / REGISTER

Regional diplomacy fails Syrian economy

6 June 2024

 

Syria’s dire economic position continues to worsen. In a report issued in May, the World Bank predicted the economy will shrink by 1.5% this year, following a 1.2% decline in 2023.

The economy had already contracted by 54% between 2010-21, according to the Washington-based body. Its international trade has also entered freefall, with the value of exports falling from $8.8bn in 2010 to just $0.7bn in 2023, while imports dropped from $17.5bn to $3.2bn over the same period. Syria was once an oil exporter with a large agriculture sector, but it has become reliant on fuel and food imports.

What makes matters worse is that the cost of importing goods is now far higher than it once was, thanks to the collapse in the value of the Syrian pound. In 2011, you needed £Syr47 to buy one US dollar; by 2023, the cost had risen to more than £Syr12,500 for every greenback. Last year alone, the Syrian pound declined by 141% against the dollar, while inflation was running at 93%.

Agriculture fared slightly better in 2023 due to improved weather conditions compared to 2022, but the north of the country suffered a devastating earthquake in February 2023, which killed several thousand people and destroyed thousands of homes.

The authorities have few spare resources to devote to rebuilding areas devastated by natural disasters or the civil war. 

The government has lost control over oil revenues to the Autonomous Administration of North and East Syria (AANES), which holds the oil-rich parts of the country. The security challenges of the past 13 years have also led to a downturn in most other parts of the economy and enfeebled the government’s ability to collect taxes.

The World Bank estimates that, after adjusting for inflation, government revenues are now 85% lower than before the war.

The poor living conditions prompted a fresh wave of protests in Daraa and Al-Sweida in August 2023, which then spread to other government and rebel-controlled areas of the country. Locals have much to complain about.

The International Rescue Committee reckons that nearly three-quarters of Syria’s population, or more than 16.5 million people, require some sort of humanitarian assistance and upwards of 90% of Syrians now live in poverty.

Smuggling economy

One area of activity that has prospered has been the production and export of Captagon. This illegal amphetamine-like drug is smuggled in huge quantities into the Gulf, where it finds a ready market despite concerted efforts by the authorities there to clamp down on it.

The World Bank has estimated Syria’s Captagon trade was worth between $1.9bn and $5.6bn a year from 2020-23; that higher figure is not far below the country’s GDP of $6.2bn in 2023.

Those linked to the Syrian trade are thought to earn between $600m and $1.9bn in revenue a year. To put that in context, the revenue generated from all legal exports from Syria last year was $960m.

The Captagon trade might be enriching some figures close to the regime of President Bashar Al Assad, but it is also undermining the country’s wider economic prospects.

One potential avenue for rebuilding the shattered economy is to attract inward investment and the rich Gulf countries are an obvious potential source for that.

However, despite the diplomatic normalisation with Gulf governments over the past few years, the hoped-for investment flows have not materialised, with unhappiness over the Captagon trade a key factor – even if there have been some signs of a reduction over the past year or two.

Caroline Rose, who runs the Washington-based New Lines Institute’s research project on the Captagon trade, said: “We keep tabs of recorded Captagon seizures … and noted a slight dip in Captagon seizures region-wide between 2022 and 2023, so the reduction in seizures could be related to a stabilisation in the supply and production of Captagon.” However, she added that Syria continued to export the drug “at industrial levels”.

Investment brakes

The drug trade is not the only barrier to attracting foreign capital, though. Inward investment has also been hampered by US sanctions set out under the Caesar Syria Civilian Protection Act of 2019, generally known as the Caesar Act, and the myriad problems within the domestic economy are also a major hurdle for any would-be investor.

“When it comes to business and investment, Syria does not really provide any good environment for that. You have high costs, high risks, absence of rule of law, low purchasing power,” said Haid Haid, a consulting fellow at UK thinktank Chatham House, in April. “Businesses in general will not be tempted to go and open businesses there because the gains are low.”

Some regional aid has been flowing in, though. Arab countries raised their contributions from 2% of the total aid in 2022 to 15% in 2023, with the UAE, Kuwait and Saudi Arabia being the largest donors.

Others have been focusing their efforts on the plight of the millions of Syrian refugees displaced inside the country and beyond its borders in Turkey, Jordan, Iraq and Lebanon. Since the war started, around half of Syria’s 23 million-strong population has been displaced, with more than 5 million fleeing abroad.

Some €7.5bn ($8.1bn) of grants and loans were pledged by international donors to help Syrian refugees at the Brussels VIII Conference on Supporting the Future of Syria and the Region on 27 May.

But until a political resolution to the civil war can be found, Syria’s enormous economic and humanitarian crises are unlikely to be solved. Speaking at the Brussels conference, the European Union’s foreign policy chief Josep Borrell said a “Syrian-owned political solution … is the only credible path for all Syrians to live in peace and stability, and for refugees to return home.”

Gaza conflict renews violence in Syria

https://image.digitalinsightresearch.in/uploads/NewsArticle/11854850/main.gif
Dominic Dudley

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Neom requests revised Gayal wind proposals

    6 September 2024

     

    Neom’s energy, water and hydrogen subsidiary Enowa has requested that the final bidders submit updated proposals for a contract to build a 1,200MW wind farm catering to the gigaproject in Saudi Arabia.

    This development follows the introduction of an addendum to the tender after companies submitted their best and final offers (bafos) for the contract to build the 1,200MW Gayal wind farm project in June, a source close to the project tells MEED.

    MEED reported on 9 July that Neom is progressing towards awarding the engineering, procurement and construction (EPC) contract to the selected bidder following receipt of the bafos.

    Enowa received the initial bids for the contract on 4 March.

    It is understood that PowerChina and Egyptian contractor Orascom are among the firms invited to bid for the Gayal wind farm EPC contract.

    The wind farm project site is approximately 35 kilometres northwest of the former town of Gayal.

    The project will have an estimated plot area of 164 square kilometres. The project duration is 31 months from the start of construction.

    The scope of work for the EPC contractors bidding for the scheme includes the design, supply and installation of wind turbine generators and foundations, three 380kV substations and control systems, meteorological towers, site roads, hard stands, crane pads and associated infrastructure.

    Enowa received bids for another renewable energy project, the 800MW Shiqri solar farm, in March. The client is conducting commercial clarifications for the solar project, MEED reported in May.

    Neom aims to be powered 100% by renewable energy by 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12465111/main0411.jpg
    Jennifer Aguinaldo
  • Wabag confirms $317m Saudi water deal

    6 September 2024

    India-headquartered VA Tech Wabag has confirmed winning a contract to build a 300 cubic-metres-a-day (cm/d) seawater reverse osmosis (SWRO) plant project in Yanbu, Saudi Arabia.

    The value of the contract for the Yanbu 5 SWRO plant is $317m, the Bombay Stock Exchange-listed company said in a statement on 6 September.

    The engineering, procurement, construction and commissioning contract covers the design, engineering, supply, construction and commissioning of the desalination plant.

    According to Wabag, the plant will operate using dual media filters followed by a two-pass reverse osmosis process and re-mineralisation to produce clean potable water, which will be further distributed by Saudi Water Authority (SWA). 

    The plant is located on the west coast of Saudi Arabia, south of the Red Sea-facing Yanbu Al-Bahr, and is scheduled to be completed within 30 months of the contract award.

    MEED reported in July that Wabag submitted a lower bid for the contract.

    Saudi Arabia's main producer of desalinated water, SWA – formerly Saline Water Conversion Company (SWCC) – received two bids in May for the contract to build the Yanbu 5 SWRO project.

    The other bidder is understood to comprise a local contractor team and an overseas-based partner.  

    The bid evaluation process is ongoing for a second project, the Shuaiba 6 SWRO plant, which has a capacity of 545,000 cm/d.

    Two other projects, the Jubail and Ras Al-Khair SWRO projects, are in the bidding stage. They will each have the capacity to treat 600,000 cm/d of seawater.

    The four contracts are being procured using an EPC model, in contrast to the SWRO facilities being procured on a public-private partnership basis by state offtaker Saudi Water Partnership Company.

    SWA is the world's largest producer of desalinated water, with a capacity of at least 6.6 million cm/d. Plants utilising older and more energy-intensive techniques such as multi-stage flash technology account for the majority of the current capacity.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12464222/main3634.gif
    Jennifer Aguinaldo
  • Chinese companies win 95% of all Iraqi energy projects

    6 September 2024

    Commentary
    Wil Crisp
    Oil & gas reporter

    Companies headquartered in China have won 95% of all major project contracts awarded in Iraq’s oil, gas, chemicals and power sectors so far this year, as they increase their dominance in the market.

    A total of $12.1bn in energy project contracts were won by Chinese companies during the first eight months of 2024, according to data gathered by regional project tracker MEED Projects.

    The only major award so far this year that was not won by a company or partnership that was 100% Chinese, was the contract to rehabilitate the Baiji 2 gas-fired power station, which is estimated to be worth $1.3bn by MEED Projects.

    This contract was awarded to a consortium of Beijing-headquartered China State Construction Engineering Corporation (CSCEC) and German technology conglomerate Siemens.

    Commenting on the figures, one industry source said: “China has been a dominant force in Iraq’s energy sector for a long time and this is only increasing as time passes.

    “The huge presence that China has in the country’s energy sector is a source of concern for Iraq’s leadership, which doesn’t want to cede control of so many important infrastructure projects to companies from any single country.”

    “The problem is, other countries are reluctant to take on the risks of doing business in Iraq and at the same offer the competitive prices that Chinese contractors can offer.”

    The biggest energy project contract won by a Chinese contractor so far this year is the agreement for the development of the Al-Faw Investment Refinery project.

    The client on the project, state-owned Southern Refineries Company, signed a contract with CSCEC in May this year.

    The refinery will have a capacity of 300,000 barrels a day and will produce oil derivatives for both domestic and international markets.

    The project will be carried out in two stages. The first phase will involve refining operations, while the second will involve constructing a petrochemicals complex with a capacity of 3 million tonnes a year.

    The wider project also includes the construction of a 2,000MW power plant and the establishment of the Al-Faw Academy for Refinery Technology, to train 5,000 Iraqi workers that will eventually work at the facility.

    Hualu, a subsidiary of China National Chemical Engineering Company (CNCEC), signed a preliminary principles agreement for the project in December 2021.

    At the time, Iraq’s Oil Ministry said that the project would have an investment value of $7bn-$8bn.

    MEED Projects has estimated that the contract value of the deal signed with CSCEC in May for the refinery project is about $4bn.

    Other energy project contracts won by Chinese companies during the first eight months of this year included the contract for the Artawi 1,000MW photovoltaic solar power plant in Basra.

    This contract, estimated to be worth $1bn, was awarded to China Energy Engineering International Group.

    Chengdu-based DongFang Electric Corporation was awarded the main contract for a project to convert the Baghdad South power plant into a combined-cycle gas turbine power plant.

    The project is estimated to be worth $85m and will increase the capacity of the power plant by 125MW-625MW.

    Also this year, a subsidiary of PetroChina, the listed arm of state-owned China National Petroleum Corporation, signed an agreement to develop Iraq’s Nahr Bin Umar onshore gas field.

    The subsidiary, PetroChina Halfaya, was awarded the build-own-operate-transfer contract, which is estimated to be worth about $400m.

    Iraq’s Oil Ministry said that the field will have an initial output capacity of 150 million cubic feet a day.

    The project is expected to be completed within 36 months and will include the construction of gas-gathering facilities, storage tanks and pipeline networks to supply gas to power stations.

    Strong performance

    Chinese contractors also performed well in Iraq’s energy sector in terms of the value of contract awards in 2023.

    Last year, Chinese contractors won $2.3bn in Iraqi energy sector contracts, almost half of the $4.8bn that was awarded.

    Looking at the data for 2023 and the first eight months of 2024 together, Chinese companies won $14.5bn in contracts, 82% of the $17.6bn in energy project contracts awarded over the period.

    The second closest competitors were companies from Germany, which won just over $1bn in contracts, 6% of all awards.

    Iraqi companies were third, winning $816m in contracts, according to the data compiled by MEED Projects.

    Contracts were also won by companies from Italy, the Netherlands and Turkiye.

    Iraq is currently in the midst of a push to try and increase the volume of work being carried out by US companies in the country’s energy sector.

    Earlier this month, Iraq announced that it was planning to offer about 10 gas exploration blocks to international companies in a new licensing round that will be launched during a visit to the US by Iraqi Oil Minister Hayan Abdel-Ghani.

    Abdel-Ghani said that he will be specifically targeting US companies in the upcoming round.

    Earlier this year, the US international oil and gas company ExxonMobil completed its exit from Iraq’s West Qurna-1 oil field, handing over operatorship to PetroChina.

    Exxon’s plan to exit the West Qurna-1 oil field was first announced in April 2021, when Iraq’s Oil Ministry said the US-based oil company was considering selling its 32.7% stake.

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12460160/main3355.jpg
    Wil Crisp
  • Region plugs in to electric future

    5 September 2024

    Commentary
    Colin Foreman
    Editor

    Read the September 2024 issue of MEED Business Review

    Saudi Arabia is well known as one of the world’s largest oil exporters. What is less known is that the kingdom is also one of the world’s most significant consumers of oil. 

    According to the US-based Energy Information Agency (EIA), Saudi Arabia consumed 3.65 million barrels a day (b/d) in 2022, making it the fifth-largest consumer globally, with a 4% share of the global total. 

    Much of Saudi Arabia’s oil consumption comes from the power sector, although this is changing as Riyadh embarks on an ambitious renewable energy programme. Another major contributor is combustion engines in automobiles. 

    Anyone who has experienced Riyadh’s traffic congestion in recent years will attest to the fact that Saudi Arabia has a lot of cars. 

    In the coming years, the plan is for the cars on Saudi Arabia’s streets to be electric rather than gasoline-powered.  

    This aim is supported by key initiatives involving establishing electric vehicle (EV) assembly plants in the kingdom and plants that will produce key components, most notably batteries.  

    For Saudi Arabia’s efforts and similar endeavours across the region to be successful, other factors will also need to be considered. Shifting from gasoline to electric will require upgrading infrastructure with charging points installed at service stations and in residential areas. 

    Overhauling infrastructure in existing urban areas is complicated and costly, but the region’s governments have demonstrated a clear commitment to making EVs work. Initial success is within reach as the region plays catch up with other geographies that have shown higher EV ownership rates are achievable. 

    Looking further ahead, if the region can successfully shift to EVs, it will prove that even the most oil-dependent economies can embrace change and lead the charge towards a cleaner and greener future.

    Must-read sections in the September 2024 issue of MEED Business Review include:

    > AGENDA: 
    > GCC ponders electric future
    > Region on the cusp of EV production boom

    > CURRENT AFFAIRS:
    > Outlook uncertain for Iraq gas expansion project
    > Security concerns threaten outlook for Libyan oil sector

    INDUSTRY REPORT:
    Analysis of the outlook for the downstream sector
    > Global LNG demand set for steady growth
    > Region advances LNG projects with pace

    > SAUDI GIGAPROJECTS: Communication gaps hinder Saudi gigaprojects

    > INTERVIEW: Legacy building at Diriyah

    > SAUDI STADIUMS: Top 15 Saudi stadium projects

    > LEADERSHIP: Navigating the impact of digital currencies on forex markets

    > KUWAIT MARKET REPORT: 

    > COMMENT: Kuwait’s prospects take positive turn
    > GOVERNMENT: Kuwait navigates unchartered political territory
    > ECONOMY: Fiscal deficit pushes Kuwait towards reforms
    > BANKING: Kuwaiti banks hunt for growth 
    > OIL & GAS:     Kuwait oil project activity doubles
    > POWER & WATER: Kuwait utilities battle uncertainty
    > CONSTRUCTION: Kuwait construction sector turns corner

    > MEED COMMENTS: 
    > Saudi World Cup bid bucks global trend for sporting events
    > Finance deals reflect China’s role in delivering Vision 2030
    > Harris-Walz portents shift in US policy on Gaza
    > Aramco increases spending despite drop in profits

    > GULF PROJECTS INDEX: UAE leads slight dip in market

    > JULY 2024 CONTRACTS: Saudi Arabia boosts regional total again

    > ECONOMIC DATA: Data drives regional projects

    > OPINION: The beginning of the end

    > BUSINESS OUTLOOK: Finance, oil and gas, construction, power and water contracts

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/12460011/main.gif
    Colin Foreman
  • PIF and Hyundai award car plant construction deal

    5 September 2024

    Register for MEED's 14-day trial access 

    Saudi Arabia's sovereign wealth vehicle, the Public Investment Fund (PIF), and South Korea's Hyundai Motor Company have awarded the contract to build a vehicle manufacturing plant in Saudi Arabia.

    According to media reports, the firms awarded an estimated $248m contract to Seoul-headquartered Hyundai Engineering & Contracting.

    Construction of the plant is expected to start in 2024, and vehicle production in 2026.

    The facility will have a production capacity of 50,000 vehicles a year, including both conventional vehicles and electric vehicles (EVs).

    MEED reported in November last year that Hyundai Motor Company had appointed Seoul-headquartered Heerim Architects as the design consultant for its vehicle manufacturing plant in Saudi Arabia.

    PIF and Hyundai Motor Company signed a joint venture agreement to set up a vehicle manufacturing plant in the country in October last year.

    The PIF will hold a 70% share in the joint venture, with Hyundai holding the remaining 30% stake. The total investment for the project is estimated to be about $500m.

    In December 2022, Saudi Arabia's Industry & Mineral Resources Ministry signed a memorandum of understanding with Hyundai Motor Company to establish a car production plant in the kingdom. 

    The PIF is keen to invest in the kingdom's automotive sector. Last year, it launched the National Automotive & Mobility Investment Company (Tasaru Mobility Investments) to develop the local supply chain capabilities for the automotive and mobility industry in Saudi Arabia.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12457629/main.gif
    Yasir Iqbal