Meed | Regional diplomacy fails Syrian economy

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

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Dominic Dudley

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Yemen’s Houthis have placed Saudi Arabia’s civil aviation infrastructure at the centre of their campaign against the kingdom. Two strikes on King Khalid International airport in Riyadh over the weekend killed 13 people and injured 320.

The deadlier attack hit a passenger terminal on the afternoon of 10 October. The General Authority of Civil Aviation (Gaca) said it killed 12 people, including four Saudi citizens, and injured 309. Airport operations were suspended pending a damage assessment.

A second strike hit Terminal 4 on the afternoon of 11 October, sparking a fire that killed a Pakistani resident and injured 11 others, according to Gaca. The Saudi-led coalition reported intercepting a cruise missile near the airport that afternoon. Gaca also reported an attack on King Fahd International airport in Dammam that evening, following a coalition report of a projectile falling near the facility the previous night.

The weekend strikes followed attacks on Abha International airport on 6 October and on King Khalid International airport on 7 and 8 October, the last of which included a strike on a Saudia aircraft. Gaca figures put the toll from the week’s attacks on Saudi airports at 19 dead and more than 350 injured.

The Houthis said they would continue operations inside the kingdom and that all Saudi airports were potential targets, with the exception of those serving the holy cities. The group says it is acting in response to Riyadh’s support for Yemeni government forces and a Saudi air strike on Sanaa airport. It has also claimed attacks on Saudi oil facilities, which Saudi authorities have not confirmed.

Aviation exposure

The attacks strike a sector central to the kingdom’s diversification plans. King Khalid International airport’s existing terminals are to be absorbed into King Salman International airport (KSIA), a 57-square-kilometre development with six parallel runways targeting a capacity of 120 million passengers by 2030 and 185 million by 2050.

Procurement on KSIA has gathered pace this year. In July, a joint venture of China Civil Engineering Construction Corporation and Dammam-based Mofarreh AlHarbi & Partners won an estimated SR800m ($213m) contract for enabling and substructure works on Terminal 6, which will add capacity for 40 million passengers. Turkish contractor IC Ictas and Saudi Arabia’s Al-Rashid Trading & Contracting recently secured a SR800m ($213m) contract for the airport’s Private Aviation Terminal.

Government-owned Saudi Royal Aviation set 8 October as the bid deadline for an estimated SR3bn ($800m) contract to build an aviation complex within the KSIA masterplan, the same day the Houthis struck King Khalid International airport and a Saudia aircraft.

Airlines have already adjusted. Flydubai cancelled flights to Riyadh and Yanbu up to 10 October and to Abha up to 11 October, and Etihad Airways reported extended delays on its Abu Dhabi to Riyadh service after the airport closed on 8 October. The UK Foreign Office has advised against all travel to areas within 10km of the Yemeni border.

Market reaction

The Saudi stock market’s response has been muted so far. The Tadawul main index fell 15.54 points to close at 10,360.74 on 11 October, the first trading session after the Saturday attack, with turnover of SR2.6bn ($693m). The session closed before the second strike on King Khalid International airport and the attack on Dammam, and Monday’s trading will be the first to reflect the full weekend.

The weekend also brought a separate maritime incident. UK Maritime Trade Operations said an oil tanker was struck by an unidentified projectile in the Strait of Hormuz on 11 October, with its crew reported safe.

Diplomatic response

The coalition described the 10 October attack as a war crime and said it would respond decisively. It said on 10 October that it had destroyed 136 military targets in Houthi-controlled areas and was working to dismantle the group’s ballistic missile network.

Egypt, Pakistan and Turkiye joined Saudi Arabia in an R4 group statement condemning the attacks and supporting measures taken by the kingdom in response. The Arab League also voiced its support for Saudi Arabia. On 11 October, Iran’s foreign minister spoke by telephone with his Saudi counterpart, Prince Faisal Bin Farhan, to discuss the escalation. The US and UK have also signalled the possibility of further support for the kingdom.

The escalation comes against the backdrop of the regional conflict, which has drawn Saudi Arabia into a renewed Yemen front after several years of relative calm following the 2022 ceasefire. The extent of the damage at King Khalid International airport, which Gaca is still assessing, and the speed at which international carriers resume full schedules will determine how far the attacks disrupt the kingdom’s aviation programme.

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Egypt and Saudi Arabia sign oil and gas deal
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Egypt and Saudi Arabia have signed an agreement to strengthen cooperation in the oil, natural gas and petrochemicals sectors, according to a statement from Egypt’s Ministry of Petroleum & Mineral Resources.

The memorandum of understanding (MoU) was signed in Riyadh by Karim Badawi, Egypt’s minister of petroleum and mineral resources, and Abdulaziz Bin Salman, Saudi Arabia’s minister of energy.

Under the agreement, both sides will enhance cooperation in trading, transporting, storing and distributing crude oil, petroleum products and natural gas.

They will also expand cooperation on developing the infrastructure and logistics services that support these activities.

In its statement, Egypt’s Ministry of Petroleum & Mineral Resources said: “These efforts will contribute to improving energy market efficiency, enhancing the resilience and reliability of supply chains, and strengthening energy security.”

The MoU also provides for expanded cooperation in exchanging expertise and best practices in operating and developing fuel stations, as well as in transporting and tracking petroleum products and liquefied petroleum gas cylinders.

Additionally, the agreement seeks to explore investment opportunities in joint projects and promote exports.

The latest agreement comes as Egypt becomes an increasingly important export route for Saudi Arabia.

Due to disruptions and security risks affecting shipments through the Strait of Hormuz, Saudi Arabia has been redirecting crude exports via its East-West Pipeline to Yanbu on the Red Sea.

Meanwhile, the Bab El-Mandeb Strait, at the southern end of the Red Sea, has also become a security concern due to military activity in Yemen. Egypt offers an alternative route through the Sumed pipeline, which runs from Ain Sokhna on the Red Sea to Sidi Kerir on the Mediterranean.

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JGC yet to return evacuated workers to Basra refinery
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Japan’s JGC has yet to bring evacuated workers back to the Basra refinery project in Iraq, according to industry sources.

JGC evacuated its personnel from the site in the southern oil hub of Basra following the start of the regional conflict on 28 February, when the US and Israel attacked Iran.

The evacuation halted work on the project, which was in its final construction stage.

On 14 August 2026, Iraq’s Ministry of Oil announced that it had signed an agreement with JGC to resume work on the fluid catalytic cracking (FCC) project at Basra refinery.

One source said: “Even though the agreement to bring the evacuated workers back was signed about two months ago, there is still no sign of the evacuated workers on the project site.

“It is possible that they will return soon, but it is hard to tell what will happen next in the current security environment.”

Earlier this month, Iraq’s Ministry of Oil said it met with Japanese officials to discuss plans to commission the FCC unit under the Basra refinery upgrade project.

The statement did not say when the evacuated JGC workers would return to the project site.

Strategic project

Iraq’s state-owned South Refineries Company (SRC) sent JGC notice of the main contract award for the FCC package of the Basra refinery upgrade project in August 2020.

JGC was awarded the contract in consortium with South Korea’s Hyundai E&C.

The official contract signing ceremony was held in Baghdad on 1 October 2020.

The contract awarded to JGC, which uses the engineering, procurement, construction and commissioning model, was worth $3.78bn.

The FCC package is part of a broader project to upgrade the Basra refinery.

The project site is located about 12 kilometres east of Iraq’s southern city of Basra.

The wider upgrade project involves installing new facilities on land adjacent to the existing Basra refinery, including a vacuum distillation unit and a diesel desulphurisation unit.

In April 2021, France’s Axens won a contract in Iraq to provide four process technologies to SRC for the Basra refinery upgrade project.

The technologies that SRC selected are:
- Diesel hydrotreatment unit (Prime-D)
- Vacuum gasoil (VGO) hydrotreating unit
- VGO fluid catalytic cracker unit
- Oligomerisation unit (polynaphtha)
In addition, Axens is providing catalysts and adsorbents, proprietary equipment, training and technical services.

MEED’s latest report on Iraq includes:

> COMMENT: Iraq’s reform window narrows
> GOVERNMENT: Al-Zaidi takes Iraq’s premiership under US shadow
> BANKING: Financial challenge tests Iraq’s resolve
> ECONOMY: Iraq enters era of resilience, reform and rising risks
> OIL & GAS: Iraqi oil and gas sector in crisis
> POWER & WATER: Focus shifts to delivery of Iraq utilities expansion
> CONSTRUCTION: Momentum builds in Iraq’s post-war construction sector

To see previous issues of MEED Business Review, please click here
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Contractors are preparing to submit prequalification statements on 14 October for a contract to build Jordan’s Al-Hussein Bin Abdullah II International Stadium, located east of the capital, Amman.

The project is part of the first phase of the Amra City development masterplan and is being implemented by Jordan Cities & Facilities Development Company, a Jordan Investment Fund-owned company.

Main works are expected to begin early next year, with the stadium slated for completion in 2029.

The project will cover about 1 million square metres, and the stadium will seat 50,000 spectators.

The stadium is being built within the Amra City development, which is located about 40 kilometres (km) from downtown Amman and 35km from Zarqa and Queen Alia International airport.

MEED reported that preliminary excavation and site preparation began in June.

The project forms part of Jordan’s Economic Modernisation Vision (EMV) 2023-25.

The EMV – Amman’s flagship reform programme – aims to increase real income per capita by an average of 3% annually, create 1 million jobs and more than double the country’s GDP over the next decade.

The strategy envisages a leading role for the private sector, which is expected to account for 73% of the estimated $58.8bn investment required.

READ THE OCTOBER 2026 MEED BUSINESS REVIEW – click here to view PDF

Industry and logistics drive development at Neom; Saudi Arabia’s investment priorities realign amid conflict; MEED’s 2026 power developer ranking.

Distributed to senior decision-makers in the region and around the world, the October 2026 edition of MEED Business Review includes:

> AGENDA: Oxagon takes centre stage at Neom

> MARKET FOCUS: Saudi projects hold steady

> INDUSTRY REPORT: MEED’s 2026 GCC power developer ranking

> POWER: AI is creating a grid capacity problem

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> LEADERSHIP: The future city does not need to hang above the ground

To see previous issues of MEED Business Review, please click here

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Abu Dhabi plans Mussafah road upgrades

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Abu Dhabi’s Department of Municipalities and Transport (DMT) has announced plans to upgrade roads in Mussafah, improving links between the industrial area, Mohamed Bin Zayed City and Zayed City.

The scheme covers about 13 kilometres of roads on the E30 and 8th Street. It aims to reduce congestion, improve road safety and cut journey times.

The works include a new three-lane highway in each direction along 8th Street, with parallel three-lane service roads on both sides providing access to local businesses and facilities.

The upgraded corridor is expected to accommodate up to 4,000 vehicles an hour.

Other works include upgrades to four E30 interchanges, improved links to 8th Street and the E20, and modifications to nine junctions.

The DMT also plans to build two bridges connecting Mussafah and Mohamed Bin Zayed City, along with a pedestrian bridge.

Abu Dhabi is planning major investments to upgrade its road network across the emirate.

Last week, it disclosed plans for a major new transport corridor in the capital, comprising a 37km coastal route linking Al-Hudayriyat Island with the E11 at Al-Nouf.

It is planned to have three lanes in each direction and will include a tunnel, about 7km of marine bridges and about 4km of causeways.

The scheme will provide a direct connection between Al-Dhafra, Al-Hudayriyat Island and Abu Dhabi Island via Halat Al-Bahrani, Al-Futaisi and Al-Aryam islands.