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Background Basics

Syrian Regional Economic Ties

posted on 03/24/08

Egypt
Egypt is a significant Syrian trade partner, representing 5.3 percent of its exports and 6.2 percent of its imports in 2006. The countries have a free trade agreement dating back to 1991 and Egyptian firms are actively seeking expansion into Syria. Egypt and Syria are also cooperating on a natural gas pipeline that will transport Egyptian natural gas through Jordan, Syria and Turkey to the European Union.

Iran
Pushed by international pressure on both Iran and Syria, the two countries are increasing economic ties while Iranians take advantage of a liberalizing Syrian economy. Although trade is limited to $240 million as of 2007, Iran is Syria’s third-largest foreign country investor, after Saudi Arabia and Turkey, with more than $400 million in 2006 and plans to increase up to $10 billion in the next 5 years. Iran also recently pledged to increase technical assistance in a wide variety of economic sectors from $1 billion to $3.5 billion. Syria and Iran have signed a number of energy deals including a $1 billion agreement to transport 100 billion cubic feet of natural gas by pipeline annually from Iran to Syria via Turkey and a $2.6 billion agreement with Malaysia, Venezuela and Iran to build a gasoline refinery in central
Syria.

Iraq
Data on economic ties between Syria and Iraq are unreliable due to the current instability, however the CIA reports that 27.3 percent of Syria’s exports in 2006 went to Iraq. The two also signed economic, financial and oil agreements in 2007 to increase cooperation and improve bilateral relations. Before the war, Syria and Iraq had extensive economic ties, with Syria serving as an outlet for Iraq’s illicit oil trade under the UN oil-for-food program.

Jordan
Although political relations have been chilly, economic cooperation is increasing rapidly, with a free trade agreement signed in 2001 and 12 trade and cooperation accords signed at the end of 2007. Bilateral trade is only around $50 million per year, yet Jordan and Syria are optimistic that these agreements, which remove customs and tariff restrictions, will increase trade in the coming years.

Lebanon
Despite their close, but tense, political ties, official trade between Syria and Lebanon represents only 9.5 percent of Syria’s exports as of 2006 and a much smaller portion of Syria’s imports. However, both economies have large informal sectors where business ties and family connections bring the countries together. Syrian businesses are dependent on Lebanese banks and Syrian expatriates working in Lebanon send back remittances of around $1 billion.

Persian Gulf
Syria has been actively courting investment from Persian Gulf countries and has gathered $1.9 billion of investments registered through the Syrian Investment Agency, though there is significantly more investment through other channels. Large Gulf lenders like the National Bank of Kuwait and Qatar National Bank are opening branches and finding local partners to increase investment. Other Persian Gulf firms are making investments like the Kuwaiti Noor Financial Investment investing $1.5 billion in an oil refinery deal and the Kuwaiti Aref Group investing $2 billion in a new business district in Damascus. Kuwait and Syria signed an investment agreement in February, 2008. Saudi Arabian investment, despite differences with Syria on regional issues, has remained fairly constant, though it has not grown at the same pace as other Gulf countries.

Turkey
Syria and Turkey have growing economic ties that were institutionalized with the signing of a free trade agreement in 2007 along with double-taxation prevention and investment protection agreements. Bilateral trade was $1.1 billion in 2007 and is expected to increase further, though trade may be held up by the quality of Syrian goods. Turkey and Syria have formed a cooperation council to remove further barriers to trade as well as a joint exploration and development company to increase cooperation on oil and energy. Turkey is also Syria’s largest non-Arab source of investment, greater than Iran.