In the Syrian conflict, all sides had developed a stake in maintaining a war economy. With the emergence of the Islamic State (IS), which controls a third of Syria’s territory, the conflict has taken on an increasingly zero-sum dimension.
Syria’s economic situation is one of most precarious in the region. Once a top producer of oil and natural gas, Syria’s oil exports have fallen sharply. It became a net importer of wheat this year, a fact that could not be ignored despite Assad’s triumphant re-election to another term as president of Syria in June.
The official parties to the Syrian conflict have developed an interest in maintaining the Syrian civil war in both the short and medium term. Syria’s government, supported by minority Syrian Alawites and Christians, as well as some Sunni Muslims, has ensured the maintenance of a high standard of living for its clients in Latakia and the capital, Damascus.
On the other side, the opposition Syrian National Council (SNC) has focused on securing political control over territory and gaining leverage over the central government after the lifting of oil sanctions on territory in the northeast. The lifting of oil sanctions on rebel-held territories in eastern Syria and the lifting of an EU arms embargo in 2013 have encouraged Syria’s rebels to leverage weapons and international humanitarian aid for strategic gains.
Importantly, the war economy itself does not rely on official trade channels, but is based on the precarity associated with the civil war. The war economy is based on the decentralized control of resources, a black market in goods and weapons and an open path of contact through refugee camps.
To understand the consequences of the IS emergence on the Syria’s war economy, it is necessary to consider the destabilizing effects of the group. It is well-trained and supports itself financially through practices like extortion and the raiding of banks in cities like Mosul, where IS allegedly earned $425 million after its takeover of Mosul’s central bank and several smaller banks.
The regional balance of power that helps maintain the Syrian war economy is also upset by the emergence of IS.
Both the Shi’ite Iraqi government in Baghdad and the Alawite government in Syria receive financial, military and economic aid from Iran. This dynamic has upset powerful Arab Gulf states like Saudi Arabia, Qatar and Kuwait and, evidently, the United States. Turkey, too, stands out as an interesting case because of the large number of Syrian refugees in Turkish refugee camps, and the emotionally charged relationship between Prime Minister Erdogan and President Assad.
Those parties that have benefited from Iran’s support for Assad, like Lebanon’s Hezbollah, have also been threatened by the rise of IS. In early August, 24 Lebanese security personnel fell under the control of IS after clashes near the Lebanese border with Syria at Arsal. They have yet to be released.
The ideological foundations and tactics of IS matter almost as much as the ‘disruptive’ events credited to the group in recent months, from capturing the largest oil field in eastern Syria to taking on Syrian rebels in Deir al-Zour, leaving the maimed and murdered bodies of their opponents in their wake.
The tactics of IS are important from an international publicity perspective, but also in terms of bolstering the group’s reputation among young potential recruits. As early as June, when Ayman al-Zawahiri distanced himself from IS’ murderous tactics in Syria, the path was paved for IS’ succession to al-Qaeda in Syria.
Reports from observers in the field, including the Syrian Observatory for Human Rights, suggest IS has resumed pumping in the oil fields captured in rebel-held territory, including al-Omar, captured in early July (capacity of 75,000 billion barrels per day). In Iraq, IS allegedly sold electricity from Iraqi power plants to the Iraqi government. Moreover, it processed oil seized in Iraq through oil refineries in Syria, selling it back to captured cities in Iraq.
If Western-led military efforts in northern Iraq fail to significantly weaken IS, we can expect that it will eclipse the moderate Syrian opposition. The war economy in Syria, which thrives on the precarious conditions around the existing civil war, will potentially shift towards a much more deadly and unpredictable balance of forces between the Assad government and IS.
In theory, Iran benefits from the current situation in the region by playing off its traditional rivals against each other. A weak Iraq, along with a hesitant U.S., is good for Iran. However, it is Iran’s gamble in keeping a stake in the Syrian regime that is potentially threatened by a strengthened IS. This is because costs in Syria will only increase, and despite early positive signs, the economic opening of Iran to the West is by no means a done deal.
