Rebuilding Balance in the Middle East: Views on Syria and Iran

This blog post is based on interviews with participants at the Mediterranean Strategy Group in Rome on November 22, 2018. Sanam Vakil, senior consulting research fellow at Chatham House, explains what Iran’s interest is in holding on to the Joint Comprehensive Plan of Action (JCPOA) after the United States’ withdrawal, and what the debate in the country is about the next steps regarding the nuclear deal and about its involvement in Syria. Omar Aziz Hallaj, co-coordinator of the Syria Project at the Common Space Initiative in Beirut, explains why the Middle East is heading towards a perfect storm and how post-conflict reconstruction in Syria can further threaten the future of the country’s communities.

Iran is Struggling with the Nuclear Deal and Syria

Sanam Vakil

Iran has a few objectives after the United States’ withdrawal from the nuclear deal. First, it would like to receive economic benefits for staying in the deal, and to do so it has not only to remain compliant in the JCPOA but also to convince the remaining signatories – the P4+1 – to continue to provide it with some sort of economic lifelines for the time being. Second, Iran is trying to demonstrate that it has the moral high ground and that it is the accountable actor right now.

But ultimately the government in Iran is quite frustrated. This standoff feels like a kind of injustice because there have been 13 verifications of Iranian compliance by the International Atomic Energy Agency and there is a bit of a reckoning and a debate going on inside the country as to how to handle the standoff. This centers around the question of whether Iran should try to wait until 2020 before engaging in a more multilateral dialogue to resolve not only the JCPOA issue but also the regional and ballistic missiles ones, or should Iran begin a quieter multilateral process as early as next year and see if it can obtain some sort of resolution. Neither option is going to be easy and that is a bit of a challenge. 

There is also a debate in Iran as to the value of its involvement in Syria, with many questioning and challenging the hardliners’ security perspective and saying that Iran’s involvement has been an example of overreach, has weakened the country, and exposed it to international and regional criticism of its behavior. On the other side, the hardliners and conservatives believe that its position in Syria will protect Iran ultimately, in the same way, that its relationship with Hezbollah has protected Iran and shielded it from attack by the United States or Israel. They think that this calculation and the support for the Assad regime will in the long run also protect Iran from external security challenges in the same way. 

The Middle East Is Heading for a Perfect Storm

Omar Aziz Hallaj

The period in early 2011, or late 2010, that we know commonly as the Arab Spring, should have been a wake-up call for governments in the Middle East to start doing serious reforms, to start looking at the infrastructure and the investments needed for their communities, to start bringing in more inclusive political spaces. Unfortunately, many governments preferred to shrink back, to take a more defensive position. They directed their funding towards short-term packages, financial bribes to their people, instead of seriously reforming their economy, creating jobs, and bringing in more sustainable environmental processes.

Looking forward 10 to 15 years from now, the region is heading for a perfect storm, with a youth bulge hitting. The population will be mainly concentrated in cities that have been deprived of any real infrastructure investments in the last years. The majority of this young urban population will be uneducated but will still be looking for jobs, for houses, for a political voice.

We are also looking at environmental issues exacerbating the situation. The region is already buying more and more of its food on international markets, while the financial capacity of most countries in the region to do so is shrinking. Regional trade is shrinking, which could lead to a further deterioration in regional ties as incentives for keeping an economic dialogue open vanish. As these ties between Arab countries dwindle further, we will see increasing competition to attract foreign investment rather than creating complementarities. Add to that the fact that there are open wounds in the region that are still going to be there, like Libya and Syria, even though some of the countries are slowly emerging out of that conflict situation.

All this creates a multi-layered, dynamic conflictual situation. The question is how do we tackle it? Where do we start? Most actors that are the agents to tackle the situation are embroiled themselves in conflicts, either internally or on a national level or on a regional level. It is like when you have a fire in a building jumping through the vents from the lower floors to the upper floors without firewalls. Once a fire erupts somewhere, the region is going to have very little resilience to contain it and as a result we might see over the next 10 to 15 years a situation in which conflicts jump from one level to the next and from one country to the next as refugees move from one place to the next as economies are shifting.

Our biggest challenge is to come up with political visions of the transformations of the future, and then gear up in the little time that we have and create these firewalls between the different layers of conflict. This means we need concerted efforts to create regional win-win situations.

Europe has an important role to play. Without leverage from the outside, the region will continue in business-as-usual mode. The impact on Europe is going to be tremendous if the worst-case scenario ends up happening. Europe cannot continue with business-as-usual either because that just means postponing the inevitable. Positive engagement with the region requires shedding away taboos. It should be looking to the region afresh, away from paradigms of the past.

It Is Crucial to Get Reconstruction in Syria Right

Omar Aziz Hallaj

Reconstruction in Syria has become a contested field because everyone is looking at different priorities. The government of Syria has its own vision. Some of the international actors are interested in leading that process according to their own objectives. Local communities, refugees, and internally displaced persons have other priorities and a different understanding of the term.

There won’t be a Marshall Plan package coming to Syria, that’s for sure. More likely there will be different kinds of financial reconstruction flows. Some of those funds will come under the guise of humanitarian aid, some of them will be humanitarian-plus, some of them will be done under stabilization frameworks, some of the money will come from development assistance under the name of redevelopment of sorts, private-sector investors will be seeking opportunities in the future, and some of it will be from Syrian expats sending remittances back to their families. We’re not expecting to see a huge sum of money flowing to Syria, but even then, given where the Syrian economy is, the biggest risk is substantial flows coming in. The economy has shrunk to a third of its original size, with a budget that is about 25 per cent of its initial pre-war size. So, even a small infusion of funds at this stage can play havoc with inflation and further disenfranchise a lot of people.

We are not yet in a post-conflict situation in Syria but we know from many other post-conflict situations that even the very basic return to normalcy tends to create major inflation. Inflation is going to hit hard the lowest echelons of communities, whether inside Syria or people who are hoping to go back to Syria. Before we can think about major infrastructure investment, we should create small financial packages that help local communities to create financial stability in the space between them and the local government. Because once you start dumping money from the top down, with or without a political transition, whichever the political context in which this money is going to be put, you can expect inflation to rise by 30-40 percent in a matter of months. Knowing that 80 percent of communities live under the poverty line, and about 40 percent live in abject poverty, any inflation shock can mean the difference between life and death. 

We also know that playing havoc with prices will eventually lead many to move out of their homes: many more people get displaced after a war than during the war because of inflation and land speculation. So the question is whether reconstruction is going to be based on supply-side thinking. Here it doesn’t matter whether it is done by the current government or a future transitional government, or whether it is done under the guise of a democratic process or not. What matters is that once you start thinking supply-side, you are going to disenfranchise the poorest of the poor, you’re going to weaken the ability to withstand shocks in inflation and rents, which is going to play havoc with the demographics in Syria.