China’s commercial ties with Syria have come to the world’s attention in the past few months as a result of the still-unfolding Huawei controversy.
China’s economic focus on Syria has been rapidly gaining steam over the preceding several years. China’s increasingly dominant industrial foothold in the country combined with Beijing’s delicate approach to the Assad regime throughout the war means China is set to be the leading foreign presence in the postwar arena, ushering in a potentially unprecedented dynamic in the immediate region.
Syria’s Growing Centrality to Chinese Foreign Investment
At the July 2018 China-Arab States Cooperation Forum, China announced a loan and aid package of $23 billion for the Arab region. While not yet delineated, it is not unlikely that a significant portion of the aid package will be invested in Syria.
Syria has traditionally been a low focus for Chinese investment compared to the oil and gas giants of Iran and the Gulf states. However, the advent of the Belt and Road Initiative (BRI) means Syria has emerged from economic insignificance in Chinese eyes to become a location of increasing focus and interest.
The Levant is set to become a critical node in the BRI’s China-Central Asia-West Asia economic corridor, as it offers an alternative route to the Mediterranean as opposed to the Suez passage. Syria is being eyed in the long term as the key Levantine region to achieve this aim. For instance, Tripoli in Lebanon is set to become a Special Economic Zone within the BRI, with the Tripoli port planned to be a main trans-shipment hub for the eastern Mediterranean.
This will provide a more direct route for Chinese goods to Europe compared to relying on the Suez Canal. In order to service this port, there are Chinese plans to reconstruct the Tripoli-Homs Railway Network. With the Tripoli port increasingly integrated, China’s attention is now turning to secure Syrian ports directly.
In October 2018, China donated 800 electrical power generators to Lattakia, Syria’s largest port. Syria’s evident growing centrality in the overland route from China to the Mediterranean mean it is set to become an increasing recipient of Chinese funds.
Chinese Industry Poised to Dominate
China is set to be the major player in the impending rebuilding process that will occur in postwar Syria. In mid-2017, Beijing hosted the “First Trade Fair on Syrian Reconstruction Projects,” at which time China committed to contribute $2 billion toward rebuilding Syrian industry, centred on a plan to construct an industrial estate that could house up to 150 companies.
Chinese businesses have been preparing to open representative offices across Syria, and have sent frequent delegations to the country, leading to numerous contracts being in the pipeline or having already been signed.
More than 200 Chinese companies, largely state-owned, were present at the 60th Damascus International Trade Fair in September 2018.
Here, China pledged deals including the construction of steel and power plants, car manufacturing, and hospital development. Some of China’s flagship involvements include Huawei committing in 2015 to rebuild Syria’s telecommunications system by 2020, and the China National Petroleum Corporation owning major stakes in two of Syria’s largest oil companies, the Syrian Petroleum Company and Al Furat Petroleum.
Once an acceptable level of stability is reached in Syria, Chinese businesses will be ready to build off their extensive groundwork and leverage the experience Chinese industry has in post-conflict Middle Eastern settings, courtesy of the significant contracts Chinese firms landed in Iraq following the war.
Beijing to Profit From Its Noninterference Policy
In addition to its poised industrial might, China’s impending centrality in the reconstruction process is also attributable to its support for the Assad regime throughout the war. In addition to China providing military support for the Syrian army in contrast to Western support for the resistance forces, Beijing also vetoed proposals tabled at the United Nations Security Council (UNSC) to impose sanctions on Syria.
In line with China’s traditional foreign policy paradigm of noninterference in the domestic affairs of other states, Foreign Minister Wang Yi has made it clear to the UNSC that, while it is incumbent on the world to help resolve the Syrian crisis, it is equally important to “respect Syrian territory, sovereignty, and independence.”
By keeping Assad in power, Beijing will maintain its primary access to the abundant investment opportunities central to the impending reconstruction. Through this approach and the fact that Chinese aid will not come with the political strings inevitably accompanying Western aid, China will be Damascus’ firm favourite as the leader of the reconstruction.
There is somewhat of a Catch-22 at play, however.
While China’s seat at the head of the table in the reconstruction process has been secured in no small part by its staunch noninterference policy, this strident unwillingness to get involved in the political process means the Assad regime will face little pressure to address the ongoing underlying grievances that caused the war.
Accordingly, the insecurity is likely to remain, complicating Chinese industry’s efforts to expand and settle in the country.
Currently, Beijing’s answer to this issue seems to be an increase in China’s counter-terrorism presence in Syria.
The passing of the country’s counter-terrorism law in 2015 now enables China to conduct joint counter-terrorism operations overseas, affording itself greater latitude to work around the traditional noninterference policy. This enabled Chinese special forces, the “Night Tigers,” to deploy to Tartus in late 2017 to combat the growing Uyghur militant presence in Syria.
While this is indicative of China’s moves to somewhat increase its military relationship with Syria, largely in the forms of arms sales and training collaboration, the extent to which this will mitigate much of the lingering insecurity is debatable at best.
Looking Ahead: Chinese Public-Private Led Development & Sino-Iranian Collaboration?
Notwithstanding Russian designs, Iran is currently the other major player besides China bidding to consolidate a large commercial stake in Syria’s reconstruction.
Alongside China, Iran is the other key supplier of the Syrian automobile market. Additionally, on top of being granted Syrian agricultural land, Iranian entities have secured an MOU to run a Syrian mobile phone operator as well as a key role in one of Syria’s leading phosphate mines.
However, because the Iranian push to consolidate this commercial presence is being led by the Iranian Revolutionary Guards Corps (IRGC), this has led to much of Iranian private industry balking at involvement. The funding shortfall this has generated for Iran’s commercial push into Syria means the IRGC network may be forced to look for business partners.
China will loom as a leading candidate here.
A salient dynamic to consider going forward is the likely public-private-partnership (PPP) centred approach of China in the reconstruction effort. With the United States and Europe set to play no role in the rebuilding process, the estimated $400 billion reconstruction cost is being left to Russia, Iran, and China. As the Russian and Iranian economies are both staggering from sanctions, China is the only power in a position to lead the effort.
However, this price tag is too large for any one state, even China, to meet on its own. Accordingly, PPPs are looming as the vehicle through which China will engage in the rebuild.
While a tight public-private sector relationship has always been the dominant characteristic of the Chinese state-directed economy, this relationship is reportedly tightening, as Zhongnanhai is looking to increase its presence in China’s largest private firms.
Therefore it seems likely that Beijing will increasingly look to and leverage its private industrial champions to pursue China’s overseas development goals.
The recent establishment of the China International Development Cooperation Agency points to an increasingly coordinated and streamlined approach driving China’s commercialised overseas development focus, with PPPs a prime potential vector within this.
The reconstruction of Syria with many Chinese SOEs having already laid foundations, ready to be augmented by the private sector may be a key setting in which we see this growing dynamic come to the fore.