Putin's World: The Economic Ties Between Russia & Syria

This is the second entry into a series diving into the historical contexts behind Russian Federation President Vladimir Putin’s interest into Syria and the Middle East. While also reporting on the current conflict in Syria.

As reported in the previous entry of Putin’s World, the ties between the Russian and Syrian governments have ties going back well over forty years. In recent years, Russia has been a vital military ally to Syria:

The Russian - Syrian partnership was well intact before Russian military forces were on the ground in Syria. According to an annual report compiled by Richard F. Grimmett - of the Congressional Research service in Washington, Russian arm deals with Syrian more than doubled from - $2.1 billion to $4.7 billion - spanning between 2007 to 2010.

When asking Elvin Aghayev of the Independent International Political Research Center (IIPRC) about the importance of the Russian and Syrian relationship over the past several decades, he directed me to an article he published - which can be found on a Turkish search engine Turkish Academic Thesis Center:

In 2000, the Double Taxation Treaty, Agreement for Cooperation between the Federation of Trade Chambers of the Syrian Arab Republic and the Chamber of Commerce and Industry of the Russian Federation, as well as the Agreement for Cooperation in Tourism were signed. In the 2000s, the Russian companies intensified technical assistance to the Syrian organizations in construction and operation of important facilities of the national economy of Syria, as well in supplies of miscellaneous machines, equipment, spare parts and materials. In 2001, the Contract for International Carriage of Goods by Road was signed. This Contract will contribute to the increase of goods exchange between Syria and Russia.

This agreement led to considerable increase in Russian exports to Syria, promoting an increasing number of Russian entrepreneurs to conduct business in the Syrian marketplace. According to Aghayev, the consistent growth of trade (despite decreased exports from Syria in relation to the 1990s).

To explain why this particular trade deal between Russia and Syria came about, Aghayev details a trade deal which Syria took a loan from the Russian government:

Before 1992, export from Syria to Russia included a wide range of goods against indebtedness under the loan provided. In 1992, after Syria stopped repayment under the debt to the USSR, and clearing trade came to a halt. Important articles such as oil and cotton were excluded from the list of goods. Russia sold machines and equipment, vehicles, miscellaneous equipment, tools and spare parts, rolled iron, saw wood, and a number of other raw materials to Syria for the freely convertible currency. Syria exported confectionery, fruit, fabrics, wearing apparels, and a number of other raw materials.

In 2005; The Syrian Minister of Finance, Mohhamad al Hosin and the Russian Minister, Alexey Kudrin brokered the signing of the Syrian-Russian arrangement for mutual debts settlement. The LA Times reports:

A major reinforcement of the alliance between the two countries came in 2005 when Putin agreed to cancel almost 73% of Syria's Soviet-era debt to Russia, according to media reports. It was therefore not surprising when in 2008 Syria threw its support behind Russia’s military intervention into the former Soviet republic of Georgia.

Aghayev explained the economic importance of the debt agreement:

Total amount of the Syrian debt to Russia reached 13.4 billion dollars. Pursuant to the agreement, Russia cancelled 73% (around 9.8 billion dollars) of the Syrian debt, the remaining portion of the debt (3.6 billion dollars) to be repaid within 10 years by allotments of 150 million dollars annually, and by supply to Russia either of the Syrian or the third parties’ goods, or by transfer to the Russian investments in Syria within 6 years.

In the article he referenced me to, he explains the benefit both countries saw from the debt agreement in the following years:

Over the recent years (2005-2008), the sales volume has grown in average by 15-20% and, in some years, even higher. The Syrian debt to Russia was not serviced for ten years; therefore, the ‘arrangement’ was especially conducive to the revival of trade relations in energy generating industry, and in supply of equipment and spare parts. Thus, in 2007, the international trade between the Russian Federation and the Syrian Arab Republic was 1.3 billion dollars; as compared with 2006, it increased by 13.4% due to the growing export.

The economic relationship between the two countries explains why they have a close military relationship as well, making it no surprise that the Assad and Putin administrations consider each other close allies.

To keep up with Walter’s journalism you can follow him @GentlemansHall on Twitter and/or add him as a friend on Facebook.