Political aspects of foreign aid are never far from the minds of Arab decision makers. Egyptian President Gamal Abdel Nasser immediately recognized that accepting the Eisenhower administration's 1955 offer to finance construction of a high dam at Aswan entailed a broad range of strategic entanglements, virtually all of which would have severely undermined Cairo's position in regional affairs.1 Nasser's successor, Anwar al-Sadat, instead calculated that some sort of dramatic overture toward the State of Israel would trigger the flow of American aid to Egypt at a time when the Egyptian economy tottered on the brink of collapse.2
Syrian leaders have more frequently shared Nasser's predisposition than that of Sadat. In February 1950, Minister of National Economy Maruf al-Dawalibi warned that “any Syrian statesman who seeks cooperation with [the] U.S. in [the] political or economic sphere will be plagued by criticism and opposition because of [the] U.S. connection with [the] Palestine tragedy.”3 Eight years later, when relations between Cairo and Washington unexpectedly improved just prior to the formation of the United Arab Republic, nationalists in the Syrian armed forces rounded up alleged communists on the grounds that they were involved in a U.S.-financed plot to destabilize the new federation.4 Volker Perthes notes that Damascus’ “strong sense for maintaining Syria's sovereignty against any possible interference of foreign actors in its policy-making” has provided successive leaderships with “good reasons to be wary of contracting further debts,” no matter how advantageous the terms.5
It is thus highly unlikely that the regime of President Hafiz al-Asad can be persuaded by offers of economic assistance to commit itself to "full peace" with Israel unless Jerusalem first promises to implement a complete and unphased withdrawal from the Golan. The chances that the Israeli government will make such a promise seem slimmer than ever with Binjamin Netanyahu as prime minister. But are there nevertheless some kinds of "positive sanctions" the Clinton administration could invoke in its dealings with Damascus that might improve the prospects for a Syrian-Israeli settlement? The most obvious carrots in Washington's basket include general economic assistance, particular goods produced in the United States, support for Syrian requests for new loans and access to American technology and technical expertise. Of these four basic components of economic statecraft, the last two appear more promising than the first pair as means of persuading Syria to soften its hard line toward Israel at this particular moment. In addition, U.S. officials quite fortuitously find themselves in a position to guarantee the Syrian economy an adequate supply of the one raw material it most desperately needs: fresh water.
GENERAL ECONOMIC ASSISTANCE
Improvements in the local economy were buttressed by an influx of external assistance in the aftermath of the 1990-91 Gulf crisis.6 The amount of official development assistance provided to Syria by foreign governments and international institutions in 1991 totaled approximately $468 million, a 350 percent increase over the figure recorded for 1990. Around 90 percent of these monies came from individual governments; specialized agencies affiliated with the United Nations accounted for most of the remainder. This pattern represented a notable shift from that of the fate 1980s, when multilateral agencies provided more than half of all development assistance coming into the Syrian economy.
By far the largest single provider of economic aid at the start of the decade was the Kuwait Fund for Arab Economic Development (KFEAD). This institution committed more than $325 million to Syria in 1991, some 30 times more than it had offered the year before. Germany was the second-largest provider ($82 million), while France was fifth ($3 million). Two U.N. agencies, the Relief and Works Agency (UNRWA) and the World Food Program (WFP), constituted the third and fourth-largest donors, respectively. Japan and the People's Republic of China contributed almost as much as France, while Czechoslovakia, Switzerland, India and Belgium each provided smaller amounts.
Just over 70 percent of the aid monies committed during 1991 consisted of investment project assistance, that is, financing for specific development projects. The greatest share of these funds came from KFAED. Another 16 percent of the total inflow took the form of free standing technical cooperation, that is, monies not earmarked for any specific project. Emergency and relief assistance accounted for another 7 percent, while budgetary aid, food aid and investment related technical cooperation made up the remainder. KFEAD monies consisted entirely of long-term loans, made on highly concessionary terms, while virtually all of the other funds took the form of outright grants.
Infrastructure in general and communications in particular received the greatest attention from aid providers as the 1990s opened. Industrial and environmental projects were financed at a somewhat lower level, while agriculture and personnel training programs received sizable support from external donors as well. Among the most important projects funded during 1991 were the expansion and modernization of Syria's national telecommunications network, improvements to the Damascus sewer system, the expansion of the oil refinery outside Homs, the upgrading of the state run textile factory at Idlib and the cement plant at Adra, the construction of a pair of new electrical power stations at Jandar and al-Zara, the building of irrigation works in the Euphrates Valley and the establishment of additional vocational training centers to give working women a wider range of technical skills.
Several important projects initiated in the wake of the Gulf War continued into the mid-1990s. These included a $49 million KFAED loan to help the Industrial Bank of Syria finance the relocation and retraining of Syrian professionals who had been forced to leave Kuwait during the 1990-91 crisis; a $23 million WPP grant to improve the attendance re cords of female primary school pupils; a $21 million WPP grant to support the expansion of irrigation networks in both the Euphrates Valley and al-Ghab; a $21 million WFP grant to increase the size and output of Syria’s forests; a $2 million Japanese government grant to finance imports of modern agricultural equipment for use in al-Hasakah province; and a $300,000 grant from the U.N. Development Program to fund a comprehensive study of Syria's foreign trade, and aimed at finding ways to increase both the quantity and diversity of the country's exports. Engineers from the Japan International Co-operation Agency prepared a comprehensive plan to improve and expand the ports at Latakia and Tartus during 1994-95.
As KFEAD scaled down its aid allocations in the middle years of the decade, other Gulf entities assumed a greater role in providing assistance to the Syrian economy. The Abu Dhabi Fund for Development offered some $300 million to upgrade the state-run cotton-spinning mill at Latakia and build a new mill at Jablah. The Kuwait-based Arab Fund for Economic and Social Development (AFESD) financed the first stage of an ambitious plan to link the Syrian and Turkish electrical power grids, along with two electrical substations at Damascus and a new cement factory outside Hama. The Saudi Fund for Development pledged financing for a new electricity plant at Aleppo, as well as for a projected steel complex. At the beginning of 1996, the International Development Fund of the Organization of Petroleum Exporting Countries announced that it would make $9 million available to upgrade the water system in Aleppo province. AFESD joined the International Fund for Agricultural Development in soliciting bids for a comprehensive agricultural project at Jabal al-Huss later that spring.7
As 1996 began, Damascus moved to supplement Gulf aid by repairing relations with the European Union.8 President Asad signaled in February that his government was interested in Joining the union's Mediterranean cooperation arrangement. A delegation of high-ranking EU officials traveled to the Syrian capital in mid-March for a preliminary round of talks, which was reported to cover the resumption of economic assistance as well as prospects for deregulating trade between the two parties.
Therefore, thanks to the largess of the Arab Gulf states, the United Nations, Germany, France and Japan, a broad range of development projects work on many of which had been deferred for decades-is at present under way in Syria. Dramatic improvements in the efficiency of telecommunications and electrical power generation constitute the most salient results of this campaign.9 It is always possible to envisage additional ways in which the country's fragile infra structure might be strengthened, but American advisers can offer little if any general assistance that is not already being provided by current donors. In fact, it is highly unlikely that the Clinton administration would be able to advance economic aid to Damascus on terms anywhere nearly as attractive as those offered by the other governments and agencies that have taken the lead in the ongoing effort to modernize the Syrian economy.
PARTICULAR U.S. PRODUCTS
Three kinds of U.S. products generate the greatest demand m the Arab world: armaments, machine tools and other capital goods, and agricultural products, particularly foodstuffs. The Israeli government can safely be expected to veto any attempt on Washington's part to gain leverage over Damascus by supplying the Syrian armed forces with sophisticated weaponry. But if the Clinton administration were to succeed in establishing a direct pipeline to supply the Syrian market with either industrial equipment or food, one might expect U.S. officials to be able to manipulate subsequent transfers of these items in such a way as to exert some degree of influence over their Syrian counterparts.
Replacing obsolescent industrial equipment does in fact represent a key component of the Syrian government's current economic program. Despite the prominence accorded to commerce and agriculture following the adoption of the 1991 investment law, state officials have taken steps to promote capital-intensive manufacturing as well.10 German and Spanish firms have provided the machinery necessary to upgrade existing state run textile mills at Latakia and Idlib; Japanese, French and South Korean companies have tendered offers to construct a state-of-the-art public-sector cement plant on the outskirts of Hama, while a Danish firm has just contracted to build the country's first private cement factory.11 Meanwhile, private textile manufacturers took advantage of the 1991 law to begin importing computerized spinning and weaving machines. Almost all of these machines were built in Germany, Austria, Italy, Japan or South Korea. Factories in the suburbs surrounding Aleppo bristle with sophisticated industrial equipment of almost every kind, virtually none of which comes from the United States.
As for the trade in agricultural products that has provided the United States with considerable leverage in dealing with Arab governments m recent years, Syria now stands less in need of imported staples than at any other time in recent history.12 Local food production remains sufficient to support the country's burgeoning population. President Asad told a rally commemorating the twenty-fifth anniversary of the November 1970 Corrective Movement that concerted effort by Syria's farmers had enabled the country to achieve self-sufficiency in foodstuffs.13 Moreover, Syria has become a net exporter of grain. Overseas shipments of barley started as early as 1988 and now account for almost half the annual output of this crop.14In addition to barley, wheat and lentils are currently being exported to Algeria, Egypt, Jordan, Lebanon, the United Arab Emirates and other Arab countries.15
Congruent with the Asad regime's hesitant tum toward economic liberalization, Syria appears willing to continue sacrificing efficiency for certainty of supply with regard to key staples. This attitude coalesced in the early 1980s, when government officials began emphasizing “autarky,” “self-reliance” and “the rationalization of consumption” as central objectives of the state's economic program.16 Government support for import-substitution projects has remained a key component of development planning over the subsequent decade and a half. As recently as January 1996, the Ministry of Agriculture announced that it was undertaking a collaborative project with the Islamic Republic of Iran to introduce tea cultivation at four state farms along the Mediterranean coast.17 Under these circumstances, Damascus is unlikely to become so dependent upon external suppliers of capital goods or staple produce that it leaves itself susceptible to external pressure.
SUPPORT FOR LOAN REQUESTS
Much more than it needs specific goods, the Syrian economy needs reliable access to finance capital. The central administration emerged from the Cold War owing some $12 billion to the former Soviet Union and another $6 billion to the communist and ex-communist states of East Asia and eastern Europe. Damascus makes little secret of its intention to de fault on virtually all outstanding debts to Moscow, on the grounds that the political entity to which the loans are due no longer exists; visiting representatives of the Czech Republic were told much the same thing at the end of 1995.18 More daringly, Damascus has also neglected to keep up payments on the much smaller number of loans it has contracted with the World Bank and the countries of the Organization for Economic Co-operation and Development. World Bank figures indicate that Syria paid less than one third of its total debt service scheduled for 1994, leaving the central administration more than $6 billion in arrears.19
Persistent laxity concerning payments to Western lenders has made it increasingly difficult for Syrian representatives to negotiate new loan agreements. Both the World Bank and the European Investment Bank have refused to discuss allocating to Damascus any additional funds until the government brings its existing accounts up to date. A delegation of senior German bankers informed members of the Damascus Chamber of Commerce in April 1996 that the scale of Syria's overdue debts severely limits the likelihood that trade between the two countries will expand in the near future.20
Syrian officials have tried to soften the impact of blocked or severed lines of credit to the West by establishing closer ties to other Arab economies. Prime Minister Mahmud al-Zubi opened the November 1995 international conference on investment in Aleppo by urging the League of Arab States to implement measures promoting a higher degree of economic and scientific cooperation among the organization's member-states. Such steps, he claimed, can prepare the ground for the emergence of a truly integrated Arab Common Market.21
Nevertheless, Damascus would find it almost impossible to tum down a firm U.S. offer to lobby international financial institutions on its behalf. The government remains strongly committed to retaining control over key enterprises, removing the possibility that dilapidated public sector plants can be modernized through an infusion of private capital from abroad. Moreover, Syrian officials insist that they will never submit to the sorts of strictures that are routinely imposed by the International Monetary Fund, a stance that further reduces the chances of obtaining World Bank financing in the future. About the only thing that might persuade Western institutions to consider lending funds to the Asad regime, given its clear predilection for limited liberalization,22 would be active U.S. intercession.
ACCESS TO TECHNOLOGY AND EXPERTISE
As the costs of oil exploration and production rise, the vagaries of operating in Syria are certain to play a greater role in firms' decisions whether or not to invest in the country. A U.S.-based consortium is currently negotiating with the authorities to obtain a license to explore for oil in the desert near Tadmur. Talks stalled during the winter and spring of 1995-96, primarily because the consortium refused to accept the terms under which foreign companies have been required to operate since the boom years of the early 1980s. The impasse led the Ministry of Petroleum to intimate that, as one means of encouraging new investment, the government will soon reduce the share of output that foreign firms are required to assign to the state-run Syrian Petroleum Company. But so far the old rules remain in effect.25 Given the need for state-of-the-art techniques to assure sustained productivity in the oil sector, Damascus might well respond favorably to an offer on Washington’s part to subsidize or guarantee the future operations of U.S. oil companies in Syria.
Even more vital to the future of the Syrian economy than oil equipment is access to computer technology. U.S. computer manufacturers are currently prohibited from shipping their most advanced products and components to Syria, making it impossible for local users to keep up with the latest programs and applications. As of the summer of 1993, the university of Aleppo possessed no more than a handful of desktop computers, most of which had been installed as part of a Ford Foundation grant awarded to the university a decade earlier. The great majority of these machines sat unused due to a lack of training or a shortage of essential peripherals. Furthermore, neither the college of engineering nor the medical school had the kind of laboratory equipment required to carry on scientific research, and the newly-constructed agricultural-sciences building contained nothing more than classrooms and administrative offices. Faculty and students alike were forced to travel to the International Center for Agricultural Research in the Dry Areas, twenty miles south of town, to conduct even basic experiments.
At a substantially lower level of technology, Syrian universities struggle to educate students using inadequate or obsolete course materials. Perennial shortages of foreign exchange prevent campus libraries from ordering books and periodicals published overseas. Scientific and medical textbooks available for classroom use present data and analyses that are years, even decades, out of date. Students recognize their inability to keep up with the latest research, the great majority of whose findings are reported in English. The impossibility of gaining access to current literature reinforces a defensive insularity within the academy, which makes it acceptable for scholars to ignore studies conducted outside the country. Such insularity is resisted by many of Syria’s most influential academicians, but is virtually impossible to overcome without external support.
There is thus a strong convergence of interest between Syria and the United States regarding technology transfer. Damascus cannot upgrade its data processing and other research capabilities without U.S. assistance. On the other hand, Washington enjoys an unprecedented opportunity to shape the course of Syrian scientific and scholarly investigation by providing the country’s resource-poor universities with equipment and research materials. Hardware, journals and textbooks from the United States are sure to generate goodwill among faculty and students eager to connect with the outside world. The prospect of accomplishing a quantum leap in indigenous technical expertise is equally certain to prove irresistible to the bureaucrats responsible for academic affairs.
GUARANTEEING THE FLOW OF WATER
According to the terms of an interim water-sharing agreement concluded in 1987, Ankara promised that the Euphrates River would flow into Syria at a rate of no less than 500 cubic meters per second. Subsequent work on the Southeast Anatolia Project, an extensive irrigation system covering virtually all of south eastern Turkey, threatens to lower this floor. Turkish officials have in fact stopped the river for one reason or another on several occasions. The fall of 1989, for example, saw a month-long diversion, which Ankara claimed was necessary to fill the reservoir behind the massive Ataturk Dam. Syrian officials fully expect that the approaching completion of the Birecik and Karganis dams will occasion similar interruptions. At the end of 1995, the Turkish government offered to convene a new round of talks to set permanent quotas of Euphrates water for Syria and Iraq. Damascus rejected the proposal out of hand, fearing that any new negotiations would lead to further reductions in the amount of water avail able to users downstream.
Faced with a steady diminution in the flow of the Euphrates River, Damascus announced at the beginning of 1996 that it would permit only 10 percent of the water from the al-Assi (Orontes) River to cross into Turkish territory around lskandarun.26 Ankara immediately charged that this move was connected to a series of strikes by Kurdish guerrillas against Turkish troops stationed in Hatay, intended to challenge the region's status as a province of Turkey. Turkish authorities then notified Syria that the southward flow of the Euphrates would be cut to around 200 cubic meters per second so that repairs could be earned out on the Ataturk Dam. The reduction was timed to coincide with the four-day holiday of Eid al-Adha at the end of April.27
Syrian and Iraqi representatives hurriedly met in Damascus to work out a joint strategy to reverse the seemingly inexorable constriction of the Euphrates River. Lacking any leverage vis-a-vis Turkey's major allies, the two states decided to submit their grievances to the March summit of the League of Arab States in Cairo. At the same time, Syria unilaterally warned Western engineering and construction companies operating m Turkey that they risked lawsuits and boycotts if they did not immediately stop work on new irrigation projects in south eastern Anatolia.28 Mutual cooperation in the struggle against Turkey's water policies laid the basis for a chilly rapprochement between Damascus and Baghdad as the spring passed.29 But the chances that Syria and Iraq can convince Turkey to revise its plans to step up electricity generation and land reclamation in the turbulent southeast remain extremely slim.
Washington could play a pivotal role in breaking the Syrian-Turkish impasse over the distribution of Euphrates River water, should it choose to do so. U.S. experience in mediating dangerous disputes over river flows in the Middle East dates to the early 1950s, when the Eisenhower administration assigned to Eric Johnston the delicate task of hammering out a permanent arrangement whereby the waters of the Jordan River Valley would be shared among Israel, Jordan and Lebanon.30 Through painstaking and even-handed diplomacy, Johnston succeeded in drawing up a set of proposals acceptable to all of the governments involved. What proved most persuasive about the proposals were three related provisions: first, that the distribution of Jordan River water be based upon the actual utilization of water resources within the Jordan basin itself; second, that water storage facilities not be monopolized by any single party; and third, that Jordan River water could be transported out of the basin only with the approval of a "neutral water master" and only pro vided that water requirements inside the basin could still be met. Washington pledged to support the second of these three provisions by earmarking some $130 million to finance the construction of a storage dam across the upper Yarmuk River.
In the case of the Euphrates, analogous provisions might take the following form. First, U.S. officials would sponsor a comprehensive survey of water usage throughout the Euphrates basin to determine the actual pattern of regional demand. Second, Washington would take steps to ensure that storage facilities inside Syria matched those under Turkish control. Third, the United States would offer to monitor any transfers of Euphrates River water out of the Euphrates basin itself. Each of these measures is almost certain to entail a financial outlay on Washington's part, but such expenditures might be kept to a minimum if the World Bank were to provide financing for the infrastructural components of the scheme. More problematic is Iraq's position regarding such an arrangement. As one of the riparian states, Baghdad enjoys certain rights concerning the distribution of the waters of the Euphrates River, and it is hard to imagine the regime of Saddam Hussein recognizing the United States as a neutral arbiter concerning their allocation.
If the United States nevertheless were to undertake to nudge the peace process along by offering positive sanctions to Syria, three inducements appear to be most likely to capture the Asad regime's attention. Washington might lobby inter national financial agencies to open up new lines of credit to Damascus, despite the latter's poor record of managing its current obligations. The leverage that would be created as a result of the Syrian government's taking on additional loan obligations is sure to offset the economic risks involved in such a move, particularly if the country suffers an economic downturn in the near future. Washington might also offer to supply advanced technology to Syria's severely under equipped universities and research centers. Here again there are significant risks, but ones that may be worth running in order to dampen the smoldering resentment that permeates many branches of the Syrian academy. Finally, Washington might set itself the most daunting challenge of all: mediating the escalating conflict between Syria and Turkey over the distribution of Euphrates River water. It would be perfectly understandable if the Clinton administration were to shy away from such a perilous task. But demonstrating that it can indeed act as a reliable mediator, whether a disinterested one or not, would go a long way toward convincing the Syrians that the United States can be trusted to guarantee what ever agreements emerge from the current peace process.
19 MEED, March 29, 1996
20 MEED, April 5, 1996.
21 Syrie et Monde Arabe, November 1995.
22 Perthes, Political Economy of Syria, pp. 53-59.
23 MEED, May 24, 1996.
24 MEED, March 8, 1996.
25 MEED, May 24, 1996
26 Economist Intelligence Unit, Country Report: Syria first quarter 1996.
27 MEED, May 3, 1996.
28 Alan George, “Syria and Iraq Threaten Anti-European Action,” The Middle East, April 1996.
29 MEED, May 31, 1996.
30 Georgina G. Stevens, Jordan River Partition (Stanford, CA: Hoover Institution, 1965).