Wednesday, July 30, 2008

Syrians See an Economic Side to Peace

July 29, 2008
New York Times

DAMASCUS, Syria — Like most Syrians, Samer Zayat has no love for Israel. He was a little uneasy when Syria announced in late May that it was holding indirect talks on a peace settlement with its old nemesis.

Yet Mr. Zayat, a 35-year-old television cinematographer, says he views a peace deal with Israel as necessary and inevitable — not just for political reasons, but because Syria’s vulnerable economy needs all the help it can get.

“We are tired, the country is suffocating,” he said, as he played backgammon with a friend at a cafe here, the sweet smell of apple-flavored tobacco drifting around him. “We have suffered a long time from the political boycott and the sanctions.”

That sentiment is echoed by many others. Prices soared here after the Syrian government cut fuel subsidies in May, deepening the gulf between rich and poor in this nominally socialist state. It had little choice. The oil reserves Syria has relied on for so long are rapidly disappearing. The hefty budget surpluses of a decade ago have turned into multibillion-dollar deficits. A country that could once afford to be serenely indifferent to Western sanctions is now being forced to liberalize and open its economy.

None of this has changed Syria’s conviction that any peace agreement must include the return of the Golan Heights, the area captured by Israel in 1967. But a profoundly uncertain economic future has created additional incentives for peace, which could help lure foreign investment by ending Syria’s pariah status in the West.

A settlement with Israel “would lift a huge weight from our shoulders,” said Ghimar Deeb, a Syrian lawyer and economist who works with the United Nations here. It would lead to the lifting of sanctions, which would give Syria access to new investment, high-tech supplies and training opportunities, he said.

“Poverty is increasing, inequality is increasing, and I believe the street is frustrated,” Mr. Deeb said. “They need peace with all our neighbors.”

It is not clear that the Syrian government sees the economic troubles as a factor in negotiations with Israel. Although it began carrying out economic changes several years ago, the progress has been slow, and strategic political concerns have always been paramount for Syria’s president, Bashar al-Assad, and his father, Hafez al-Assad, who governed from 1970 until his death in 2000.

It is also far from clear that the talks will succeed. Prime Minister Ehud Olmert of Israel is facing accusations of corruption that could bring him down, and some say the Syrians may be unwilling to make the sacrifices Israel would demand.

This month, Mr. Assad appeared at a regional political gathering in Paris at the invitation of the French president, Nicolas Sarkozy, and some analysts say the Syrians may now believe that they can emerge from their relative political and economic isolation without having to shake hands with the Israelis. This is despite the fact that the Bush administration, which accuses Syria of supporting terrorism, has recently added sanctions on the government and its business associates.

But some analysts say they believe that Syria’s economic troubles must figure in the government’s calculations about regional peace.

“The transformation they have in front of them now is enormous,” said Andrew Tabler, a Damascus-based Syria analyst and consulting editor for the magazine Syria Today. “They must move from a state funded by oil revenues to one funded by taxation, and that has to play some role in their thinking.”

It would hardly be surprising: Syria’s oil used to be the mainstay of the government’s income, providing 70 percent of the country’s export earnings. Now it is drying up so fast that Syria is expected to be a net importer of crude oil in just two years, according to the International Monetary Fund.

Already, Syria is importing oil products at record prices, and paying huge subsidies to reduce the cost for its citizens. That is why Syria finally started cutting its ruinous subsidies over the past year, causing prices to rise and resulting in a domino effect on food prices.

Two bad harvests in Syria’s wheat-growing region have added to the problem. In May the government increased public sector salaries and pensions, which had averaged $130 a month for two million recipients, by 25 percent, putting another burden on the budget.

The government has revised the tax system, which was inefficient and ignored in the days when oil filled the government’s financial needs. Rates have been lowered but collections have increased substantially, said Hussein Khaddour, a Damascus lawyer and the president of the Syrian chapter of Junior Chamber International, a business group.

Other efforts have been made to create a more business-friendly environment, including revised laws on intellectual property. Some of the new entrepreneurial activity is visible to any visitor to Syria, though mostly on the high end: dozens of restaurants and boutique hotels have opened in the capital over the past two years.

“In the past 18 months, there has been a much faster liberalization,” said Abdul-Salam Haykal, who leads the Syrian Young Entrepreneurs Association. “People are realizing that the government is not the only provider for them anymore.”

That new activity, Mr. Haykal adds, is creating a new incentive and constituency for a real result to the talks with Israel.

“I think the biggest driver for peace is all this new business development,” he said.

Still, even congenital optimists like Mr. Haykal concede that serious challenges remain. Some investors say they are concerned about a lack of the rule of law and widespread corruption. Plenty of Syrians see any economic consideration as far less important than the need to confront Israel, widely viewed as an imperialist and predatory state.

Even Mr. Zayat, the cinematographer, said he would find it “very hard to accept” seeing an Israeli flag flying in Syria, and he believed that many other Syrians felt the same way.

But he added: “If peace is not achieved, then the possibility of war will always be open and that terrifies me. I fear for the future of my children and my family.”

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