Syria And Iraq Revive Business Ties

Syria's border with Iraq has long been a line of tension. The U.S. and the Iraqi government have accused Syria of allowing foreign fighters to cross into Iraq. But these days, the border is a potential business asset, as Syria looks to Iraq to help improve its economy.

This month, a new freight rail line opened between Syria's port cities of Tartous and Latakia on the Mediterranean, and Iraq's port city of Basra on the Persian Gulf. The first freight cars, loaded with automobiles from Europe, ended up in the Baghdad market. Syria offers a faster and cheaper route than the traditional transit through the Suez Canal.

The new railway is a sign that Damascus and Baghdad are eager to revive business ties, says Samir Seifan, a Syrian economist.

"The atmosphere is getting better and [more] positive. The two sides [understand] that they should work together," Seifan says.

He notes that Iraq is a booming market for products that Syria exports. It's a partnership based on economic necessity: Syria is running out of oil — production is down by 30 percent — and for the first time, the national budget is in deficit.

On the Iraqi side, consumer demand is high, says Joshua Landis, an American academic who writes an influential blog on Syria, SyriaComment.com.

"Syrians are shoveling all sorts of things across to Iraq, because Iraq doesn't have any factories; it doesn't have electricity. Nothing is working in Iraq, and there are 24 million people. ... [The Syrians] see the potential for real, new trade," Landis says.

Syria Aims To Be Key Trade Route For Iraq

Trade ties were even stronger in the past — bilateral trade totaled $2 billion in 2002, the year before the U.S. invasion. Since then, relations have been tense because Syria opposed the American military presence in Iraq.

But ties with the Iraqi government have warmed somewhat since the U.S. announced plans for withdrawal. In April, Syria's prime minister was in Baghdad for trade talks. Now, Syria wants to be the key land and sea route between Iraq and Europe, says Faisal Mekdad, the country's deputy foreign minister.

"What we and our Iraqi brothers have in mind [is that] anything Iraq needs to import from the world will go through [Syria]," Mekdad says.

The big money is in the transport of Iraq's oil and gas. There have been discussions on building a new natural gas pipeline to serve Europe's energy needs, while a deal on reopening an oil pipeline is already in the works, says Peter Harling, who is based in Damascus with the International Crisis Group.

"A contract has been signed to reactivate a pipeline between Iraq through Syria up to the Mediterranean. That's a crucial Syrian interest," Harling says.

Trade Ties Would Bolster Syria's Economy

Landis, the U.S. academic and blogger, says this could be a business partnership with political consequences.

"Syria is the natural route for taking oil out of northern Iraq because it's just flat desert. There are plans to build a big new toll road. This means a lot of things. It means that Syria wants to work with the United States on stabilizing Iraq," Landis says.

The partnership would also help stabilize Syria's economic prospects.

This spring, Syria's Damascus Securities Exchange opened its doors. Trading takes place two days a week. The exchange's Issam Kayyal says there are six brokerage firms so far and that the stock market is going up.

Syria is shifting from a state-run system to a model open to foreign investment and private banks, but there are significant challenges ahead. Corruption is well documented. Business contracts often are controlled by the family and allies of the Syrian president. U.S. economic sanctions still limit outside investment. The U.S. cites Syria's support for militant groups and charges that foreign fighters are still able to slip across the Syrian border into Iraq.

Stemming Flow Of Militants Serves Dual Purpose

Now, Syria has an interest in closing the border to militants while opening it to business, says Harling of the International Crisis Group.

Increasingly, Syria has discovered it has an interest in Iraqi stability beyond economic reasons: The militants have become a problem inside Syria, Harling says.

"You had a pattern of clashes on Syrian territory [that] also opened the eyes of Syrian officials to the dangers related to instability in Iraq for their own country," he says.

As a result, Harling says, stability could mean good business on both sides of the border.

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