19th century Prussian military strategist Carl von Clausewitz is famously quoted as saying that war is “the continuation of politics with other means.” This is certainly true of the dramatic escalation of violence in Aleppo and other parts of Syria since the breakdown of the partial truce on September 19. At the most immediate level, Russia seeks to help the regime of President Bashar al-Assad make irreversible military gains and place it in an unassailable political position ahead of any attempt by the incoming U.S. administration to resume diplomatic efforts to resolve the conflict in Syria. 

But for the Assad regime, the strategic aim of continued violence will be less to win the most favorable terms in a negotiated political settlement, than to secure the economic and financial assets it will need in order to survive the transition from war to peace. After all, the U.S. administration has already concluded that it cannot prevent Assad from remaining in office during an agreed transition. And according to activists who met John Kerry on September 22, the U.S. Secretary of State also envisaged Assad running in the presidential elections that would take place at the end of the transitional period. 

So when the new U.S. administration and Russia resume their dialogue about Syria, as they surely will, the real focus will soon shift to lifting economic and financial sanctions on the Assad regime or enabling it to access other forms and sources of capital and goods. And the regime will continue to use violence, in a Clausewitzian mode, until agreement is reached or it has secured alternative material means of rebuilding its domestic political power and social control. 

The dilemma for the Assad regime is not just that it is fundamentally unwilling to reach a political settlement of the conflict, but that it is also unable to do so. Whether in peacetime prior to 2011 or in the ongoing armed conflict since then, its grip on power has always depended on the informal networks it commands throughout the state apparatus, armed forces and security services, and the public and private sectors of the economy. In turn, governing these networks depended on controlling key economic assets, especially access to credit, contracts, and markets and to factors of production such as energy and land. 

But the regime has lost most of these resources and levers in the course of the conflict. It has only maintained its hold by encouraging loyalist networks to embed themselves deeply in the war economy, developing alternative modes of income generation and recreating pre-conflict patterns of collusion between security agencies, state bureaucrats, and Ba’th Party cadres and black economy actors. At the same time, the regime has directed Iranian credit lines and commercial contracts towards privileged business cronies, again replicating long-established patterns and intensifying them. 

None of this will be sufficient to keep the regime afloat once the conflict ends, unless it can tap into sizeable new sources of capital and reconnect the domestic economy to significant external markets. The regime expects to emerge dominant, whether through a negotiated political settlement or outright military victory, but will rule a devastated economy and shattered markets. It will have few means of generating the capital needed to undertake physical reconstruction of housing, economic facilities, and public infrastructure, let alone repatriate refugees or reabsorb internally displaced persons, restore education and health care and other public services, and rebuild external trade links. 

The regime may choose to economize by impeding the return of some 4.8 million refugees now estimated to be outside Syria, and by putting housing and reintegration of the 6.5 million displaced persons inside the country low on its list of spending priorities. But the regime cannot rely on induced shortages of basic commodities and services or on repression by security agencies alone to contain millions of sullen citizens who previously supported the opposition. It must supplement these “sticks” with some “carrots,” if only because even in authoritarian regimes coercion is more costly than co-optation. 

More important still, from the regime’s perspective, is that the material demands and expectations of loyalist constituencies that incurred a terrible price in its defense will be no less pressing. Failure to meet them will be far more costly politically. And although the regime has induced many businessmen who remain inside the country to help subsidize it, attracting the return of flight capital and of middle class entrepreneurs and professionals with the skills needed for economic revival will be a far harder task. 

For now, therefore, the regime needs war, as its only means of deferring the full costs of reconstruction and reabsorption of hostile communities and of deflecting pressure from its own ranks, by keeping loyalists mobilized against the perceived existential threat and redirecting them to meet their needs from the war economy. But, contrary to those who assume that the regime uses violence only to secure Assad’s presidency and continued political dominance, its strategic purpose will shift—if it has not already done so. Its logical goal can only be to regain access to external capital and markets, and to get sanctions lifted. 

In theory, the Assad regime has little hope of achieving this aim through diplomacy. Russia and Iran are unable to provide capital and assets on the scale needed—indeed they refrained from doing so even at the height of the regime’s wartime need. But the parties that offer the greatest financial and economic potential—the U.S., EU, Gulf Cooperation Council (GCC) states, and Turkey—will be reluctant, if not wholly unwilling, to lift their bilateral sanctions or allow unfettered access to global markets. So the regime will pursue the war inside Syria, using humanitarian need and the threat of new refugee flows into neighboring countries and beyond, as a means of coercing external powers into accepting its demands. 

Russia will be at least a reluctant accomplice in this scenario. It wants a peace deal and a clear end to the conflict, but lacks the leverage to make the Assad regime accept even the highly favourable terms contained in Russian proposals for a political settlement. Rather than engage in a futile contest of wills with the regime, Russia is more likely to adopt its demands for lifting sanctions and financial assistance when talks resume with the new U.S. administration. For leverage, it will argue that the U.S., EU, and others in the international community cannot demand transition in Syria but then undermine its chances of success by maintaining sanctions and trade embargoes. And it may additionally lobby the GCC states to compensate the regime for supporting the “terrorists” who allegedly destroyed Syria. 

Rather than wait on the outcome, the Assad regime is already preparing to tap into other sources of capital. Since late 2015, the Damascus government has passed what Syrian economic journalist Jihad Yazigi has called “a frenzy” of new laws to attract investment. These include forgiving companies in arrears on tax, VAT, and social security payments; establishing new agencies to develop small-and-medium enterprises and to promote local production and export; imposing hikes in income and property taxes; changing urban planning codes to allow replacement of informal housing in rebellious neighborhoods with high-value real estate projects; legislating for public-private partnerships to offer businessmen a major stake in government-funded projects and equity in state-owned land; and creating an “iron and steel council” in anticipation of the construction boom. 

Nor is this aimed only at Syrian investors. Despite the harsh rhetorical exchanges between their capitals, Turkey has a significant economic interest in getting back into the Syrian market. So do Lebanon and Jordan, which have suffered the most economically and are keenest both to repatriate Syrian refugees and to revive their banking and business sectors. Iran and possibly other countries such as China may also expand trade and investment with Syria without waiting for Western or GCC sanctions to be lifted, or indeed for an end to the conflict.

With so much at stake for Western and allied countries eager to stem the bloodshed and refugee flows, and with their limited influence over the actions of other countries and private actors, those seeking to shore up the diplomatic front against the Assad regime by maintaining economic and financial sanctions will soon face a rearguard battle. Indeed, Western envoys, international refugee agencies and aid organizations, and the World Bank among others are already increasingly focused on the need to prepare for the economic reconstruction of Syria. The EU has made its contribution conditional on the start of a meaningful political transition, but the arguments for softening its approach will mount. 

Clausewitz described the uncertainty of factors such as information on which action in war is based as a “fog.” But when it comes to discerning emerging trends on the economic and financial front in Syria, the fog appears to be lifting. 

This article was originally published in Arabic in Al-Hayat.