Iran sets sights on Syrian reconstruction projects

Iran wants to boost its Syrian profile, and presence, by plugging into that country's electrical sector needs.

While fighting and military actions seem to be subsiding in the country, talk of reconstruction is surfacing as the Syrian government's allies, namely Russia and Iran, seek to secure contracts to rebuild devastated sectors.

Tehran is facing US sanctions aimed at undermining its financial capability. Yet Iran is one of the most significant parties bidding and concluding agreements to reestablish the electricity sector and wants to take advantage of coming opportunities that also include mining and telecommunications.

Syria and Iran signed a memorandum of understanding in September 2017 to cooperate in the field of electricity. According to the memorandum, a 540-megawatt power plant will be established in Latakia and five 125 MW, gas-fired power plants will be built in the Mediterranean coastal city of Banias. Also, Iran would be allowed to assess the damage inflicted on the Aleppo thermal power plant, while also rehabilitating a 90 MW power station in Deir ez-Zor and the Jandar power plant in Homs, among others.

Officials believe half of Syria's estimated 23 power-generation stations are out of service.

Mahmoud Ramadan, director of the Public Establishment for Electrical Generation, told al-Watan newspaper that damages to Syria's electrical grid are estimated at 1.2 trillion Syrian pounds ($2.33 billion).

Before the 2011 protests erupted in Syria, it produced about 9,530 MW per day of electricity, but that fell to about 2,000 MW in 2016. When it recovered somewhat, to about 4,000 MW by March 2018, Minister of Electricity Mohammed Zuhair Kharboutli attributed the jump to strategic electricity generation projects in 2017 at Deir Ali, Jandal, Tishreen and Bania. He said the projects were valued at 900 billion Syrian pounds, the equivalent of $1.75 billion.

The parties that implemented and funded these projects haven't been revealed.

There are ongoing efforts and agreements with Iran to improve the current level of production. According to the Syrian government's SANA news agency, Kharboutli said priority will be given to Iranian companies in reconstructing Syria, especially in the field of electricity.

Of note, the Public Establishment for Electrical Generation and the Iranian MAPNA electric company agreed Oct. 2 on a timeline for implementing the 540 MW power generation project in Latakia at a cost of 411 million euros ($472.2 million). This would increase power production in Syria to about 4,540 MW, which is half the capacity produced before the war.

According to the timeline, the first phase of the project will be completed within 18 months, the second in 24 months and the third in 34 months.

Abbas Ali Abadi, MAPNA chairman and general director, stressed during Sept. 30 negotiations with Kharboutli in Tehran his company’s readiness to provide various types of substantive and technical support for the Syrian Ministry of Electricity.

Hassan Danae Fer, head of the Committee for Development of Syrian-Iraqi-Iranian Economic Relations, said Iranian companies are fully prepared to cooperate with the Syrian side in the field of electricity in Syria, according to SANA.

Last year, Iran paid $300 million for a license to launch Syria's third mobile network operator, but it hasn't started the project. This raises the question of whether the projects Iran is undertaking will actually see the light of day amid the wave of US economic sanctions it faces.

Osama Kady, head of the Syrian Economic Task Force, told Al-Monitor that these projects, among others, are a way to repay Iran for losses it suffered during the Syrian war. Iran has spent billions of dollars a year supporting the regime of President Bashar al-Assad since the civil war began in 2011.

The projects, he said, include the Deir ez-Zor power station, the mobile network, agricultural investments in large areas stretching over no less than 5,000 hectares in Latakia, and the phosphate mine in Khunayfis, Homs province. Add to this the construction of oil reservoirs and other real estate projects, he added.

“All of the investments that the Iranians have signed with the regime will depend on the international political balance," he said, referring to any new or previous political deals and how areas of influence are divided up. For example, it will be difficult for Russia to allow the Iranians to invest in phosphate, as Russia has already signed an agreement with the Syrian regime allowing Russia to invest in phosphate and other mining resources. This Russian agreement was signed before the Iranian-Syrian memorandum.

In addition, one of the deals between Iran and Syria is for Iran to rehabilitate the power station in Deir ez-Zor. But Americans aren't likely to allow Iran to enter their area of control in Deir ez-Zor. 

Some potential investments such as these "merely serve media and political purposes aimed at entrenching Iranian influence in Syria,” and are likely to be delayed, Kady added.

As Western countries refrain from participating in Syria’s reconstruction because no political resolution has been reached, Iran might be able to rebuild part of the electricity network to alleviate the electricity shortage plaguing Syria.

According to Kady, however, the question arises as to “the efficiency, continuity and environmental friendliness of the Iranian and Russian manufacturers, who can't compete with German, US or Canadian manufacturers.”

Also, the financial revenues Iran would reap from participating in Syria’s reconstruction are negligible, considering Iran's budget. Even though Iran is struggling financially, “the Iranian GDP in 2016 amounted to $404.4 billion, while the Syrian GDP didn't exceed $60.04 billion before the revolution in 2011. [Syria's] GDP has now sunk to $11.9 billion. In other words, the return on Iranian projects in Syria is very marginal for the Iranian economy, but such projects serve as political and media messages used by Iranian decision-makers to achieve a better Iranian position in the world,” Kady said.

Without a prompt political solution in Syria, the electricity shortage will remain a problem. Other sectors won't be able to recover, either, as long as Syria is divided into different areas controlled by several countries around the world — such as Iran, Russia, the United States and Turkey.