By Eric Vandenbroeck and co-workers

The dramatic collapse of the government of Syrian President Bashar al-Assad on December 8 has sparked hopes of a fresh start for a country that has endured more than a decade of war. But Syria’s recovery faces enormous hurdles. The economy lies in ruins—a shadow of its prewar self, crippled by years of catastrophic conflict, entrenched corruption, and punishing international sanctions. Any new leadership will inherit a broken state and a thicket of challenges that defy simple solutions.

After public protests and then rebellion erupted in Syria in 2011, Assad’s regime clung to power through systemic torture and relentless military campaigns with support from Iran, Russia, and an array of allied militias. International focus on Syria waned in recent years, with many observers suggesting that Assad had “won” even as he presided over the rump of a country and the shell of a state. The world was taken aback when the rebel group Hayat Tahrir al-Sham (HTS) led an offensive that in mere weeks forced the regime to implode. Assad’s departure marks the end of an era, but it also underscores the precariousness of power in a battered and brittle Syria.

HTS has now assumed the role of Syria’s central authority, overseeing a transitional period set to last until March 1, 2025. Whatever government emerges from this process will have to figure out how to revive Syria’s economy. It will take serious domestic reforms and international support to overcome years of destruction, sanctions, and fragmentation. The new Syrian leadership must address the country’s humanitarian crises and restore critical energy and housing infrastructure. But to get the kick-start it needs, it will require an initial push from the international community. To start, the United States and the European Union must ease the sanctions targeting Assad’s regime and HTS and support the new government’s efforts to restore opportunities for private investors and reconstruction.

This period will shape the contours of Syria’s future. If the country’s new leaders struggle to implement reforms and inspire confidence in their citizens and outside powers—and if those powers continue to maintain sanctions and withhold needed assistance—the country risks deeper chaos and renewed violence that will only worsen Syria’s humanitarian crises and further displace and immiserate its people.

 

A Country in Ruins

Before the onset of the civil war in 2011, Syria had a relatively diverse economy, with agriculture, oil exports, manufacturing, and a growing service sector contributing to its GDP. The country was emerging as a regional hub for trade and tourism, with modest economic growth driven by market-oriented reforms introduced in the early 2000s. But after more than a decade of conflict, Syria’s transitional authorities now inherit a country in tatters. Syria’s GDP has contracted by over 80 percent since 2011, with 90 percent of the population living under the poverty line. Rampant inflation has ravaged the national currency, with the Syrian pound losing more than 99 percent of its value in little more than a decade. Unemployment rates have soared to new levels, and widespread displacement has left millions of people with little chance to return to economic stability.

The country’s infrastructure also lies shattered. The energy sector, crucial for bolstering state finances, has been decimated. Power plants, oil refineries, and distribution networks have been systematically destroyed or looted, or have fallen into disrepair. Once a net oil exporter, Syria now struggles to meet even basic domestic energy needs, providing electricity for only a few hours per day across the whole country.

Decades of international sanctions and isolation have severed Syria from the global economy. The sanctions, primarily levied by Western countries, aimed to curb the Syrian regime’s ability to fund its military operations and repress dissent, and force it to the negotiating table. But beyond targeting individuals and institutions responsible for abuses, the sanctions were extended to include broad economic sectors, such as banking and energy. These coercive measures, still in place, will compound the challenges to economic recovery. As the West conditioned reconstruction and diplomatic engagement on the regime’s striving toward a political settlement with rebel groups, something Assad was loath to do, Syria grew isolated. The Assad regime’s pariah status has precluded significant development support or loans from key regional players including the European Union and Arab states, as well as multilateral organizations such as the World Bank and the International Monetary Fund.

Elites affiliated with the regime often managed to bypass certain sanctions and restrictions, but ordinary Syrians have suffered the full effects and have been largely cut off from international financial systems. This isolation has obliterated economic opportunities, stifled private-sector activity, and curtailed the country’s exposure to global markets, all of which are vital for economic recovery. The transformation into a wartime economy also provided new opportunities for extortion and corruption, further hollowing out state structures, entrenching inefficiencies, and undermining economic resilience.

 

Recovery in Jeopardy

As Syria grapples with these economic problems, new obstacles are beginning to take shape that will further complicate recovery efforts and demand the urgent attention of any future leadership. Among the most pressing challenges is an anticipated influx of returnees. Over five million Syrians have been displaced abroad over the last 13 years, and many of them are now contemplating a return home. But Syria lacks the capacity to absorb even a fraction of that number. The country’s infrastructure is already stretched beyond its limits in attempting to meet the needs of the current population. A third of the housing stock is destroyed or uninhabitable, much of it having been bombed by Russian and Syrian government forces. Basic services such as health care, education, and sanitation are in shambles. Additionally, unresolved legal disputes over property ownership and the absence of robust institutional mechanisms to facilitate reintegration threaten to deepen social tensions.

Counting Syrian currency at a market in Damascus, December 2024

Another short-term challenge will be the emerging government’s struggles to overcome extensive sanctions. Because HTS is designated as a terrorist organization by the United States, the EU, and the UN, among others, the sanctions and other economic restrictions that originally applied to the Assad regime and its allies have effectively extended across all of Syria. Maintaining those penalties will only intensify Syria’s isolation by severely limiting the country’s access to reconstruction aid and foreign investment. Western powers will lift sanctions only if the new rebel-led government makes a clear commitment to political reform and stability, but whether HTS can credibly do so is unclear.

The unification of Syria’s fragmented economy poses another critical challenge. For nearly seven years, the country was divided into four main areas of control governed by the Assad regime; the Kurdish autonomous administration, led by the Syrian Democratic Forces (SDF); the Turkish-backed Syrian Interim Government; and the HTS-affiliated Syrian Salvation Government. Each area had its own economic systems and policies, and their standards of living varied widely: monthly salaries for employees of the Syrian Salvation Government ranged from $80 to $110, compared with just $24 to $30 for government employees in areas held by the Assad regime. Now that HTS has taken over most of Syria’s political institutions except in areas controlled by the SDF, it must merge those fragmented economies. Forging a cohesive national framework will require reconciling different governance models and currencies—not an easy task. For example, HTS has implemented zakat, a form of taxation based on Islamic principles that may face resistance if applied across Syria. Currency usage also varies across regions, with the Syrian pound prevalent in areas formerly controlled by Assad and the Turkish lira widely used in northern regions. To lay the groundwork for recovery, the new leadership must adopt the Syrian pound as the unified national currency, reversing counterproductive protectionist policies on trade and dismantling exchange-rate supports for inefficient domestic production. Such changes will mark an abrupt shift in the status quo but are crucial to creating a stable economic environment and signaling the new government’s readiness to pursue meaningful reforms.

Complicating the unification process are the competing interests of the business elites who emerged over the course of the conflict in regions beyond Damascus’s control, particularly those from Idlib in the northwest, who have thrived under a system that resembles the crony capitalism of the Assad regime. These power players are likely to vie for a larger share of the economic pie in post-Assad Syria, creating tensions with traditional business networks in cities such as Aleppo and Damascus that were previously dominated by Assad’s cronies and that might be ostracized under the new government. Economic actors closely affiliated with the new power in Damascus may also seek to capitalize on the opportunities created by the regime’s collapse and the vacuum left by business elites close to Assad. As soon as HTS seized control of Aleppo, for example, Syria Phone, a telecommunications company affiliated with the group’s government in Idlib, began maneuvering to fill the gap left by providers in areas formerly held by Assad’s forces.

Unification must also occur at the level of territorial control. The SDF, backed by the United States, continues to control many of Syria’s natural resources, particularly its oil fields. This dynamic complicates efforts to establish a cohesive national economic framework and to reconcile competing claims. The United States, however, could use its leverage with the SDF and HTS to prevent these factions from fighting over disputed areas, ensure that the new government respects and integrates Syrian Kurds into the country’s political and economic structures, and ultimately enable an orderly withdrawal of American troops from Syria. The country’s economic recovery depends on the effective management of oil-rich areas, both to stabilize governance and to ensure that these vital resources can contribute to national reconstruction.

 

A Path Out of the Rubble

The Syrian people face monumental challenges, and after more than a decade of conflict and devastation, piecemeal solutions will not suffice. Only comprehensive and pragmatic reforms, sustained by international engagement, can pave the way forward.

The immediate focus must be on addressing the country’s humanitarian crisis. Millions of Syrians currently suffer from extreme poverty, hunger, and displacement, making large-scale relief efforts imperative. Reconstruction of critical infrastructure—particularly in the energy, housing, and transportation sectors—is urgent. Restoring electricity and fuel supplies is not just a practical necessity but also a precondition for economic activity and a semblance of normalcy. In this regard, bringing oil-rich regions, particularly those controlled by the SDF in northeast Syria, into a broader national framework will be critical to ensuring energy security, equitable distribution of revenues, and the return of international investment.

Meeting these urgent needs will require substantial funding from the international community, which is likely to condition reconstruction aid or the lifting of sanctions on political reform. As a recent statement by the G-7 highlighted, Syria will only be able to unlock international support by making progress toward meeting the terms of UN Security Council Resolution 2254, which in 2015 outlined a path to peace in Syria through a democratic political transition. Without these foundational steps (and the ensuing assistance from the international community), any broader recovery will remain precarious at best. The emerging government in Damascus must therefore prioritize political reform. For their part, Western policymakers must set realistic goals and outline clear steps for the new authorities in Damascus to follow. Syrians cannot afford further delays. With winter intensifying and basic commodities in short supply, action is imperative to mitigate suffering and lay the groundwork for sustainable recovery.

A phased easing of sanctions will also be essential to Syria’s recovery. With Assad out of the picture, the West should immediately offer unconditional sanctions relief in key sectors, such as energy, electricity, and banking, to reintegrate Syria economically and allow these critical industries to recover. Broader sanctions relief, however, relating to the removal of HTS from terrorist designation lists, should remain tied to measurable benchmarks in governance reforms, including inclusivity, respect for human rights, and commitment to a democratic transition. This approach would use existing sanctions to incentivize reform while fostering international confidence in Syria’s political and economic trajectory.

Beyond international economic relief, sustainable development will have to be led by Syrians, for Syrians, and underpinned by private-sector activity. The private sector’s revitalization will be essential for reducing poverty and fostering self-reliance. Decades of cronyism and sanctions have stifled entrepreneurship, leaving businesses hesitant to invest in a coercive and opaque environment. To restore confidence and stimulate economic activity, it is imperative to develop free-market capacities by encouraging private ownership and entrepreneurship, fostering competition, lowering barriers for new businesses, and establishing a transparent regulatory framework. The immediate reforms needed, including reversing protectionist policies on imports and dismantling exchange-rate mechanisms that prop up inefficient domestic production, are essential to creating a level playing field and encouraging economic growth.

Finally, Syria’s long-term recovery will depend on reintegration into the global economy through trade agreements, regional partnerships, and diplomatic engagement. The country’s new leaders must recognize that a failure to meet the international community’s expectations of political reform and transparency risks prolonging the country’s exclusion, deepening its instability, and exacerbating the humanitarian crisis. As the past 13 years have shown, what happens in Syria does not stay in Syria. If the new government and the international community cannot work together to carry out meaningful reforms, the Syrian people and the greater region will suffer the consequences.

 

 

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