Foreign Capital Flows into Damascus Despite Insecurity

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Foreign Capital Flows into Damascus Despite Insecurity

Soldiers trying to dismantle a bomb near a Defence Ministry building in Damascus on Tuesday were hit by a second device stashed in a parked car. The explosion killed one soldier and wounded 18 others in the Bab Sharqi district. No one claimed responsibility for the attack.

The blast struck one week after European ministers restored the Cooperation Agreement with Syria, and a day before TotalEnergies, QatarEnergy, and ConocoPhillips signed a deal to study offshore Block 3 near Latakia. That coincidence raises an obvious question: can foreign capital safely enter a country where bombs still go off during the workweek?

Warnings Met With Action

The January joint statement from Washington and European partners was direct enough. Parties must avoid any security vacuum around detention facilities housing thousands of fighters, according to the American embassy’s text

The warning was issued just as Damascus was assuming control from Kurdish forces in the northeast. The worry wasn’t broad. Armed groups had proven they could exploit handoffs between one security provider and another. Four months later, the car bomb confirms that the gap is still there.

But investors signed contracts anyway. French, Qatari, and American energy firms are reviewing an offshore block where water depths reach 1,700 metres. Saudi Arabia announced a $2 billion package covering aviation, telecommunications, and real estate. 

The matter is less about whether investment will enter and more about which model Syria will adopt to manage the contradiction between commercial confidence and ongoing violence.

Iraq’s Long Education

Iraq offers useful precedents because it spent two decades learning what works in places where state authority competes with other armed structures. Security sector reform seeks to demobilise armed groups and integrate them into formal state bodies, including the army and the police.

But this formal integration often caused friction instead of resolution. Militias with genuine local legitimacy resented subordination to institutions they remembered as tools of repression.

The Kurdistan Regional Government kept separate security forces despite nominal integration agreements. Turkish military operations inside Iraqi Kurdistan still threaten stability and frustrate efforts against resurgent armed groups.

Syria grapples with the same struggle in the northeast, where Kurdish-led forces control detention facilities, oilfields, and farmland. The January ceasefire between Damascus and these forces established frameworks for integration. Implementation has been patchy. Some areas transferred smoothly. Others saw clashes.

The Syrian government took control of detention centres holding thousands of captured fighters, accepting a responsibility that American and European officials had warned about for months. 

What Iraq proved over decades is that formal agreements about who controls territory rarely turn into actual monopolies on violence. Local commanders keep their pull through community links, external backing, or simply holding weapons and know-how.

Decentralised Power, Literal and Political

Iraq also tried another way that Syria could adapt. When national grids failed to deliver electricity, households and businesses turned to neighbourhood generators and solar panels.

The broken-up security setting accidentally opened room for decentralised energy systems. A recent analysis of reconstruction efforts in Iraq, Lebanon, and Yemen found that distributed renewable systems sped up local economic growth even where central governance stayed weak.

The same thinking applies to security. Damascus cannot provide uniform safety across every district. Local arrangements fill the gaps.

The energy deals now on the table hint that investors accept this reality. TotalEnergies ran operations in Syria from 1988 until European sanctions in 2011. 

Returning to offshore blocks means working in areas where central government control is newer and less tested than in Damascus. QatarEnergy brings experience from other fractured markets. 

The memorandum of understanding covers technical review rather than immediate drilling. Companies are buying time to see how security arrangements develop.

Risk Calculations Without Rhetoric

The car bomb in Damascus will not be the last violent incident. Syria’s transitional leadership has limited control over its own forces, according to security assessments published earlier this year. Retributive killings happened in coastal regions. Clashes erupted in the south. And armed factions integrated into the military keep links to groups still sanctioned by Washington.

This causes complications for investors who need to prove compliance with rules on financing designated groups. The worry is less about spectacular attacks and more about how funds circulate through an economy where formal and informal power structures overlap.

Iraq again supplies context. Foreign investment in energy reached billions despite ongoing violence because investors concentrated on specific secured zones instead of waiting for nationwide stability.

The Kurdistan Regional Government attracted separate deals by offering its own security guarantees. Syria may go a similar route: international firms negotiating protection arrangements with Damascus for offshore blocks, with Riyadh for transport infrastructure, with local commanders for power generation. The model is fragmented by necessity, not design.

European officials who revived trade links made their own calculation about acceptable risk. The Cooperation Agreement dating to 1977 removes customs duties on most Syrian industrial products entering the bloc. Brussels committed €620 million for humanitarian aid and early recovery between now and next year. 

This funding flows despite car bombs because European governments decided engagement serves their interests better than isolation. Refugee returns, border security, and economic development inside Syria reduce pressure on European systems. The question is whether this reasoning extends to private investors who answer to shareholders rather than voters.

Keep up with Daily Euro Times for more updates


Read also:

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Double Bind: Struggle in Syria Between Foreign Peace and Domestic Clashes

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