Throughout the rule of Hafiz al-Asad (1970-2000), analysts widely agreed that Syria’s regional policies were mainly driven by a sometimes crude interest in national and regime security. Ideology, such as Asad’s famously stubborn rejection of “normal” relations with Israel, did not drive his regional and international foreign policies, but mostly served as a means to sell those policies to the Syrian and wider Arab public. Neither were Syria’s regional policies driven by the pursuit of economic gain. In the 1970s and 1980s, Syria did receive heavy financial subsidies — a sort of war dividend — from the Gulf monarchies because of its front-line position in the Arab-Israeli conflict. The Syrian leadership certainly appreciated this support, and it exploited other economic chances that emerged, for instance exporting additional labor to the Gulf after the 1990-91 Gulf war, and to Lebanon at the end of the Lebanese civil war. But Syria did not simply adjust its regional policies in order to make the Gulf countries pay, or to create employment opportunities for the country’s surplus labor. Rather, Syria consistently subordinated economic interest to political objectives, missing or openly sacrificing potential benefits in the process. Examples here include the closure of the Syrian-Iraqi border and the Iraqi pipeline from 1980 until the late 1990s, and the recurrent interference with Jordanian-Syrian trade exchanges in the late 1990s, when Damascus was angry at Jordan’s “normalization” with Israel.
The Arab-Israeli conflict was obviously the main concern defining national and regime security which Hafiz al-Asad aimed to shore up through his regional policies. According to the perceptions that developed under his regime, Syria was primarily responsible for creating a balance of power that would prevent Israeli domination of the entire region. Smaller countries in the Arab east would be best off casting their lot with Syria, and accepting some form of Syrian guidance in the conflict and peace process with Israel. This rule applied especially to Lebanon (whose post-civil war governments have toed the line of Damascus) and to the Palestinians (who did not accept Syria’s leadership, creating a deep rift between Yasser Arafat and Hafiz al-Asad).
Syria, for its part, would work closely with stronger Arab players, notably Egypt and Saudi Arabia. These two countries would give Syria a political-strategic depth, guaranteeing that it could not be isolated in its approach to the conflict with Israel. Ideological differences and different international alliances notwithstanding, the leaderships in these three states learned to respect each other’s vital interests. Saudi Arabia and Egypt have supported Syria’s stance in the “peace process,” and refrained from undermining the regime and its position in Lebanon. Syria became one of the main recipients of bilateral Saudi and Kuwaiti aid, and Saudi Arabia became the main source of foreign investment in Syria. Damascus coordinated its policies toward Iraq with Riyadh and Kuwait, and accepted a measure of Saudi and other Gulf Arab influence in Lebanese affairs. The leaderships of Syria, Saudi Arabia and Egypt knew that, as long as they coordinated their policies, which they managed to do to a large extent during the 1990s, they could dominate the Arab League and the agenda of inter-Arab politics. 
In July 2000, Bashar al-Asad succeeded his father, who had passed away the month before, as president of Syria. One year on, it is possible to make an initial assessment of Syria’s regional policies under the second Asad regime. The Middle East, of course, has changed a great deal since Bashar al-Asad has been in power, and policy changes aren’t necessarily the result of the change of regime. But certain adjustments in Syria’s regional approaches do reflect the changed priorities of the new leadership.
Two policy shifts have emerged in the first year of Bashar al-Asad’s rule. First, while the regime maintains the strongly security-oriented approach of the last 30 years in principle and still sees the Arab-Israeli conflict as the prime security concern for Syria and the Arab world, it is giving more weight to Syria’s economic interests than its predecessor did. This can be seen in the improving relationships with Jordan and Turkey — two countries with deep political differences with Damascus. Bashar al-Asad’s regime has unblocked the domestic economic reform process which began in the late 1980s but was halted around the time the US-led Madrid peace process was launched in 1991. Following Madrid, the Syrian leadership’s thinking was that serious economic and other reforms would be undertaken once a comprehensive regional peace had been concluded. The second Asad regime no longer subscribes to this notion.
Second, Syria’s new leaders have been convinced that they cannot and must not ignore popular feelings on foreign policy issues, particularly with regard to the Arab-Israeli conflict. Bashar al-Asad’s statements to the effect that Zionist racism is worse than the racism of the Nazis weren’t slips of the tongue. They were clearly intended to boost the new president’s image with the Syrian and wider Arab public, portraying him as a tough leader who dares to speak out against world opinion. The Syrian leadership obviously underestimated the negative effects of these strong words for the country’s international image, but Western public opinion was not the intended audience.  The stepped-up rhetoric, at Arab summits and in the press, also made the point that Syria’s young leadership would neither tolerate being treated as junior partners by other Arab leaders, nor being patronized by Europe or the US.
The regime had few incentives for milder approaches. The Syrian-Israeli negotiating track has been frozen since President Bill Clinton’s unsuccessful attempt to prod Hafiz al-Asad into accepting then Israeli Prime Minister Ehud Barak’s parameters for a bilateral settlement at Geneva in March 2000. In May 2000, Israel withdrew its troops from southern Lebanon, thereby considerably reducing Syria’s ability to use Lebanese resistance operations to convince Tel Aviv to reach an agreement with Damascus. The Israeli-Palestinian track also got stuck after the US-sponsored marathon at Camp David in July 2000 and the beginning, two months later, of the second intifada, now degenerated into low-level warfare between Israel and the Palestinian Authority. The election of Ariel Sharon as Israel’s new prime minister in February 2001, as well as the initial reluctance of the Bush administration to engage actively in restarting the peace process, further reduced expectations that substantive moves toward regional peace will occur in the near future. Similarly, the obvious failure of the US to force Iraq into submission through sanctions and occasional air strikes — and the related inability of the UN and Iraq to find a constructive way out of the sanctions quagmire — pointed to continued stalemate on that front, and a steady increase in popular anger over Western policies toward the Middle East.
Using the Stalemate
In addition to its sharp words for Ariel Sharon, Syria has engaged in a measure of brinkmanship by tolerating, and probably even encouraging, limited Hizballah activity against Israeli forces in the Shebaa Farms, a fertile valley that Israel says is part of Syria. Syria and Lebanon insist that the Farms belong to Lebanon, and should have been evacuated in the course of Israel’s withdrawal from Lebanon. (Beyond dispute is only that the farms are Israeli-occupied.) But Syria clearly does not wish to be dragged into a region-wide confrontation, and hence did not respond to the April and July 2001 Israeli attacks on Syrian military installations in Lebanon that followed Hizballah actions in the Shebaa Farms. The new leadership has repeatedly stated that peace with Israel — on the basis of a total Israeli withdrawal to the boundaries of June 1967 — remains the strategic option for Syria. Even Vice President ‘Abd al-Halim Khaddam, who is counted among the foreign policy hardliners, has left no doubt that, for Syria, the conflict with Israel will be over once peace treaties have been concluded between Israel and Syria as well as between Israel and Lebanon.  Syria’s position contrasts starkly with the position of Islamist and hard-core Arab nationalist forces who do not see the conflict as a territorial issue, and do not accept the “end of conflict” even when peace agreements have been signed.
But Syria is not likely to sign an agreement any time soon, certainly not while the second intifada continues. Instead of further postponing necessary economic policy changes, Bashar al-Asad’s government has decided to pursue, and give priority to, economic reform and modernization regardless of where the peace process stands.  Critics argue that Syria hasn’t managed as yet to create an attractive investment climate. But one has to acknowledge that important groundwork has been laid in Bashar al-Asad’s first year in office.
The most significant step was the promulgation of a banking law that allows the establishment of private banks for the first time in three and a half decades. No one should have expected that the deficiencies of a strongly state-centered economy could have been overcome after only a year. After Bashar al-Asad’s accession, the Syrian government also resolved a long-standing debt problem with Germany, removing a major obstacle to European development assistance. The political elite began more seriously to ponder the risks and opportunities of an association agreement with the European Union, in the context of the “Barcelona process” begun in 1995. Though a conservative faction sees the Barcelona process as just another Western attempt to gain control over Arab resources, and advises against the market-opening measures which an association agreement would imply, the policy debate now occurs mainly between those who advocate decisive reform,  and those who defend a more gradual approach, to preserve national economic interests in the negotiations with Europe.  After entering the Barcelona process for mainly political reasons in 1995, not least the expectation that Europe would play a more active, “balancing” part in the Middle East, Syria today considers primarily what economic benefits the partnership with Europe could yield. Decision-makers are convinced that Europe can help Syria to make a soft landing in the global marketplace, but they are clearly disappointed that Europe has yet to challenge the dominant US political role in the region. In the new president’s inauguration speech of July 2000, Europe was not even mentioned.
While Damascus would appreciate a stronger political role for Europe, Syrians know that the one power that could (and should) pressure Israel into accepting what Syria deems a just and equitable peace is the US. Since such US pressure is not on the horizon, however, Damascus shows little interest in supporting US policies in the Middle East at large. Iraq policy is the major case in point: Syria will not endorse “smart sanctions” or any other new measures against Iraq as long as the West, and particularly the US, does not adopt a more even-handed approach to the Arab-Israeli conflict.
Opening Up to Iraq
Until recently, the Syrian and Iraqi Ba‘thist regimes were inveterate foes. Hafiz al-Asad supported Iran in the Iran-Iraq war, and supplied troops to the Gulf war coalition that repelled the Iraqi army from Kuwait in 1991. But Bashar al-Asad has not answered US Secretary of State Colin Powell’s call to “reenergize” sanctions against Iraq. Instead, Damascus speeded up the cautious opening towards Iraq that had begun in 1997. Exchanges of ministerial visits, regarded as exceptional in the late 1990s, became almost routine (see below). It remains evident that the Iraqi side, rather than the Syrian side, pushes more forcefully for renewed contacts. In May 2001, Baghdad announced the imminent visit of Syria’s prime minister, but Damascus denied that any such visit was planned, and sent the economic minister in the end. Iraq had been seeking a full restoration of diplomatic ties — cut in 1980 — since 1998. Syria didn’t want to proceed so quickly; instead, interest sections were opened in the Algerian embassies in Damascus and Baghdad, in 2000 and 2001 respectively.
The semi-official discourse on Iraq has nonetheless changed since Bashar al-Asad’s accession. Opposition to the sanctions has become a regular feature of public discussion, and a “Syrian Arab Committee for Lifting the Blockade on Iraq” is given ample coverage in the Syrian media. Syrian policymakers occasionally even speak of Iraq as constituting the “strategic depth” of Syria. Analytically, such notions are not very sound. Syria is not Russia waiting for the Napoleonic or Hitlerite army to invade and be caught in the depths of the hinterland. Nor would the Syrian leadership, with its clear aversion to military confrontation with Israel, want to see Iraqi divisions stationed on Syrian soil. In the conflict with Israel, the country’s real depth lies in its political alignment with Saudi Arabia and Egypt. Syrian-Saudi relations are stable and highly appreciated, and though there have been some disagreements with Cairo over the proper way to deal with the intifada and Israel, a realignment toward Iraq would, among other things, endanger relations with Riyadh and probably with Iran, something the Syrian leadership will surely try to avoid. Syrian policymakers do not, at present, consider Iraq a threat, but they haven’t developed any trust in the Iraqi leadership. They blame Baghdad for missing the chance to find a common Arab position on the disputes between Iraq and Kuwait at the Amman summit in March 2001. Concrete moves toward normalization with Baghdad have not exceeded those of other Arab countries, including Egypt. A bilateral free trade agreement with Iraq was signed two weeks after a similar agreement had been signed between Cairo and Baghdad. “Alignment talk” makes political sense, though. It is popular, and it signals to Washington that Syria might consider “strategic options” besides the pursuit of peace with Israel. This talk also pleases the Iraqis, who are prepared to pay economic rewards for political cover.
Syria has a strong economic interest in developing relations with Iraq. Cautiously and with due respect to the government’s prerogatives, Syrian industrialists started to lobby for an opening towards Iraq in 1997, when the Oil-for-Food program came into effect. Most of the visits from Syria to Iraq were trade delegations, and the Syrian authorities initially only granted permits to visit Iraq to businessmen, not to ordinary citizens. Syrian-Iraqi trade flows have always increased considerably when the state of political relations allowed for unrestricted exchanges.  Given the need of the Iraqi market for cheap consumer goods, the ability of Syrian industry to produce those goods and geographic proximity, there are enormous opportunities for Syria’s recession-plagued economy, particularly for the private sector.  The reestablishment of the railway link from Aleppo to Iraq in the summer of 2000 presaged plans to link the Syrian, Iraqi and Iranian rail networks.
Even more substantial gains were to be made from the Iraqi oil pipeline, reopened (on an experimental basis, officially) in the fall of 2000. Iraq apparently delivers 100,000 to 150,000 barrels per day of crude oil through the pipeline to Syria at a discounted price. Iraqi oil enables Syria to export more of its own crude. These sales realized an estimated profit of $500-600 million in the first year — which could rise to a billion dollars per annum if the pipeline operates at full capacity. This revenue goes straight into the state’s coffers. The government can use it freely, whether for a proposed $1 billion job creation program, or for armaments and other purchases from abroad that would not necessarily be accounted for in the official budget.
Syria’s opening to Iraq reflects a combination of political and economic rationality. Syria needs to increase its industrial exports, Syrian industry is more competitive in the Iraqi market than in Europe or elsewhere and Syrian businessmen are loath to leave the Iraqi market to Jordan, Turkey or extra-regional competitors. Oil revenue from the pipeline adds substantially to the regime’s domestic room for maneuver. But rent seeking alone cannot explain the changes in Syria’s regional policies. If Syria’s opening to Iraq had been based only on expectations of cash inflow, it should have been possible for the US to entice Damascus into joining the “smart sanctions” initiative, and accept UN compensation — paid for by Iraqi oil sales — for its foregone business with Iraq. But Powell was unable to extract this concession, and despite his claim that Bashar al-Asad had promised to shut down the pipeline in March, oil continues to flow into Syria from Iraq. Syria has made it quite clear that it will reconsider its refusal to support US policies toward Iraq only if Washington modifies its approach to the peace process.
Sovereign Interests of Neighbors
The Arab-Israeli conflict and peace process retains absolute priority in Syria’s regional policy calculations. Occasional differences over the best way to handle the conflict come up in bilateral relations with other “front-line” Arab states. But given the repeated Arab summit pronouncements in favor of the pursuit of peace, while conditioning “normalization” on Israel’s implementation of signed agreements and eventual withdrawal from the areas occupied in 1967, such differences are no longer likely to totally disrupt functional relations with these states, as had been the case in the 1970s or 1980s. Syrian disagreement with Egypt over the Egyptian-Jordanian initiative to deescalate the Israeli-Palestinian confrontation is a case in point. Despite its reservations, the Syrian leadership did not obstruct the initiative. Any uneasiness in Egyptian-Syrian relations resulted from the feeling, on the part of a number of Syrian officials, that Egypt might not take the new regime seriously, and wanted to monopolize the peace process.
Bashar al-Asad’s regime has also differed with Jordan and the Palestinians over the proper way to proceed at the current impasse. The Syrian leadership is deeply suspicious of the Mitchell Commission’s plan for restoring negotiations, a plan which both Jordan and the Palestinians endorsed. Mainly, Damascus feared that Israel and the US would try to substitute the Mitchell recommendations for UN resolutions 242 and 338, which mandate full Israeli withdrawal from territories occupied in 1967. Because of these reservations, the Syrian leadership was reluctant to receive the state visit of Yasser Arafat planned for June, and therefore imposed a number of conditions on the visit which Arafat could hardly accept. But these differences have not impeded cooperation in other areas. Among other things, the electricity networks between Syria, Jordan, Egypt and Lebanon were connected, and talks began about the delivery of Syrian natural gas to Jordan. Syria finally recognized the Palestinian Authority as a government. All this gave implicit proof that Syria, while unhappy with the strategic choices of some of its neighbors, has nevertheless come to accept the sovereign right of each Arab state — or quasi-state — to pursue its regional policies in accordance with its particular national and security interests, rather than pan-Arab goals.
The “Resistance Card”
Finally, there is Syria’s relation to Lebanon. In June 2001, Syrian troops began to withdraw from Beirut and some of its suburbs, continuing a redeployment from “political” to “defensive” positions that had begun in the spring of 2000, and then stopped with the Israeli withdrawal from the Lebanese south.  The Israeli withdrawal disturbed the Syrian leadership. They hadn’t expected that Barak would withdraw over the objections of parts of the military. Israel’s withdrawal also took from Syria what has been dubbed the “resistance card” — a way for Syria to nudge Israel toward full withdrawal from occupied Syrian territory without attacking Israeli positions itself. But Syrian and Lebanese rationales for ongoing Hizballah operations in the Shebaa Farms area did not really convince the international community or, for that matter, many Lebanese. More importantly, since the Israeli withdrawal, criticism of the Syrian presence and the involvement of Syria in Lebanese politics became considerably more vocal. The wave of criticism reached its height with two memoranda, one of Christian and one of confessionally mixed, liberal democratic origin, demanding, in fairly unguarded terms, an end to Syria’s political domination as well as the redeployment and eventual withdrawal of Syrian troops.
Bashar al-Asad and his team did not want to antagonize the Lebanese, particularly the administrative, academic and business elites, who they wanted as investors and partners, not least in the banking sector and for the development of higher education. Syria was in fact overextended in Lebanon, at times getting involved in the daily management of intra-Lebanese quarrels. In principle, Syria’s new leaders weren’t opposed to “putting Syrian-Lebanese relations on a new basis,” as the formula of Prime Minister Rafiq al-Hariri went. But Bashar al-Asad managed to avoid the impression that he had ordered the redeployment under Lebanese pressure. Syria made it clear that — while other things were negotiable — it could not and would not relinquish strategic positions in Lebanon as long as Israel was still occupying Syrian and/or Lebanese territory. Syria, in formal coordination with the Lebanese government, would decide about operational needs. In a sense, Israel’s recent air raids on Syrian radar stations in the Beqaa Valley gave credibility to the claim that a Syrian troop presence would remain necessary as long as a state of war persisted. With the redeployment, Bashar al-Asad escaped the dilemma of risking heightened anti-Syrian agitation in Lebanon or appearing weak in the eyes of his own generals. One year after he assumed the presidency, Bashar al-Asad has passed his first major regional policy test.
 See Volker Perthes, Vom Krieg zur Konkurrenz: Regionale Politik und die Suche nach einer neuen arabisch-nahöstlichen Ordnung (Baden-Baden: Nomos, 2000), pp.111-130.
 Anders Strindberg, “Growth with Strength: Syria’s Hardline Reformer,” Jane’s Intelligence Review (February 2001).
 Al-Hayat, June 10, 2001.
 See Volker Perthes, “The Political Economy of the Syrian Succession,” Survival 43/1 (Spring 2001).
 Nabil Sukkar, al-Islah al-iqtisadi fi Suriya [Economic Reform in Syria] (Beirut: Riad El-Rayyes Books, 2000).
 Ayman ‘Abd al-Nur, “On European Partnership,” unpublished manuscript (June 2001).
 ‘Ali Kan‘an, “Usus al-‘alaqat al-iqtisadiyya bayn Suriya wa-l-‘Iraq” [The Bases of Economic Relations between Syria and Iraq], al-Hayat, April 17, l998.
 Data are scarce. Official statistics still put Syria’s exports to Iraq at zero. But Iraq’s trade minister, in an interview with the Syrian daily Tishrin on May 30, 2000, estimated the total amount of Syrian-Iraqi trade at $400 million from 1997-2000. Based on this and other estimates, Syrian exports to Iraq may have amounted to $50-100 million per annum during this period. This is less than three percent of Syria’s total exports, but up to ten percent of its non-oil exports.
 The Ta’if agreement which ended the Lebanese civil war scheduled this redeployment for 1992. Ta’if states that Syrian forces would help the “legitimate Lebanese forces” for a period not to exceed two years after, among other things, “the incorporation of political reforms into the Constitution.” This happened in September 1990.
Slowly Improving: Syrian-Iraqi Relations, 1996-2001
May 1996 Official Iraqi delegation attends the Arab Parliamentary Union meeting in Damascus.
May 1997 Syrian business delegation visits Baghdad, and signs $20 million in food and pharmaceutical contracts.
June 1997 Syria reopens its borders with Iraq for businessmen.
July 17, 1997 After 17 years, Syria takes Radio Voice of Iraq — a broadcast critical of the Baghdad regime — off the air.
July 22, 1997 Syrian government allows businessmen to travel individually to Iraq, contrary to previous instructions that travel to Iraq be in groups.
August 1997 A joint venture is started to run a bus service between Damascus and Baghdad.
August 23, 1997 Udai Hussein’s newspaper Babil calls for resuming diplomatic relations between Iraq and Syria.
August 26, 1997 Iraqi and Syrian officers sign trade contracts in Baghdad.
September 1997 Iraq signs several food deals with Syria.
October 1997 400 Syrian companies exhibit Syrian products in Baghdad.
November 21-22, 1997 Iraqi Deputy Prime Minister Tariq ‘Aziz visits Syria. First visit by a senior official in 17 years.
March 29, 1998 Syrian Health Minister Iyad al-Shatty arrives in Baghdad, marking the highest-level visit in 18 years.
July 14, 1998 Syria and Iraq sign a Memorandum of Understanding on reopening the oil pipeline — closed in 1982 — from northern Iraqi oil fields to Syria’s Mediterranean port of Banias.
February 28, 2000 Iraqi interest section opens at the Algerian embassy in Damascus.
August 2000 Resumption of train links between Baghdad and Aleppo.
November 6, 2000 The oil pipeline is reopened. Iraq begins pumping crude oil to Syria.
January 30-31, 2001 Iraqi Vice President Taha Yasin Ramadan is received by Syrian President Bashar al-Asad. He signs an executive protocol to establish a free trade zone.
May 2001 Syrian company wins international bidding to build tunnel in the Basra area.
May 22, 2001 Syrian interest section opens in the Algerian embassy in Baghdad.
June 7, 2001 Iraq, Syria, Egypt and Libya sign free trade agreement.
June 19, 2001 Bashar al-Asad establishes Syrian Trade Center in Baghdad.
July 9, 2001 Iraqis open duty-free area in al-Qa‘im on the border with Syria.
July 11, 2001 Syria reportedly cancels visa requirement for Iraqi visitors.
July 16, 2001 Bashar al-Asad sends congratulations to Baghdad on Iraq’s National Day, the first such greeting in over 20 years.
— compiled by Stefania Spapperi