On May 22, 2026, I joined Umutcan Yüksel on the first episode of PRISM Insights: The Future of Syria: Economic Recovery and EU–Syria Relations for a wide-ranging discussion on Syria’s economic recovery, reconstruction prospects, energy politics, refugee returns, and evolving relations with the European Union.

The conversation took place roughly 15 months after the collapse of the Assad regime, at a moment when Syria was no longer in outright economic freefall, but still far from genuine recovery. Inflation has eased, investor and consumer sentiment have improved, electricity provision has expanded in parts of the country, and regional engagement has accelerated. Yet the daily economic reality for most Syrians remains extremely difficult.

Below is a structured readout of the key arguments I made during the discussion.

1. From Collapse to Partial Stabilization

I began by arguing that Syria’s economy is best understood as being in a phase of fragile stabilization, not reconstruction.

Over the past months, Syria has seen some improvements in macroeconomic indicators. Inflation has come down from extreme levels (but is picking up again), regional economic ties are reopening (but promises fail to materialize), refugees and IDPs are returning (to sometimes poor living conditions), and electricity provision has improved in parts of the country (unequally, and with prices increasing significantly). But these improvements start from an exceptionally low base.

The structural picture remains extremely fragile. GDP is still only a fraction of its pre-war level. Public institutions are overstretched. The banking system remains weak and disconnected, both from Syrians inside the country and from the international financial system. Purchasing power remains low, and investment announcements are still running ahead of actual implementation.

For that reason, I described Syria as moving:

This distinction matters because, while stabilization can mean that the worst forms of collapse have slowed, it does not necessarily mean that households are better off, that businesses can operate normally, or that people feel a material improvement in their daily lives.

During my most recent trip to Syria in early May, what struck me most was the scale of frustration with the economic situation, including in Damascus. This is important because if people are struggling in Damascus, the situation is likely even more difficult in Aleppo, Idlib, the northeast, the coast, and other areas further away from the political and administrative center. This was confirmed to me by contacts on the ground and reporters who have made the trip to Northern Syria.

I also emphasized that it would be unfair to blame all of this on the current authorities. Syria is emerging from near-total economic collapse, institutional fragmentation, sanctions, destruction, and massive capital flight. Recovery was always going to be slow.

Still, several policy choices have increased pressure on vulnerable households. The gradual lifting of subsidies on bread, fuel, and electricity has weighed heavily on Syrians who were already economically insecure. Discussions around greater privatization in sectors such as healthcare have also generated anxiety.

One central challenge today, therefore, is the tension between macroeconomic stabilization and social protection.

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2. Energy as the First Condition of Recovery

A major part of the discussion focused on energy. My main argument was rather straightforward: electricity is a condition for almost every form of recovery, not just one sector among others.

Electricity affects factory production, irrigation, cold storage, hospitals, schools, water pumping, telecoms, household welfare, and the ability of local markets to function. Where the lights are on, people are more likely to return, businesses are more likely to restart, and local economies are more likely to recover.

This is why recent energy arrangements are so important. Qatar has provided gas through Jordan. Azerbaijan has provided gas through Turkey to Aleppo. MOUs have been signed for new power plants. The government has also sought to regain control over oil and gas resources in the northeast.

Yet energy recovery also involves a difficult balancing act. Emergency gas and fuel support can improve electricity supply quickly, but new power plants, offshore exploration, oil and gas development, and grid rehabilitation are much longer-term projects.

The government, therefore, needs to ensure that short- and medium-term support from countries such as Qatar, Turkey, Azerbaijan, Saudi Arabia, Jordan, and Egypt remains durable enough to allow time for deeper rehabilitation.

I also warned that energy recovery can create an uneven geography of reconstruction. Areas connected to gas supply, generation, or transmission improvements will recover faster. Areas outside those networks may lag, even if they are politically important or resource-rich.

3. EU–Syria Normalization: Politically Significant, Economically Slow

We then turned to EU–Syria relations. I argued that the improvement in relations between the European Union and Syria is politically significant, but its immediate economic impact should not be overstated.

The EU lifted most economic sanctions in 2025 and moved to restore the full application of the 1978 EU–Syria Cooperation Agreement. This marks a major political normalization after years of rupture. But it does not mean that European companies or banks will quickly return to Syria.

Sanctions relief changes the legal environment, but it does not automatically solve Syria’s operational constraints. Banks remain cautious. Companies still face uncertainty. Payment channels are weak. The investment climate remains difficult.

The same applies to European aid and socio-economic support. The EU has pledged substantial funding since Assad’s fall, but implementation remains slow. It is difficult to find reliable partners on the ground, difficult to move money into Syria, and difficult to align European and Syrian priorities around reconstruction and recovery.

Moving from an emergency humanitarian framework toward development assistance and socio-economic recovery takes time. For that reason, I argued that EU–Syria normalization is very important politically, but will require time before it becomes economically meaningful.

This is not only true for Europe. Gulf countries, Turkey, and other partners have also promised significant support and investment. But in many cases, announcements have moved faster than implementation.

4. Aid, Investment, and the Limits of the “We Want Investment, Not Aid” Narrative

Another central tension in Syria’s recovery is the government’s insistence that it wants investment, not aid.

Politically, this makes sense. No postwar government wants its legitimacy to rest solely on humanitarian dependency. The new Syrian authorities want to project sovereignty, normality, and economic revival. They want power plants, industrial projects, tourism, ports, logistics, and private investment, not only aid convoys and emergency relief.

But economically, aid and investment solve different problems.

Private investment will not replace humanitarian support in areas where people are poor, services are weak, and markets are not functioning. With millions of Syrians still requiring assistance and the humanitarian response facing major funding gaps, Syria cannot simply substitute aid with investment.

At the same time, I understand why the government wants to move beyond the emergency framework. If people only continue to see humanitarian trucks and aid deliveries, while officials announce large investments abroad, frustration will grow. Syrians need to see recovery materialize in visible and practical ways: better electricity, functioning services, jobs, and local economic activity.

The challenge is therefore not to choose between aid and investment, but rather to manage both.

The government should give international organizations and NGOs enough room to operate, while also pursuing investment in sectors that can restart economic life. Excessive centralization of aid and recovery processes risks slowing delivery and alienating donors.

As I put it in the discussion, the government cannot simply refuse aid. It still needs billions of dollars per year in external support. The more constructive approach would be to frame aid, development support, and investment as complementary parts of the same recovery process.

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5. Syria, Lebanon, Turkey, and the Political Economy of Refugee Returns

We also discussed Syria’s economic relationship with neighboring countries, especially Lebanon and Turkey.

On Lebanon, I argued that Syria and Lebanon are deeply economically interdependent. Their relationship has long involved labor, trade, informal finance, smuggling networks, refugee flows, and transport corridors. If Syria stabilizes, Lebanon could benefit through voluntary returns, renewed trade, transport activity, tourism, and cross-border commerce.

But Lebanon’s own collapse limits its ability to play the role it once did. Lebanese banks are damaged, the state is weak, and border infrastructure remains vulnerable.

I made the point (maybe somewhat bluntly and controversially) that:

This is because Syria is Lebanon’s only viable land gateway to the Arab hinterland. Beirut needs Damascus for overland trade, transit routes, potential electricity interconnection, and possibly future energy flows.

At the same time, refugee returns should not be celebrated too quickly. Large-scale returns could reduce pressure on Lebanese housing and services, but they could also reduce humanitarian funding flows into Lebanon and shrink parts of the low-wage labor force.

The same applies, in different ways, to Turkey. Syrians in Turkey are relatively well integrated compared to Syrians in Lebanon, Jordan, Egypt, or Iraq. They are active in the Turkish economy, including in sectors that depend on low-wage labor. A large-scale return of Syrians would therefore have economic consequences for Turkey as well.

More broadly, I argued that European and regional expectations around returns remain too simplistic. Many assumed that once Assad fell, Syrians would return quickly. But return is not just a question of permission or safety.

That means housing, electricity, schools, water, healthcare, documentation, security, and livelihoods. Without these, return risks becoming a transfer of vulnerability: Syrians who were vulnerable in Turkey, Lebanon, Jordan, Iraq, Egypt, or Europe may simply become vulnerable inside Syria.

Some Syrians will return. Many already have. But others will not, especially those with citizenship, residency, jobs, family ties, and social networks in host countries. European and regional policymakers need to accept that some Syrians will stay abroad, and that this is not necessarily a bad thing.

6. What Gives Me Hope and What Worries Me

The final question was more personal: what gives me hope, and what worries me?

What gives me hope is the ability of Syrians to rebuild economic and social life from almost nothing.

In Syria, this is visible everywhere: small businesses reopening after years of destruction, families returning despite uncertainty, traders reconnecting supply chains, young people launching projects, and communities trying to restore some form of normality after more than a decade of war and displacement.

There is also an international and regional opening today that did not exist before. Syria is no longer isolated diplomatically or economically. Regional actors, international organizations, investors, the IMF, and the World Bank are all engaging in ways that would have been unimaginable only a few years ago.

But what worries me is the possibility that reconstruction becomes too narrow politically and economically.

There is a risk that recovery becomes too centralized, too opaque, and too focused on large headline investments. Syria could end up with announcements, luxury projects, diplomatic meetings, and reconstruction contracts — but without meaningful improvements in the daily lives of most Syrians.

I also worry about expectations. Many Syrians expected the fall of the Assad regime to quickly translate into better living conditions, more dignity, and greater economic opportunity. But recovery after this level of destruction will be long, uneven, and painful. If the gap between expectations and lived reality becomes too wide, frustration could grow quickly.

At the end of the day, Syria does not just need capital or reconstruction contracts.

It needs trust, functioning institutions, credible rules, social protection, and a recovery process that people can actually feel in their daily lives.

We are not there yet. But with enough support, engagement, pressure, and institutional learning, Syria can still move from partial stabilization toward a recovery that is not only visible in macroeconomic indicators but felt by ordinary Syrians.

I would like to thank Umutcan Yüksel and PRISM Insights for the invitation and for launching the podcast series with such a substantive discussion.

You can listen to the full episode here:
👉 https://www.prismonitor.eu/insights/the-future-of-syria-economic-recovery-and-eu-syria-relations

The episode runs for 42 minutes and covers Syria’s economic recovery, energy constraints, EU–Syria relations, aid and investment, refugee returns, regional interdependence, and the challenge of turning political normalization into material recovery.

Read the report from my previous podcast appearance, “Centralization First: Syria’s Emerging Political Economy,” based on my discussion with Colin Powers and Richard Solomon on Sultat al Mal, where we explored reconstruction, Gulf capital, sovereign debt, and the risks of managed access.

Nearly three months later, many of the structural questions we discussed remain highly relevant: the centralization of authority under the new institutional setup, the rise of sovereign and development funds, the growing reliance on PPPs, evolving state–capital relations, Gulf capital’s expanding role, and the unresolved questions surrounding sovereign debt and financial reform.

The conversation took place at an early but decisive moment in Syria’s post-Assad transition—when institutions were still being consolidated, major MOUs were being signed, and the contours of the new political economy were beginning to take shape. Below is a structured readout of the key arguments I made during the discussion.

1. Centralization and the “Project State” Model

In the first part of the program, I argued that the new institutional setup signals a clear hierarchy of priorities: centralization first, investment facilitation second, and accountability third—for now. The Constitutional Declaration concentrates authority in the presidency, while newly created or revamped bodies, including the Supreme Council for Economic Development, the Syrian Investment Authority, and the Syrian Sovereign and Development Funds, largely report upward rather than outward.

I characterized the emerging model as a “project state”, where reconstruction is fast-tracked through sovereign/development vehicles and public-private partnerships, with the presidency acting as the central hub. At the same time, a technocratic layer built atop a factional inheritance, with governing instincts shaped by Idlib’s wartime political economy: tight control, selective inclusion, and speed. This can produce early wins (e.g., ports and energy MOUs) but risks institutionalizing opacity.

A year after the collapse of the Assad regime, I emphasized that this remains an early post-regime phase. The Constitutional Declaration was drafted quickly to balance domestic and international audiences during a period when the new authorities were still consolidating power. The rules of the game are not yet fully set a d that Parliament’s ability to legislate and exercise oversight will be a key test of whether meaningful checks on executive and economic power emerge.

2. State–Capital Relations: Managed Access, Not Open Competition

There are obviously clear continuities between Idlib and Damascus in the structure of state–capital relations, as I described the current pattern as:

• Centralized bargaining rather than rules-based policymaking, with deals routed through committees and funds with limited public disclosure.

• “Managed access” rather than “free access”, where businesspeople operate through proximity and sponsorship networks.

“We have first centralized bargaining rather than rules-based policymaking.”

In my view, this is unsurprising for several reasons: (1) many formerly wealthy elites were tied to Assad and are now sidelined or cautious; (2) authorities must move quickly, and personal networks accelerate decisions; (3) investors close to the current leadership are more willing to move in Syria’s high-risk environment; (4) there is a strong supply-and-demand dynamic, with many investors eager to enter; thereby, limiting their leverage to impose conditions.

As a result, early beneficiaries are likely to be firms positioned to win concessions and PPPs, along with intermediaries who possess security-bureaucratic access. Broader households, given that roughly 90% of the population lives under the poverty line, will only benefit if deals translate into tangible improvements in electricity, water, jobs, and price stability.

Obviously, there is a risk for these patterns to become entrenched. However, two potential counterweights should be considered:

• Donors and international partners, if they coordinate around transparency, procurement standards, and audit safeguards;

• Parliament, if it gains the capacity to legislate and oversee executive economic decisions meaningfully.

3. Gulf Capital: Necessary but Risky

In my opinion, Syria’s outreach to the Gulf reflects limited alternatives. Yet, the state is effectively swapping long-term revenue streams for short-term capital expenditure, fuel, and legitimacy. While Gulf engagement may be one of the only viable sources of large-scale financing, it risks rent leakage, weak domestic value capture, and longer-term fiscal vulnerabilities, especially if PPP structures generate implicit or contingent liabilities.

Parliamentary oversight will be key.

Still, details surrounding various deals, including the UCC Holding BOO electricity deal, for which I mentioned that key contractual terms (pricing, indexation, guarantees) have not been made public, making firm conclusions impossible.

4. Banking Sector Constraints

Then, I discussed plans to expand Syria’s banking sector, possibly by doubling the number of banks, as per a previous statement from the Central Bank Governor. I argued that the most realistic path would involve foreign banks (particularly Gulf institutions) opening affiliates or recapitalizing existing Syrian banks.

However, I see several major bottlenecks:

• Lack of correspondent banking relationships;

• Persistent compliance caution despite sanctions easing;

• Snapback risks;

• AML/CFT vulnerabilities and heavy cash usage;

• Weak capitalization and non-performing loan exposure in domestic banks.

Indeed, only a small share of liquidity is in the formal banking system, and meaningful normalization will take time.

5. Debt to Iran, the EU, and Future Borrowing

On the topic of debt, I expressed some skepticism vis-a-vis the various figures put forward. Syrian authorities have cited approximately $30 billion owed to Iran and Russia, while leaked Iranian documents have suggested up to $50 billion owed to Tehran alone. This is because much of this debt was opaque and did not follow proper parliamentary procedures.

As a result, the most likely path is selective contestation, particularly framing Iranian claims as “odious” or non-enforceable. In fact, I highly doubt that Syria will repay substantial portions of that debt.

I also highlighted Syria’s outstanding obligations to the European Union (approximately €640–700 million), suggesting that restructuring or forgiveness is more plausible than repayment.

Regarding new borrowing, although Syria is now eligible for World Bank operations after Gulf states cleared arrears, officials have publicly signaled reluctance to borrow externally. However, I am still quite skeptical about a strategy relying primarily on donations and PPP-style investment, noting that “free money” is rarely free and often carries political or economic strings.

I would like to sincerely thank Colin Powers for the invitation and for hosting such a thoughtful and substantive discussion on Sultat al Mal – The Power of Money. It was a real pleasure to exchange views with both Colin and Richard Solomon at such an important moment in Syria’s transition.

If you would like to listen to the full episode (Episode 9: Ahmed al-Sharaa’s Syria – A Political Economy, Part 1), you can find it here:
👉 https://podcast.ausha.co/sultat-al-mal-the-power-of-money/9-ahmed-al-sharaa-s-syria-a-political-economy-part-1

The episode runs for 55 minutes and covers institutional restructuring, state–capital relations, Gulf financing, sovereign debt, and the outlook for Syria’s financial sector in greater depth.

And of course, I would also encourage you to listen to Part 2 of the conversation (Episode 10 – Ahmed al-Sharaa’s Syria: A Political Economy, Part 2): https://podcast.ausha.co/sultat-al-mal-the-power-of-money/10-ahmed-al-sharaa-s-syria-a-political-economy-part-2