f t

HI GLI SH ONLY HATO RESTRICTS?)

OTi gl
iember
COMMITTEE ON SOVI Eg ECONOMIC POLICY
fiCOlOMIC PENETRATION IN SYRIA
Note by the I nternati onal Staff
Sovi et penetrati on has once more been brought i nto the
open by recent events i n Syri a. Al though i t I s certai n that
Sovi et i nf l uence i n Syri a has i ncreased, we cannot as yet assess
i ts extent. I t i s possi bl e, though, to exami ne the new economi a
rel ati onshi p between the Sovi et bl oc and Syri a, and to deri ve
some i dea about tho extent of economi c penetrati on.
a. The Russi an l oan to Syri a i n August, 1957 reported to
he about $112,000,000(1), brought to over $350 mi l l i ons(2) tho
amount recei ved from Sovi et countri es over the past ei ghteen
months. I n contrast wi th most previ ous deal i ngs, the current l oan
I s to be used f or economi c, not mi l i tary purposes. However,
reports from Moscow cl earl y show that much mi l i tary negoti ati on
was carri od on there.
3. Syri a' s i ndebtedness to Conmunist countri es i s great
rel ati ve to her abi l i ty to pay. For exampl e, Syri a' s total exports
amount to about $130 mi l l i ons a year, and her f orei gn exchange
holding total 60 mi l l i ons. I t i s cl ear that Syri a wi l l be many
years i n payi ng of f these l oans, and that a l arger part of her
trade wi l l be conducted wi th the Sovi et bl oc.
4. A reori entati on of Syri an trade has al ready taken pl ace.
Before the arms deal of May, 1956, Conmunist trade wi th Syri a was
negl i gi bl e, accounti ng f or no more than 2 to 3 per cent of Syri a *
total . Rcccnt f i gures show that a sharp i ncrease has taken place
and i t Is reported that al most one half of Syri a' s cotton sales
(the most i mportant export) i n the past year have gone to the
Sovi et bl oc.
Economi o BaekyounA i n Syr i a
5. Syri a provi des a cl assi c example of an underdevel oped
country starti ng to i ndustri al i se, and requi ri ng l arge amounts cf
capi tal . She i s not poor by Middle Eastern standards, i s mai nl y
(1) Russi an negoti ators are presentl y i n Damascus, arrangi ng
for the impIementation of the offer.
(2) See annex for analysis of this total.
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agr i cul t ur al and concent r at or on gr owi ng cr ops of cot t on, wheat ,
bar l ey, t obacco and wool . I ndust r y i s smal l scal e and consi st s
mai nl y of t ext i l es and ot her consumer goods. Syr i a expor t s mai nl y
agr i cul t ur al pr oduct s and i mpor t s oi l and i ndust r i al goods ( i mpor t ed
oi l i s Syr i a' s onl y sour ce of ener gy) . Unt i l r ecent l y al most t he
whol e cf Syr i an f or ei gn t r ade was wi t h t he Mi ddl e East and West er n
Eur ope.
Syr i a' s Pat t er n of Tr nde 1055 ' ' ~'
3 Per cent Di st r i but i on
O
co Ar ea Expor t s I mpor t s
=3
Mi ddl e East ( mai nl y Lebanon and I rai ' ' 40 20
o^ West er n Eur ope ( mai nJ y Fr ance, UI C and 51 62
z> Vif
8
Ger many)
Sovi el ; IDI oc 2 3
Ot her s L 45,.,
100 100
w 6. A suvon- yuur devel opment pl an cal l i ng f or investments of
w ^175 mi l l i ons was est abl i shed : n 1955. Agr i cul t ur al production
vvns t o bo i ncr eased and mor e of Syr i a's domest i c needs wer e t o be
f i l l ed by her own i ndust r y. I hi c was t o be accompl i shed by
i r r i gat i on scheme-i,. t he t r anspor t nci wor l c was t o bc expanded and
_ smal l f act or i es woul d be bui l t . The capi t al was t o "be r ai sed
j j by i nt er nal bor r owi ng, wi t h f or>" i pn. exchange cost s t o be met
w f r om I . P. C. t r ansi t c
1
ues ( appr oxl nat el y 15 mi l l i ons a year )
<
O 7. The pl an seemed t o have been par t l y successf ul f or t he
Jij i i r st year . Domest i c pr i ces di d not r i se much, and no bal ance
5 cf payment s di f f i cul t i es wer e cncount cr od, r?v.t bet ween 1955 and
' 957, t he budget has about doubl ed, due al most ent i r el y t o a
3 r. -i pi a i ncr ease i n def once expendi t ur es. Coverr. r. ent bor r owi ng,
co t he money suppl y, and pr i ces( 1) al l r ose sub; . - ant i al l y. I t became
O evi dent t hat t he count r y coul d not meet al l i t s obj ect i ves wi t hout
O ^or ei cn assi st ance.
CO
Q 8. Russi an mi l i t ar y ai d had hel ped f i nance t he r i si ng
O
r
I ef enco cost s, but unt i l l i arch, 1957, no economi c assi st ance had
-J been f or t hcomi ng. The Czoch cr edi t of yl 5 mi l l i ons f or bui l di ng
^ t ho oi l r ef i ner y at Homs( 2) mar ked t he f i r st t i ne non-military
o_ assi st ance had !>en recei - <
r
edf romt he bl oc. The newest l oan of
I nbout #112 mi l l i ons at f r om t he USSR wi l l be used f or
Q economi c dovol opncnt , i r."-I uc
1
i ::? tr. - nf - . or' t ALi en f aci l i ti es,
y i r r i gat i on schemes and dams l i t sterns l ; W: - l y tl i at Syr i a wi l l be
tt ri bl e t o absor b t hi s cr odi u- .'.r.d use i f . ef f ect i vel y over t he next
^ f ew year s.
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Q (1) See annex to this peper.
( 2) The capaci t y of one mi l l i on t ons annual l y wi l l more than cover
Syr i a' s domest i c needs of 600,000 t ons annual l y. I t i s
expect ed t hat t he r ef i ner y wi l l "be compl et ed by 1959
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I I CTED
Rel at i ons wi t h Ot her Mi ddl e East Count r i es
9. Syr i a' s f ut ur e cour se i s by no means dear , but l ack of
n common l and f r ont i er wi t h t he USSR di mi ni shes t he possi bi l i t y of
sat el l i sat i on al ong East Eur opean l i nes. I t i s pr obabl y Syr i a' s
poi nt i ons wi t h i t s nei ghbour s whi ch wi l l be of most si gni f i cance
i n det er mi ni ng t he f ut ur e cour se of event a.
10, Syr i a mai nt ai ns a st r ong hol d ever t he I r aqi economy
wi t h i t s cont r ol ever t he I ,P.C. pi pel i ne t hat cr osses t o t he
UJ Medi t er r anean I r aq suf f er ed t he gr eat est l oss i n oi l pr oduct i on
= of ni l Mi ddl e East er n count r i es when t he I . P. C. pi pel i ne wns
y damaged, f ol l owi ng t he Suez cr i si s i n November , and onl y one
j quar t er of nor mal pr oduct i on l evel s was r eached. I r aq i s Syr i a' s
3 second bi ggest cust omer among Mi ddl e East er n count r i es,
CL
uj 11. Syr i a' s economi c r el at i ons wi t h Lebanon are of gr eat
i mpor t ance, wi t h t he l at t er t aki ng one quar t er of Syr i a' s expor t s.
I t was onl y i n August , 1956. t hat Syr i a set up i t s own Cent r al
O Bank, havi ng used t he f aci l i t i es of t he Bank of Syr i a and Lebanon
ZJ unt i l t hnt t i me. Ther e hr. ve been r epor t s t hnt Syr i a i s anxi ous t o
Z devel op Lnt r ki a as an ent r epot cent r e f or t he Mi ddl e East , and par t
UJ of t he Russi an I onn may be used f or bui l di ng such f aci l i t i es. Thi s
LU woul d pose a t hr eat t o Bei r ut , al t hough i t har dl y seems l i kel y t hat
w t r ader s woul d choose Syr i an f aci l i t i es, i n vi ew of t he unset t l ed
pol i t i cal si t uat i on. I t I s I mpor t ant t o not e t hat i f Syr i a seal ed
of f t he bor der , Lebanese t r ader s woul d be har d hi t . The embar go
y i mposed r ecent l y by Syr i a and Egypt on t he I mpor t of Lebanese
t appl es, poi nt s up t he di f f i cul t i es Lebanon may have t o f ace
< 12. The oi l pr oduct i on of Saudi Ar abi a ccul d be t hr eat ened
by Syr i an- Egypt i an act i on I n cl os hgALh 15z Canal and di sr upt i ng
i u t he pi pel i nes, as was pr oved l ast year ,
Q
LU 13, I t i s especi al l y i n concer t wi t h Egypt t hat Syr i a
I X at t ai ns st r at egi c i mpor t ance. Egypt and Syr i a ar e capabl e of
i nf l i ct i ng consi der abl e damage t o t he economi es of I r aq. Lebanon
and Saudi Ar aMa. whi l e t hese l at t er count r i es woul d not be abl e
t o r et al i at e t o t he same ext ent . Syr i a i s bound by t r eat y t o
Egypt , and t he Syr i an ar my i s under J oi nt command of t he Egypt i ens,
who i n r et ur n ar e r epor t ed t o have agr eed t o pay t wo- t hi r ds of
Syr i a' s def ence cost s. I t i s not known whet her t hi s ar r angement
_j wor ks, but i t har dl y seems l i kel y t hat Egypt wi l l be wi l l i ng or
m abl e t o hel p Syr i a t o r epay t he l ar ge mi l i t ar y cr edi t s gr ant ed her
^ by t he Sovi et bl oc
Z)
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Q Suntnar. v and Concl usi ons
^ 14 Syr i a' s economy i s r el at i vel y st abl e and has been
to expandi ng i n r cccnt year s. The l ar ge l oans gr ant ed by t he Sovi et
bl oc wi l l case i nf l at i onar y pr essur es and wi l l t i e Syr i a' s f or ei gn
_] t r ade t o t hat of t he bl oc t o an Qver- i ncr easi ng ext ent . Al t hough
^ r el at i vel y dependant on f or ei gn t r ade ( one- si xt h of her nat i onal
S i ncome i s der i ved f r omexpor t s) and suscept i bl e t o out si de
economi c pr essur es, Syr i a i s i n a posi t i on t o i nf l i ct mor e damage
on ot her Mi ddl e East er n st at es, especi al l y I r aq, Lebanon and Saudi
Ar abi a, t han t hey i n t ur n coul d i nf l i ct on her . At t he same t i me,
her st r at egi c i mpor t ance depends upon cl ose co- oper at i on wi t h Egypt
f or success.
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