At the onset of the Syrian uprising in 2011, Iran started lending its longtime ally, the Bashar al-Assad regime, through a credit line to help it survive the wave of Arab Spring protests that swept the region. As opposed to lump-sum lending, a credit line implies that the borrower would be borrowing at times and paying back at other times, with the overall amount of debt not exceeding a certain level at any given date. Effectively, it is a credit card for countries.

Having that been said, there is almost no possibility that Syria was paying off any of the debt back to Iran as its government struggles to cover its expenses. Looking into Syria’s national budgets over 2012-2016 (see, for instance, the 2016 budget), we calculate that, on average, 38 percent of Syria’s government spending came from deficit funding by printing more money. The breakdown of revenues for more recent budgets, where the economic situation continued to worsen, is not available.

With that in mind, uncertainty surrounds the limit of Iran’s credit line: As of 2019, Reuters estimated it at $4.5 billion, while others put the figure at $7.6 billion. Earlier estimates from the International Monetary Fund and Haaretz also vary widely. In fact, the uncertainty about the credit line goes beyond its limit: Who pays it? Who spends it? In what currency is it valued? When is it due? And what is it used for? 

Despite the considerable uncertainty, the credit line has been routinely brought up by commentators whenever the Syrian pound depreciated, when the country faced oil shortages in April 2019, and with the announcement of every Syrian budget. There is barely an article about the Syrian economy since the 2011 uprising that does not entail a reference to that rather mysterious credit line. The impression this created is that the Iranian credit line covers all of Syria’s needs: a well that never runs dry.

However, even the highest estimate of the credit line limit is a drop in the bucket of Iran’s actual spending in Syria. As an earlier work shows, Iran’s oil shipments to Assad over 2013 – 2018 alone are worth $10.3 billion, which eclipses the highest estimate of the credit line limit of $7.6 billion. Iran’s oil shipments resumed to their 2013 – 2018 level in June 2019 after a six-month interruption due to the US sanctions on any entity exporting oil to Syria.

Apart from the oil, Iran showers Assad with money: paying and equipping militia fighters, reconstructing damaged public institutions, delivering aid, and funding the Syria Central Bank’s sales of US dollars to prevent the Syrian pound from nose-diving. Due to the lack of transparency in Tehran and Damascus, estimating Iran’s actual military and economic spending in Syria is a daunting task, with estimates ranging from $30 billion to $105 billion for the first seven years. In other words, what we do know is that the actual costs are considerably higher than what the supposed credit line implies.

The credit line is meant to camouflage the real costs of Iran’s Syria engagement—something that has been increasingly criticized in Iran itself over the past few years, on moral, political, and economic grounds. Over the past years, one of the main demands of Iranian protesters was to end Tehran’s regional adventures and to redirect the resources to meet their domestic needs. The fact that Iran has been spending much less for its military role than its regional rivals has been a moot point for many Iranians.

Here is where the credit line comes in handy. In April 2019, Foreign Minister Mohammad Javad Zarif, while visiting Damascus, claimed that “Syria has exhausted the option of persuading Iran to restart the credit line”—giving the impression that the credit line is all that matters even though nobody knows what it is. Meanwhile, Iranian support to Assad continues unabated.

In another attempt to appease the public, Iranian officials have also adjusted their rhetoric to the new reality of rising domestic skepticism about their Syria involvement. For instance, one such new argument was that Tehran would balance its expenditures by profiting from Syria’s reconstruction. In August 2017, thirty-one Iranian holdings took part in the first Damascus International Fair organized after five years, constituting the largest national representation among all countries. Exactly two years later, in August 2019, the Syrian–Iranian Joint Chamber of Commerce held its first meeting. Tehran has sought to play a leading role in the reconstruction of Syria—including residential buildings, power stations, agriculture, telecommunications, oil, and mining—with many of its companies being owned or affiliated with the Islamic Revolutionary Guards Corps (IRGC), which controls a large portion of the Iranian economy and is in charge of Tehran’s regional policies, including Syria. In 2018, Iran signed a Memorandum of Understanding with the Syrian regime to construct 200,000 housing units near Damascus alongside other megaprojects. Many similar megaprojects have been announced over the past two years, but none of which has come to fruition. 

Still, Iranian commercial expectations have been clearly unmet. Iranian exports to Syria have been far lower than the pre-conflict year of 2010 when they stood at $516 million, while during the years of armed conflict Iran’s market share during 2010 –2017 has been only 3 percent, thus even lagging behind Russia, South Korea, Lebanon, Egypt, Turkey, China, and the UAE. As a case in point, during that period, Ankara’s share grew from 9 percent to 24 percent and is thus eight times higher than Tehran’s.

Iran is unlikely to benefit from any reconstruction projects before the sanctions on Assad’s regime are lifted. The competition is likely to be fiercer if sanctions on Syria are lifted and other countries, such as China, enter the scene.

The cost of Iran’s intervention in Syria has been tremendous. Under rising public pressure, Tehran uses the credit line to conceal that it has spent more than $10 billion in oil shipments alone to Assad while Syria’s national budget for 2020 stood at $9.2 billion. Iran’s draft state budget for the next Iranian year (beginning on March 20), on the other hand, stands at $39 billion, including a $5 billion loan Tehran expects to receive from Russia this or the next Iranian year. Instead of propping up Syria’s brutal dictator in his endless conflict, Tehran might be better off heeding the call of its citizens to use the money to help alleviate the socio-economic vulnerability affecting around half of its population.

The credit line does not help to assess Iran’s involvement in Syria—it is instead a cover for the total cost of Iran’s engagement there. Putting the value of Tehran’s intervention in Syria in perspective reveals the high cost of its adventure in the country and highlights the increasing difficulty of continuing it as Iran continues to hemorrhage due to punitive US sanctions, specifically on oil. As what Tehran has spent in Syria far exceeds what is announced, another question is how much Syria owes Iran. Should Syrians pay back what is in the books or what is actually spent? Only time will tell.

Karam Shaar is a senior economic analyst in New Zealand’s public sector. He has a PhD in economics from Victoria University of Wellington. He is also the author of the 2019 Middle East Institute policy paper, “The Syrian Oil Crisis” and co-author of the Carnegie Middle East Center’s “Trump’s Crude Justification.” Follow him on Twitter: @KaramSh88.

Ali Fathollah-Nejad is a visiting fellow at Brookings Doha Center. He holds a PhD in international relations and development studies from the University of London SOAS. Follow him on Twitter: @AFathollahNejad

Image: Syria's President Bashar al-Assad meets Iran's Foreign Minister Mohammad Javad Zarif in Damascus (Reuters)