In early April, a convoy of 299 Iraqi fuel tankers passed through Syria on their way to the Mediterranean port of Baniyas — one of the few remaining routes to international markets amid the closure of the Strait of Hormuz. It was the first time since 2003 that Iraqi oil had passed legally through Syria — the year the US invasion of Iraq effectively ended cross-border oil shipments from Iraq to Syria, write Jesse Marks and Nicholas Lyle for Foreign Affairs.
"In late April, Iraq expanded the route by reopening the northern border crossing of Rabia with Syria — a crossing that had been closed for more than a decade during the Syrian civil war. Between April and the end of July, more than 2.1 million metric tons of Iraqi fuel were transported to the Syrian coast.
Before the Syrian civil war began in 2011, the country was a trade hub between Iraq, Jordan, Lebanon, Turkey and the Mediterranean, connecting the Gulf states with European markets. After 2011, however, Syria became a different kind of transit hub. The trade was dominated by Iranian weapons and logistical support on their way to "Hezbollah" in Lebanon, as well as fuel, drugs and other illicit goods that filled the coffers of the country's dictator, Bashar al-Assad, but brought little benefit to Syrians.
After "Hayat Tahrir al-Sham" — the armed group once led by Syria's new president, Ahmed al-Shara— After the Assad regime was overthrown in late 2024, regional trade has gradually begun to recover. According to estimates by the Syrian customs service, up to 327,000 trucks carrying over seven million tons of cargo had crossed Syrian borders by August 2025. Jordan, Qatar, Saudi Arabia, and Turkey have begun to normalize relations with Syria and develop business in the country. The new authorities in Damascus have quickly begun to restore the country’s ties with a wide range of regional and international partners in an effort to end Syria’s economic isolation. While this is a significant change, it is far from enough to rebuild the country after more than a decade of civil war. In 2025, the World Bank estimated that rebuilding Syria would cost $216 billion — nearly ten times the country’s projected 2024 GDP.
Now, Syrian leaders are trying to position the country to capitalize on the resurgence of regional turmoil. Since the outbreak of war with Iran in late February, the opportunities for new foreign investment in Syria have increased dramatically. As ties to the United States and Israel, as well as dependence on the Strait of Hormuz, carry a growing risk of retaliation from Iran, many countries are turning to Syria, which has a number of strategically located land and sea routes. Syrian authorities are using the potential influx of capital and trade to create a new source of revenue, allowing the state to rebrand itself — from a source of refugees, terrorism, and regional instability to a transit power that plays a leading role in regional connectivity. But the speed and scale of the investment could overwhelm the institutions needed to govern it. If new investment is not properly monitored or fairly distributed, this investment boom, which currently looks so promising, could destabilize the country’s fragile recovery.
Secondary effects
The need for better and more diverse transit through the Middle East is not new, but for nearly 15 years, the Syrian civil war has made it impossible to do so through the country. In 2009, the governments of Saudi Arabia and Turkey began discussions to restore the Hejaz Railway, built by the Ottoman Empire and largely destroyed during World War I. However, the plans were abandoned after the outbreak of the Syrian civil war. Between 2010 and 2021, Syrian exports shrank by an estimated 90%. Major transit routes through the country were completely closed as the country disintegrated into competing zones of control. In 2023, India, Saudi Arabia, the United Arab Emirates, the United States, and European partners proposed the "India-Middle East-Europe" economic corridor as a way to boost intra-regional and inter-regional connectivity and to integrate Israel — a key element of the corridor — with its neighbors.
The disruption of shipping through the Strait of Hormuz has made the expansion of these projects even more urgent. In April and June of this year, the governments of Jordan, Saudi Arabia, Syria, and Turkey agreed to restore the "Hejaz" railway within three to four years. Analyses of similar regional rail corridors, such as that by the Atlantic Council, estimate that the railway could initially carry about 1.5 million containers per year, and with the expansion of rail and port capacity, that number could potentially reach three million.
This proposal is consistent with Shara’s overall vision, presented in April at an informal EU summit of European and Middle Eastern leaders, for a “Four Seas, Nine Corridors” initiative that places Syria at the center of a network connecting the Persian Gulf, Caspian, Black and Mediterranean seas and facilitating land and sea trade in goods, electricity and oil.
Then, in July, Iraq and Syria agreed to rebuild the Kirkuk-Banias oil pipeline, destroyed during the 2003 US invasion of Iraq, to create a permanent outlet for Iraqi oil to the Mediterranean. If the pipeline is operational within the projected four-year timeframe, it could transport two million barrels per day by 2030 — the equivalent of approximately 60 percent of Iraq’s crude oil exports before the Iran war and about 9 percent of all oil passing through the Strait of Hormuz. With the new routes, also planned through Turkey, Iraq could redirect more than 80 percent of its exports away from the Strait of Hormuz, ending its near-total reliance on terminals in the Persian Gulf.
These trends, however, do not guarantee an improvement in the economic and political situation of Syrians. Syria’s geographical location gives it geopolitical leverage over foreign actors seeking alternative export routes, but it also places the country at the center of emerging rivalries. Saudi Arabia and Turkey are converging on security issues, the UAE is increasingly focused on trade, ports, and logistics, and Israel is seeking to prevent Turkey from establishing influence near Israel’s borders. The competition over who will finance, manage, and defend these corridors could drag Syria into conflicts it is not yet stable enough to withstand.
Damascus has tried to limit this vulnerability by working with almost every power willing to support Syria’s reconstruction and reintegration — including Qatar, Saudi Arabia, Turkey, the UAE, and the United States, as well as China and Russia. But over time, this strategy has proven increasingly difficult. The influence of Syria’s largest financial backers is pushing Damascus toward a configuration centered around Qatar, Saudi Arabia, and Turkey. If competition for the corridors grows faster than Syria can manage it, the country could fall victim to increased foreign control and resource extraction.
Israel could prove a serious obstacle to Syria’s resurgence as a reliable transit corridor for trade. If the restoration of the Hejaz Railway is successful, it would reduce Israel’s importance in the India-Middle East-Europe economic corridor, as well as its role as a Mediterranean gateway to the Arab states. Israel is likely to try to counter such a development.
In February, Israeli Prime Minister Benjamin Netanyahu warned of a “radical Sunni axis emerging” as Syria moved closer to Qatar, Saudi Arabia, and Turkey. In June, Israeli Transport Minister Miri Regev said that regional trade and energy partnerships designed to bypass Israel pose a “real strategic threat to national security,” placing the emergence of Syria as an alternative trade corridor within Israel’s broader threat perception.
Israel has already demonstrated a willingness to use force against these countries. In 2025, it bombed a Hamas compound in Doha, carried out large-scale attacks in Syria — including against air bases that Turkish military teams were scouting for a deployment in Syria — and seized additional territory in the south of the country. In August 2026, Israel struck the Syrian Abu ad-Duhur air base after claiming that Damascus was preparing to allow a Turkish deployment there, designed to "harm Israel", in the words of Israeli Defense Minister Israel Katz.
Damascus, which cannot afford war with Israel, has refrained from a military response and has tried to achieve a withdrawal of Israeli forces by participating in negotiations brokered by the United States. However, this moderate approach may not deter Israel from expanding its illegal occupation of Syrian territory, attacking Syrian infrastructure, or fomenting instability through its ties to Syrian minorities - actions that are hindering key projects for Syria's reconstruction.
The new Syrian government's attempts to counter these actions could result in Israel and Syria becoming permanent adversaries. Such attempts will also require even greater support from foreign partners.
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The growing influence of foreign powers in Syria also affects important political aspects of the country's reconstruction. During the civil war, Assad granted countries supporting his repressive regime access to Syrian territory and economic assets. Russia built military bases and received lucrative concessions for phosphates, oil and gas, and ports. Iran, in turn, used Syria as a land bridge to Lebanon and stationed thousands of troops in the country.
The efforts to rebuild the Syrian state since Assad’s fall have been carried out in the shadow of this legacy. Shara’s government has largely ended this pattern of exporting Syrian sovereignty, expelling Iranian forces and Hezbollah from Syria, dismantling the networks that supported Iran’s military corridor into the country, and regaining control of former Russian military bases, although they will continue to be jointly managed.
But the risk of exporting sovereignty has not disappeared. Damascus still struggles with a fragmented system of national governance. For years, the customs systems in different parts of Syria have been run by competing state and non-state entities, most notably the Kurdish Autonomous Administration of North and East Syria. While Damascus has regained control of border crossings with Iraq in areas previously ruled by the Kurdish minority, the main crossing into Turkey from that territory has yet to reopen.
To attract the funding needed for Syria’s reconstruction, the new government has lowered barriers for regional and international powers seeking access to and investment in the country’s routes, ports, and territory — projects that could help connect its disjointed regions.
In June last year, Shara signed a decree allowing foreign investors to fully own companies in most sectors, freely export their profits, and benefit from significant tax and customs breaks. The decree concentrates the power to issue investment licenses, access to state land, and the right to significant tax incentives in institutions closely linked to the president, giving him significant influence over who can invest in Syria’s post-war economy.
This centralization is likely to help speed up the investment process. But without independent oversight over these decisions — a mechanism that Syria has yet to build — centralization could also revive the Assad-era practice of granting economic access as a reward for political loyalty. Such a system could turn reconstruction into a new source of political patronage, undermining the legitimacy of the new government in the eyes of Syrians who remain disadvantaged and potentially reproducing the same inequalities that contributed to the country’s fragmentation before the civil war.
Long-term concessions give foreign companies significant influence over critical infrastructure. French shipping company CMA CGM has a 30-year concession for Syria’s largest port, Latakia — a deal that gives the Syrian government 60 percent of the port’s revenues. UAE-based logistics company DP World will finance and build new infrastructure at Syria’s second-largest port in exchange for operational control of the facility for 30 years, after which control will be returned to Damascus. But with no published terms for revenue sharing under the deal, it remains unclear how much of the revenue the state will receive and how those funds will be managed and distributed.
The scale of Syria’s reconstruction makes foreign funding hard to turn down. While the World Bank has committed nearly $500 million in grants to public service projects in electricity, water, healthcare and financial institutions, that will cover less than 1 percent of the country’s reconstruction needs.
In October, Shara said his government had attracted commitments of $28 billion from Turkish and Gulf investors in the first ten months of his term — roughly 13 percent of Syria's total estimated needs. But the largest commitments have been for government-commissioned infrastructure and development projects — power plants, ports, airports, telecommunications, and urban real estate — with little attention paid to restoring basic services and destroyed homes in the hardest-hit communities. In addition, much of this money comes from pre-agreements.
Shara’s government has created two funds to manage reconstruction: the Syrian Development Fund, designed to provide donations and grants to rebuild public infrastructure, such as roads, bridges, and water and electricity networks, and the Syrian Sovereign Fund, modeled after the sovereign wealth funds of the Gulf states, to manage state assets, invest in public property, and acquire stakes in strategic projects.
Specialized reconstruction funds are common in countries emerging from conflict, and a sovereign fund can be justified as a way to more effectively manage fragmented, troubled, and historically mismanaged public assets. The problem, however, is that in its current form, the Syrian Sovereign Fund concentrates the management of public assets directly in the hands of the president, with no independent oversight and limited transparency about its structure and governance — in the vein of some reconstruction programs in Afghanistan, Iraq, and Somalia.
Even reforms designed to strengthen accountability are centralized under the presidency. For example, the planned center for resolving investment and trade disputes will be part of the Syrian Investment Authority, which itself reports to the presidency. This architecture could give the president excessive influence over which investors, regions, and communities benefit from reconstruction. In a country that has suffered from state abuse of power and wealth since the 1960s, this pattern of control seems disturbingly familiar.
Benefits
Transport corridors and investments cannot generate sustainable benefits if the country’s new fragmentation perpetuates the divide between a strong and wealthy Damascus and a poor, underdeveloped periphery. Ultimately, Syria’s ability to translate foreign investment into domestic benefits depends on whether Damascus can establish a predictable political order. So far, the government has made steady progress, but it still has a long way to go.
Shara's campaign to unify the country has been marked by violence over the past two years. Fighting along the Alawite-dominated coast, in the largely Druze Suwayda region, and in the Kurdish northeast has deepened distrust between the state and the communities it seeks to govern.
The new standoff between Damascus and the Syrian Democratic Forces — a U.S.-backed, Kurdish-led coalition that has governed much of northeastern Syria since pushing out the "Islamic State" from the region, gave the clearest warning of a possible resumption of civil war.
Although the central government and the Syrian Democratic Forces signed a unification agreement in March 2025, disputes over military integration and Kurdish autonomy initially hindered its implementation. This led to an outbreak of fighting in January, forcing more than 170,000 people to flee their homes.
After a U.S.-brokered ceasefire halted the government advance in the north, Damascus and the SDF leadership signed an agreement that would see the transfer of control of border crossings, oil and gas fields, and local institutions to Damascus, as well as the integration of SDF fighters into the Syrian army.
In August, after months of gradual implementation of the agreement, SDF commander Mazloum Abdi announced the dissolution of the coalition as an independent military force and the end of Kurdish self-rule in northeastern Syria. Even infrastructure and resources that had been under de facto Kurdish control were now being handed over to Damascus.
In theory, the January agreement between Damascus and the Syrian Democratic Forces provides a framework for resolving unofficial wartime borders and closed routes, as well as for unifying competing powers and parallel systems of governance. However, if the Kurdish majority in the northeast of the country perceives this reintegration as insufficient or as threatening Kurdish rights and representation, it could begin to resist, hindering Damascus’ attempts to establish full control over the country and its transit corridors.
The return of millions of Syrians further raises the political stakes. By the end of May, an estimated 1.67 million refugees and 1.92 million internally displaced Syrians had returned to their home communities. Many of them are returning after prolonged poverty in neighboring countries to communities that are already struggling to provide for their residents’ basic needs. This intensifies competition for housing, jobs, and public services, and could create new local sources of resentment and conflict as the process continues.
To successfully integrate returnees, Damascus must give provinces and municipalities the resources and autonomy they need to address issues related to service delivery, job creation, and education in a timely manner.
To avoid reproducing a rentier economy dependent on transit fees and foreign concessions, the Syrian state must reinvest project revenues back into local economies. Assad’s dependence on Iran and Russia has limited his room for maneuver, but the new government can negotiate with Europe, the Gulf states, Turkey, the United States, and international institutions seeking access to Syrian markets and transit routes.
The competition among these partners allows Damascus to negotiate terms that retain as much of the value of investments in Syria as possible. But using this leverage effectively will require transparent agreements tied to clear state priorities for reconstruction and economic revitalization.
To better connect the capital to outlying cities and towns, the central government must invest in improving roads and electricity connectivity, and require foreign investors to support the hiring of local workers and revenue-sharing agreements. It will also need to reach sustainable and fair agreements with minority and tribal leaders to build domestic trust.
The renewed interest in Syria as a profitable transit point for regional trade has given Damascus revenue, importance, and influence at a time when the country needs all three. But these resources are not a given. The challenge for Damascus is to capitalize on its newfound importance in regional trade to build functioning institutions, allocate resources for reconstruction, and overcome historical animosities.
Otherwise, after decades of isolation, Syria may return to the regional map only as a fragile conduit for foreign commercial interests.