Investing in Ruins: Power and Reconstruction in New Syria

In Brief

• Syria faces massive reconstruction needs. These needs present a strategic opportunity for regional and international actors.

• Five major fault lines shape Syria’s investment landscape: geopolitical, political, legal, economic, and social.

• Israel and Türkiye have consolidated territorial and resource advantages during the war – Israel through the Golan Heights and Türkiye via upstream water control. This dynamic calls for pragmatism where Israeli concessions are improbable, and assertive negotiation where Türkiye’s flexibility intersects with existential water needs.

• Syria remains fragmented, with competing armed groups, minority mistrust, and localized power structures. The Suwayda crisis illustrates limits of centralized control and the dangers of coercive governance. A viable political model will require a hybrid governance approach, recognizing local authorities and integrating them into national structures, essential to prevent renewed violence.

• The judiciary suffers from loss of independence, capacity shortages, and low public trust. Without serious judicial reform, investors face high legal and contractual risks, even if economic incentives are strong.

• Syria’s economy has contracted severely with poverty, fiscal strain, and fragmented markets shaped by war economies and informal networks. Yet opportunities remain through international investment, potential oil and gas revival, and a future rebound in tourism, even as structural challenges persist.

• Transitional justice mechanisms remain narrow in scope, risking further social fragmentation and feeling of exclusion from the reconstruction process, unless reformed.

Key Takeaways for Investors

• High-risk environment: political and social fragmentation, weak institutions, and legal uncertainty. Potential returns could however be very significant, particularly in energy, infrastructure, logistics, and urban development.

• Investment viability will depend on political and geopolitical stabilization, progress in judicial reform and rule-of-law guarantees, a shift toward inclusive, decentralized governance, improved security conditions, clear resource-sharing agreements, and integration of diaspora capital into formal channels.

After 14 years of destruction and brain drain, Turkish upstream colossal dams, recent Israeli territorial grabs, and Kurdish-Syrian sustained divisions, Syria’s post-war reality is, to put it mildly, challenging. However, reconstruction is Syria’s opportunity to assert agency over its future and lay the foundations for long-term resilience.

With Syria’s economy operating at just a third of its pre-conflict capacity, and infrastructure in a state of collapse, the scale of its reconstruction needs is staggering. Estimates place the cost between USD 250 billion and USD 400 billion. Yet, this daunting figure represents reconstruction not only as a humanitarian and political imperative, but also as a long-term economic opportunity for both domestic and international actors – Gulf countries, the United States, Türkiye, and even private companies are competing to secure strategic footholds in post-war Syria.

Rebuilding Syria is not only a technical task but a balancing act with five fault lines: geopolitical, political, legal, economic, and social. A prolonged civil war, and the regional instability it generated, created a sustained power vacuum that undermined Syria’s geopolitical standing and devastated its economy and social fabric, while five decades of authoritarian governance hollowed out political and legal institutions.

1. Geopolitical

In spite of the gradual lifting of sanctions on Syria, the country’s 14 year absence from the global stage is not easily reversed. The vacuum created by the civil war continues to reverberate across the regional geopolitical landscape.

Israel perceived the fall of the Assad regime as an opportunity to consolidate its hold over territories east of the Golan Heights. Türkiye, much earlier, used the chaos of the conflict to expand its upstream water retention capacity, significantly increasing hydroelectric production and agricultural development along the Tigris and Euphrates.

Syria appears to be redeveloping a diplomatic safety net through rapprochement with stable middle-power neighbours, such as Türkiye, Egypt, and Saudi Arabia. Though some causes are more likely to be lost – Israel, for instance, rarely relinquishes occupied land – other issues, notably water scarcity, will become negotiable once domestic stability is restored. It remains, after all, also in Türkiye’s  strategic and economic interests to have a stable neighbour and partner. 

However, no geopolitical manoeuvres will be possible without a semblance of political stability: a unified, institutionally solid Syria is essential.

2. Political

Balancing the interests of Syria’s diverse factions remains one of the country’s main challenges. The reintegration of armed groups and the representation of minorities, such as the Kurds, Alawites, Shia, and Druze, are essential to preventing renewed turmoil.

Parliamentary elections were a first step in the right direction. The adoption of indirect suffrage is justified by the current impossibility to conduct fully representative elections, but it must be a transitional measure, rather than a permanent solution.

Recent unrest in Suwayda and Aleppo has however illustrated the fragility of the post-war political landscape. Using the Suwayda example, violent clashes between Druze and Bedouin groups in southern Syria exposed the limits of centralized control and the failure of the transitional government’s in restoring order. What began as a local dispute rapidly escalated into sectarian conflict, drawing in regional actors – notably Israel. 

The Suwayda crisis revealed three converging dynamics: a Druze quest for security, Damascus’ reliance on coercion to reassert authority, and Israel’s growing ambition to shape a demilitarized sphere of influence in the south. By framing the violence in binary nationalist terms, authorities alienated communities already distrustful of state institutions.

More broadly, the events in Suwayda, similarly in and around Aleppo with the Kurdish-led Syrian Democratic Forces (SDF), highlighted the unsustainability of rebuilding Syria along rigid lines. The persistence of localized violence and the rise of informal zones of influence point to a deeper fragmentation that now defines postwar Syria. Stability will not depend on military control (which is not conceivable for the newly formed state) but on a reimagined form of governance – recognizing plural centers of authority.

Reconstruction will have to depend on local governance models. Larger institutional rebuilding will not be sufficient. Effectively, a hybrid state model is emerging: some local authorities operating with partial autonomy, using civil society and regional actors.

This model could become either an asset or an obstacle for the central government, depending on the approach it adopts: integration and empowerment could strengthen national cohesion, while suppression and over-centralisation could quickly backfire.

3. Legal

The collapse of institutional integrity in Syria’s judiciary is now widely recognized as a critical barrier. The reputation of subordinating courts to executive control has eroded public confidence in legal institutions, and many qualified judges have either fled or were purged. Reform initiatives will need to address not only structural redesign (appointment criteria, tenure, independence) but also human capacity. 

As a first step, Sharaa has publicly called for the activation of suspended laws after review by the new Parliament, but the institutional weakness of the judiciary remains to be properly addressed and could quickly turn into a problem. Even with a renewed corporate and investment structure, in the absence of an impartial and legitimate judiciary, actors wishing to capitalise on the reconstruction will be limited to high risk litigation. Arbitration, though sometimes presented as a viable alternative, is not a credible solution. 

Because of prolonged sanctions and economic collapse during the civil war, Syria no longer possesses any significant foreign assets that could be targeted for enforcement purposes. This has direct implications for investment arbitration, which is typically seated in Western jurisdictions and relies on the availability of attachable assets abroad to ensure compliance with arbitral awards. In cases where a sovereign refuses to recognise or execute an award that goes against its interests, enforcement usually proceeds through foreign courts by freezing or seizing state assets located outside its territory. In Syria’s case, the near absence of such assets makes forced execution of arbitral awards largely unachievable, weakening the effectiveness of investment arbitration as a protection mechanism for investors.

Still, the prospect of substantial economic and financial gains may justify assuming such risks.

4. Economic

Today, Syria’s GDP is half of its pre-conflict $35 billion (in the latest estimations for 2024, real GDP is standing at $15 billion). Its economic regression has been such that captagon has become its biggest product, with an annual market value of up to $5.6 billion between 2020 and 2023 – roughly a third of its GDP.  During that same time, the extreme poverty rate increased dramatically, going from 0.15% in 2011 to 17% in 2024. Recent shifts in inflation and the cost of living, marked by a sharp reversal from record-high food price inflation to sustained deflation and the issuance of a new currency, signal economic improvement.

Furthermore, the economy has been split geographically and politically into distinct war economies (state-controlled, rebel/armed group-controlled, and criminal networks) whose revenue streams come from informal trade, smuggling, checkpoint levies and illicit production. In this context, tax and oil revenues dropped, as both the tax base and the tax collection capacity decreased. In 2024, the fiscal deficit was 10% of GDP (not including electricity subsidies and off-budget military items). Syria now has to take measures to incentivize the “formalization” of the economy, to encourage both growth and increased tax revenues. Focus on restoring fiscal credibility, by simplifying the tax system, tackling its debt burden and restoring confidence in both the public and private sector in order to encourage international investment. 

Between July and August 2025, Syria secured investment pledges from Saudi Arabia, Qatar and the UAE reaching $20 billion, although they have been criticized for prioritizing mega-projects over immediate concerns (such as affordable housing, or food and water security). Tourism investment is also on the mend, with big names like Accor and Rotana, expressing interest in expanding in Syria, suggesting investor confidence in its future.

Balancing the socio-economic priorities for reconstruction and investor appeasement, is a challenge. However, power supply is an important common priority – both socio-economic and an investor favourite. Once a net oil exporter, the country has had to resort to importing from neighboring countries. Now, Syria’s exports are mainly supported by olive oil and other agricultural products, amounting to less than $1.5 billion in 2023. Oil production resumed for the first time in 14 years in September 2025 in Tartus governorate, while reporting the arrival of the first cargo ship to the country since the lifting of economic sanctions on Damascus. Syria’s natural gas sector is also on its way to recovery, with a new memorandum of understanding signed with ConocoPhillips and Novaterra, expecting to raise daily production to 4-5 million cubic meters per day in a year.

Syria has a long road to economic recovery, burdened with weak government finances and still difficult living standards. Its potential is high, and improvements are already underway, either through internal consolidation or international investor interest. The challenge remains to rebuild a Syria that meets both its potential and tangible improvements in living standards.

5. Social 

Syria’s population remains fragmented. Most of the upper and middle class that was able to leave during the civil war, fled abroad. After nearly 14 years, their return appears limited. Having built stable lives, secured employment, integrated into their host societies, and in some cases obtained citizenship, few have incentives to return and contribute to the country’s workforce or economy. A recent survey shows that 75% wish to return one day, but that with the lack of adequate housing, limited access to employment, and persistent concerns over safety and security, that return is not planned for the short or medium term. 

As of September 2025, about 1 million refugees have returned to Syria, while 4.7 million remain in neighbouring countries. Additionally, 7 million remain internally displaced with only 1.8 million having been able to go back to their original areas. More recently, larger waves of return have been documented but the demographic and logistical challenges of a complete return remain unresolved. 

A likely outcome mirrors Lebanon’s current situation: a significant portion of educated Syrians abroad and a domestic economy reliant on remittances. Leveraging these remittances to capitalise on education and social cohesion programmes could help stabilise the country and prevent renewed sectarian divisions.

Reconstruction will also require mechanisms of justice and reconciliation. Syria has already established a National Commission for Transitional Justice to investigate past abuses, provide reparations and promote national reconciliation. Yet, the commission’s mandate has been criticised as narrow, potentially excluding victims of non-state actors and raising questions about inclusivity and legitimacy. 

The design and implementation of transitional justice, drawing lessons from models such as post-Apartheid South Africa, will be central to shaping whether reconciliation in Syria will allow for viable and long term social cohesion.

This is an evolving situation and very recent developments may not be reflected in this article.

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