SYRIA

Trade and economic relations have been maintained since 1957. Until 1992 these were fairly extensive contacts in terms of the trade turnover and mutual investment. Before 1993 they were regulated by a number of intergovernmental instruments, including the Long-Term Trade Agreement and the Payment Agreement, both signed on November 4, 1965, which provided for payments for goods and services on a clearing basis.

A legal basis for the Russian-Syrian trade and economic relations was formed by an Agreement on Trade and Economic and Technical Cooperation, signed on April 15, 1993, under which the parties were to grant mutual most favoured nation treatment and switch over from clearing settlements to actual, basically hard currency, payments.

In February 1998 a Double Taxation Agreement was ratified in Damascus. The parties are negotiating draft agreements on the encouragement and mutual protection of investments, on cooperation in peaceful uses of nuclear energy, on international motor-road communication, on cooperation in the field of medicine and health care, as well as of a long-term programme of the development of trade and economic, industrial, research and technological cooperation.

The first meeting of the Standing Russian-Syrian Commission for Trade and Economic, Research and Technical Cooperation was held in Damascus from February 17 to 23, 1998. Participants in the meeting defined basic lines of partnership in the field of trade, investment, finance and interbank contacts, power engineering, water supply, irrigation and land cultivation, oil and gas, geology and natural resources, transport, industry, civil use of nuclear energy, health care, tourism, education, culture and sport, as well as in the sphere of law, science and technology.

A Russian parliamentary delegation headed by chairman of the State Duma, or lower house, Gennady Seleznev visited Damascus at the end of February 1998.

Before 1992 Syrian exports to the USSR consisted of a wide range of goods delivered towards credit debts. In 1992, after the disintegration of the Soviet Union, the clearing-based trade between the two countries was discontinued, and such important items as oil and cotton were excluded from the list of goods. Russian exports to Syria, basically for hard currency, consist of machinery, motor vehicles, miscellaneous equipment, tools and spare parts, ferrous rolled products, timber and certain other raw material goods. Supplied from Syria are: confectionery, fruit, fabrics, clothes, knitted goods, perfumery and make-up articles.

Russia accounted for some 3% of Syria's trade turnover in 1998. Partnership relations between the two countries were restrained due to a number of reasons: lack of government support to Russian exporters; an insufficient treaty and legal framework for economic contacts between Russia and Syria; the outstanding problem of the Syrian debt; and the low level of budget financing of Syrian government agencies.

In 1998 the trade turnover between Russia and Syria amounted to US million (special supplies not included) or 7.9% down from the 1997 figure due to a drop in imports. Worth noting here is the growth of exports by 43.1% to reach US million, including equipment, spare parts, design development and services (37.5%), and materials. The imports consisted of light, food, perfumery and make-up goods which were purchased primarily by Russian joint-stock and private companies.

In 1998 Russian and Syrian companies were partners in the construction, modernisation and operation of 24 projects on contract terms, and in technical assistance in power engineering, the oil industry, irrigation, transport and other fields. Such deliveries and services totalled US million. Welding and laying of pipes have been completed for the Homs-Aleppo main, and 35 oil wells at the Rumelan oil field have been put into operation.

Economic and technical cooperation between the USSR and Syria has been maintained from 1957 and covered almost 80 projects. Over those years such projects, important for the Syrian economy, were implemented, above all out of government loans extended to Syria: the Euphrates hydropower grid with a 800 mWt plant, a Baath hydropower unit with a 75 mWt plant, the first stage of the 400 mWt Tishrin thermal power station, 1,500 km of railways, 3,700 km of electricity transmission lines, irrigation and water supply projects, a nitrogen fertiliser plant in Homs, a number of vocational training centres were built and oil fields in the north-east of Syria developed. Partnership projects created and operated with Russian assistance provide over 30% of electricity supplies, almost 30% of crude oil produced and irrigation of 60,000 hectares of arid lands.

Syria's debt to Russia is almost US billion of which 90% accounts for military supplies. Russia's clearing debt to Syria of one billion US dollars has not been repaid either. The four rounds of talks held between 1992 and 1995 brought no positive results, as proposals made by the Syrian side are in actual fact tantamount to writing off Syrian debt in full.

At the first meeting of the Russian-Syrian Commission in February 1998, the Syrian side spoke of its willingness to find a solution to this problem. They believe that the issue of debt is to be settled politically, while the idea of a similar approach to be taken to credits extended for economic and military purposes may, in their opinion, lead to an impasse.

In connection with Russia joining the Paris Club and undertaking to comply with basic principles of foreign states' debt settlement, Russia must coordinate the rescheduling of the Syrian debt to it with other creditor countries.

Russian companies bidding at international tenders. In accordance with the effective Syrian laws, government agencies are importing machines, equipment, materials and services on an international tender basis.

In 1996-97 eight Russian companies (Tyazhpromexport, Energomashexport, Selkhozpromexport, Gidroproekt, Sovintervod, Gidrospetzstroi, Zarubezhenergostroi and Vneshtekhnika) took part in 19 international tenders invited by Syria various projects in the field of power engineering, oil and gas, irrigation, transport, etc. Their overall cost was estimated at almost 400 million dollars. Russian companies won 4 tenders in tough competition with western firms and signed US million worth contracts: Tyazhpromexport, for the construction of the second stage of Homs-Aleppo oil product pipeline (US billion) and craft paper supplies (US million); Energomashexport, for the delivery of diesel generators and spare parts for Russian-manufactured diesel locomotives (US million).

As a result of tenders held in 1997, two contracts to a total US million were signed in the 1st quarter of 1998 by Selkhozpromexport and Gidrospetzstroi for the supply of spare parts for A50Y oil well repair (US million) and electrodes (US million) for the construction of the Tishrin hydropower plant, respectively.

Tyazhpromexport has won a tender for the construction of two oil storage facilities with pumping stations at an oil refinery in Homs (US million). However a relevant contract has not been signed yet due to commercial reasons.

In 1998 Russian companies prepared and forwarded to Syrian customers proposals on the following projects to a total amount of US million: Tyazhpromexport and Stroitransgaz, Palmira-Aleppo gas pipeline construction (US million); Tyazhpromexport and Energomashexport, 6 oil storage facilities in Idlib (US million): Tyazhpromexport, nitrogen fertiliser factory near the city of Deir ez Zor (US million); Tyazhpromexport, cement production line construction at the operating cement works in Adra (US million); Energomashexport, delivery of railway track switches (US million); Energomashexport, supplies of spare parts for Russian-made UAZ automobiles (US million).

The Syrian Oil Company invited tenders for geophysical surveying and drilling of 25 horizontal wells. Tatneftegeofizika and Udmurtneft are preparing to take part in the tenders.

The 45th Damascus International Fair. The fair in which companies from 50 countries took part was held in Damascus from August 28 to September 10, 1998. Like at previous fairs Syrian government agencies, private companies and joint ventures presented their achievements in the field of power engineering, water supply, oil, phosphate, light and food industries, agriculture and construction.

Other countries, above all Germany, France, Italy, South Korea, China, Turkey, Iran and Jordan, put on display motor vehicles, road-building machines, machine-tools, and light and textile industry equipment which are in high demand in Syria.

The CIS was represented by Russia, Belorussia, Azerbaijan and Turkmenistan. With the assistance of Russian companies, Inconnect and Negus Expo, specialising in exhibition arrangements 36 other Russian companies took part in the fair.

The Russian exposition was placed in a 160 sq m pavilion, where a wide range of machines, equipment, spare parts and materials were on display: railway machinery, trailers, gas cylinders, furniture, etc. (Uralvagonzavod, Muromteplovoz, Irbit Automotive Unit Plant); diesel engines, power units, boilers (Avtodizel, Belgorod Power Engineering Works and others); millers, metal-cutting devices, bearings (ZeFS, Bearings Plant No. 20 and others); oil well equipment, food industry equipment (Iksa, Uralgidromash, Sverdniikhimmash and others); lighting devices, pipeline diagnostic instruments, medical instruments (Makskom, Diaskon, the Gorky Medical Instrument Plant); steel (Zlatoust Iron and Steel Works, Nytva and others); pipes (Chelyabinsk Rolling Mill, Seversky Pipe Plant); pipeline and power engineering fittings (Fitting, ChZEM, Fobos and others); metal products (Cherepovets Steel Rolling Mill, Solnechnogorsk Metal Screen Factory); rubber (Ural Rubber Product Factory, Tomsk Rubber Footwear Factory).

The Republic of Udmurtia of the Russian Federation took part in the fair and also held its own industrial exhibition in Damascus in 1997. As a result, contracts were signed for supplies from Russia of railway rolling stock units and spare parts, metal-working equipment and lighting engineering products to a total of US million.

Prospects for further cooperation. In view of Syria's requirements for equipment and materials needed for the construction of new projects and maintenance of operating facilities, including those built with Soviet assistance, as well as its willingness to develop full-scale and long-term partnership relations with Russia in all spheres of trade and economic and military-technological cooperation, the Syrian market seems to offer fairly good prospects.

The key projects of economic and technical cooperation in power engineering include: the construction of a 630 mWt Tishrin hydropower unit on the Euphrates, operation of the first stage of the Tishrin thermal power station for 400 mWt and the Euphrates hydropower complex with a 800 mWt power plant, design and construction of the second stage of the Tishrin thermal power plant, blueprinting of the Balih hydropower plant, deliveries of equipment and materials for the construction of a 230 kV and 66 kV transmission lines, and other projects; in the oil and gas industry: assistance in the exploration of oil and gas fields, exploration and production drilling, repair and restoration of wells, laying of oil and gas pipelines, oil storage facilities and other projects; in the field of irrigation and water supply: design, joint programmes for water resource prospecting, land cultivation, drilling equipment supplies, etc.; in the sphere of civil uses of nuclear energy: the Nuclear Studies Centre.

Energomashexport, the winner in a number of tenders, completed construction of a 925-km-long 230 kV transmission line; in 1995 Tyazhpromexport won a tender for the construction of a180 km Homs-Aleppo oil product pipeline and is successfully implementing the contract. All in all they won six tenders and signed contracts to a total of US million.

In May 1998 a protocol on research in the field of water resources and construction of new irrigation facilities was signed by the Syrian Ministry of Irrigation and Gidroproekt.

Several working conferences of experts from the Syrian Oil Company and Zarubezhneft were held from October 3 to 10, at which a detailed programme of bilateral cooperation in the oil and gas industry was drawn up.

In November 1998 the General Chemical Industry Organisation of Syria and Tyazhpromexport negotiated prospective construction of a pesticide factory in Syria.

Representatives of the Russian Stroitransgaz company which took part in the tender for the Palmira-Aleppo tender visited Syria. Tyazhpromexport, Zarubezhneft and Machinoimport submitted to the SOC their proposals for the delivery of spare parts for oil drilling equipment and motor vehicles.

The visit by President of Syria Hafez Asad to Russia and the second meeting of the Standing Russian-Syrian Commission for Trade and Economic, Research and Technical Cooperation held in June 1999 in Moscow were of great significance for the progress of partnership relations between Russia and Syria.