The Syrian Disease: Death of a Petrostate

From Crude Oil to Illegal Drugs.

I visited Syria once, in the early 2000s, while I was engaged in a research project in Lebanon. I found it a fascinating country, rich in culture and traditions, and friendly to foreigners. I am sorry to see in which desperate conditions it is reduced right now. But for everything that happens, there is a reason. Sometimes, that reason is not difficult to find if you know where to look: crude oil and money create and destroy things in our world. Image: the Great Mosque of Damascus.

Unlike diamonds, oil is not forever. All producing countries must face the stark reality that their oil production cycle must start at zero and end at zero. It is what has happened to Syria, and the last scenes of a decades-old drama have been played just in the past few months. But there is a special quirk in Syria’s history: how it transformed itself from a Petrostate to a Narcostate. That didn’t save the country from collapse as the effect of a phenomenon we could call the “Syrian Disease.” It is an even worse version of the “Dutch Disease” that hits countries that become too dependent on a single resource.

One day, someone will write a treatise on how different countries reacted to the decline of their oil production. The result is always social and economic turmoil, but large countries with a solid economy, such as the US and Russia, could survive and sometimes restart oil production. So far, only one region has shown a textbook example of a full cycle of oil production from nearly zero to nearly zero: Syria.

Here are the data for the Syrian oil production (source). The production is measured in thousand barrels per day:

Syria is still listed as having “2.5 billion barrels” of oil reserves and is still producing a small amount of crude oil. However, in the midst of a civil war and with the country being partitioned by its wealthier neighbors, no one will invest in the huge costs needed to restart producing a resource that may never become profitable again.

Oil is not just a source of profit; it is a political and military tool. The oil production cycle in Syria nicely corresponds to the tide and ebb of the Syrian ambitions for a “Greater Syria.” During the good times, Syria stood up against Turkey and participated in several campaigns against Israel. In 1976, Syrian troops entered Lebanon and remained there for 14 years.

However, in the mid-1990s, depletion started to kick in. With oil production declining, the Syrian government found itself no longer fighting to be a major regional power, but for mere survival. In 2011, the combined effects of depletion and the rebellion of several provinces dealt the final blow to the Syrian oil industry. Production fell to nearly zero in 2013.

You could have expected the Syrian government to collapse at that time, but it didn’t, despite the turmoil and threats from other countries, including the US. Military help from Russia and Iran helped, but what kept the government alive was another factor. Syria transformed itself from a “petro-state” into a “narco-state,” mainly based on the powerful amphetamine known as “Captagon” (aka “Fenetylline”). It is a drug that can bring people to such a degree of homicidal madness that they will wear an explosive belt and blow themselves up in a crowded public space. I discuss the use of this and other similar drugs as weapons in my book “Exterminations.”

There are several reasons listed for Syria having become the world’s center of Captagon production; for instance that Syria had been a transit point for drugs long before the civil war. But the most likely reason was that moving from oil to drugs is relatively easy: in both cases, we have highly profitable commodities sold in a “captive market.” There is not much interest in the drug and oil markets to lower prices or provide better products to customers known to be addicted and willing to pay almost any prices. So, producers tend to form cartels dedicated to exploiting customers as much as possible. This is the reason why Mafia does not produce smartphones or computer chips, but tends to sell illegal drugs. It is a marketing structure especially suitable for a market where you can use violence to eliminate competitors.

So, we may imagine that the structures that operated within the Syrian government found it relatively easy to transmogrify themselves from oil producers into drug producers. We do not have detailed data for Captagon production in Syria, but it is reported that in the late 2010s, Syria produced about 80% of the world’s supply of Captagon and that, in 2021, it produced revenue for about 5 billion dollars — a value probably not much smaller than the revenues from oil production in the good days.

Of course, these numbers have to be taken with great caution, but at least they provide us with an order-of-magnitude estimate. Consider that the current Syrian GdP is only about 9 billion dollars, and you can understand how important Captagon was in keeping the economy afloat. During the late 2010s and early 2020s, Syria existed by Captagon, for Captagon, and in the name of Captagon.

The problem with cartels is that they are unstable when members tend to acquire larger and larger slices of the market. The Syrian Captagon industry navigated in relative quiet for about ten years, but then something happened that rocked the boat. We cannot know what that was; Assad may have done a “Sgarro” against more powerful drug bosses, or, simply, the good fortunes of the Syrian drug trafficking generated envy in other players in the same market. Whatever the case, a series of events started and then snowballed.

First, there came the “Captagon Act,” enacted by the US on December 23, 2022. It was explicitly aimed at stopping “Assad’s Proliferation, Trafficking, and Garnering Of Narcotics.” The act was soon followed by military action, including air raids by Jordan in 2023 that destroyed Captagon factories in Syria and killed some of the Captagon bosses. In parallel, diplomatic action by the Arab League seems to have convinced President Assad to agree to stop Captagon production in 2022. It seems that it went to nearly zero in 2023. It was the death knell for the Syrian state.

In a previous post, I discussed the general mechanisms that can cause an army to collapse, suggesting that the Syrian one was destroyed by corruption. That’s exactly what is likely to have happened when the government ran out of money. No Captagon, no money. No money, no state. Could Bashar El-Assad have missed the point? Unlikely, but he had no choice after he found a severed camel head in his bed, or received some equivalent message. If he was offered a chance to pack up and disappear quietly, he must have been very happy to take it.

We don’t know which new Cosca will step in to replace Assad’s one to gain control of the lucrative Captagon market. A 5-10 b$ per year market is too juicy to leave unexploited. Possibly, there is already an agreement on that; otherwise, we’ll see new sparks of war in the Middle East. 

Syria’s story tells us something about what happens when a country that relied on oil production for its economy hits the physical limits of production. This kind of economy is often based on corruption and once it has become dependent on this kind of resources, it is nearly impossible to return it to a “normal” economy based on industry and commerce. It is the phenomenon called the “Dutch Disease,” but, after what we saw this year, we might switch to call it the “Syrian Disease.” In the future, as oil resources continue being depleted, it is likely to affect other countries.