With the Iran-U.S. war stuck in a stalemate, U.S. policymakers cannot afford to neglect other priorities in the Middle East. A year ago, Trump touted a new opening with Syria’s interim president Ahmed al-Sharaa, stating that the U.S. “want[s] to see Syria become a country that’s very successful.” To back that vision, the administration pressured Congress to lift major sanctions programs—including the 46-year-old designation of Syria as a State Sponsor of Terrorism (SST). The theory of the case was straightforward: the private sector, not U.S. aid, would drive Syria’s recovery, with Washington using its policy tools to encourage foreign direct investment and other forms of international support.
Yet even as Secretary of State Rubio quietly lifted the SST designations last month, Syria’s recovery is in jeopardy—not because the theory was wrong, but because the global energy crisis and other spillover effects of the U.S.-Iran war are overwhelming it. Syria’s energy, water, and food needs were already acute a year ago; they have since been sharpened by rising oil and gas prices and shortages in supply chains for commodities like fertilizer and wheat. Meanwhile, Syria’s push to improve energy access through regional cooperation—especially with Iraq and Türkiye—risks getting sidelined by more pressing diplomatic priorities. At the same time, Syria’s interim government confronts a common dilemma facing transitional leaders: how to balance the economic reforms demanded by international financial institutions and donor governments with Syrians’ immediate expectations for basic needs.
Syria’s Vast Energy Needs
Limited electricity has been a persistent drag on Syria’s economic recovery. Even before the Iran war, soaring energy prices in early 2025 constrained the transportation, manufacturing, and food distribution sectors in Syria—and the Iran war has sharply worsened the problem. After 14 years of civil war, over the past 18 months Syria’s electricity grid was generating only 1,500 megawatts and providing about two hours of power a day by the time al-Sharaa took power. (A year later, that amount has crept up to now 2,000 megawatts daily, with promises of more megawatts offered by solar energy. Still, before the war, the grid produced on average nearly five times that daily.)
In 2025 and early 2026, the fledgling government understood that its political legitimacy would hinge on rapidly expanding electricity output, and turned to a consortium led by UCC Holding, a Qatari energy company. The plan called for four combined-cycle gas turbine plants with a combined capacity of 4,000 megawatts in Aleppo, Hama, and Deir ez-Zor within three years, plus 1,000 megawatts of solar capacity across Aleppo, Homs, Deir ez-Zor, and southern Syria—enough, together, to supply more than half the country’s electricity. It is critical that supply chain disruptions caused by the Iran war do not impede progress on the power plants.
At the same time, the rise in energy prices led the state-owned Syrian Petroleum Company to raise diesel, gasoline, and cooking-gas prices on May 7, 2026. The Ministry of Energy recently attributed a further cut in daily electricity supply to a decline in natural gas imports via Jordan. Jordan began supplying Syrians power plants with natural gas in January 2026 as part of urgent measures intended to prevent power outages. Only a few months later, the Iran war forced Egypt (the original source of the Jordanian gas) to cut its gas exports to prioritize its domestic needs.
Another promising breakthrough had occurred just before the Iran war began: the Syrian Petroleum Company signed a separate agreement with Jordan’s National Electric Power Company for Jordan to supply 4 million cubic meters of gas per day via the Arab Gas Pipeline. That deal reflected a quiet post-Bashar al-Assad realignment in which Syria, via Jordan, came to rely on Israeli-sourced gas. But when Israel’s gas fields shut in or curtailed during the war, its exports to Jordan—and in turn Jordan’s gas flows to Syria—declined or stopped altogether.
A further complication: after the fall of the Assad regime, the new interim government had tried to pivot away from Russian oil. Today, it has little choice but to lean back on it. Russian oil shipments to Syria rose 75% in 2026, to roughly 60,000 barrels a day, as the Iran war has cut off other sources and Russian vessels transiting the Mediterranean have become the safer bet. This necessity undercuts Syria’s pledge, made in recent months during talks with the U.S. on the SST-designation removal, to reduce reliance on Russian oil. The war may be forcing al-Sharaa into hard choices he had hoped to avoid and perhaps even limiting his desire to pivot away from Russia, toward the West.
Water, Agriculture, and Food Insecurity
In 2025, Syria endured its harshest drought in 36 years, leading to a depressed harvest. Luckily, in 2026, when Syria’s wheat output expanded enormously, al-Shaara and others in the interim government expressed an ambition for Syria to reduce its reliance on import contracts.
However, shifting rainfall patterns tied to climate change mean that the future harvests are not certain. Roughly 60% of groundwater reserves in northeastern Syria are depleted while desertification now affects nearly 73% of the country, and reservoir levels sit at historic lows. Because agriculture consumes about 88% of Syria’s water resources, the shortage hits food production directly—compounding damage the civil war had already inflicted on agricultural infrastructure and yields.
While domestic wheat production may be recovering, the Iran war continues to strain Syria’s agricultural sector. Since agrifood inputs rely on sea passage through the Strait of Hormuz, higher fuel and shipping costs—plus disruptions in Gulf fertilizer production—pushed urea fertilizer costs up 56% in June 2026 compared to the previous six months in Syria. Fertilizer prices overall have now risen for four straight months.
What Can Be Done
There is a clear tension between what Syrians need today—jobs, healthcare, housing, and electricity—and the medium-to-long term investment focus of regional players, including many Gulf neighbors. The Trump administration has wisely reversed its previous policy of cutting Syrian foreign aid. Instead, the administration has proposed a new Syria funding program of an estimated $10 million to address poverty, unemployment, financial management, infrastructure, and reforms made to attract foreign investment. The administration will now need to make tough decisions on how to use this funding—especially how to address pressing needs in Syria today while investing in efforts that will yield results in the medium-to-long terms.
More broadly, the United States should focus on the following efforts. Ideally, though they vehemently disagree on the Iran war, Washington should solicit the help of key European allies as well:
First, water diplomacy. The United States should work with the European governments to help revive the 1987 Syria-Türkiye agreement guaranteeing a minimum Euphrates flow of 500 cubic meters per second. They should also back the interim Syrian government’s recent protocol with Jordan on the Yarmouk River Basin, shared by Jordan, Syria, and Israel, to ensure equitable water distribution.
Second, sustained support for U.N. humanitarian and recovery programs. The U.N. Mine Action Service (UNMAS) and the U.N. Food and Agricultural Organization (FAO) are launching their first-ever joint global project—a two-year effort to clear mines and restore agricultural livelihoods in northwest Syria. Food security recovery depends on farmers being able to safely return to their land. The United States and other donors should join Japan in funding this effort and influence international financial institutions to direct additional support toward irrigation technology, infrastructure rehabilitation, and drought-resistant crops for Syria’s agricultural sector.
Third, medium-term financing from international institutions and private capital. In July, JPMorgan Chase joined Qatar National Bank (QNB) and Abu Dhabi Commercial Bank to arrange a $7 billion, five-year loan facility guaranteed by QNB, intended partly to fund power infrastructure and an airport. Given the financial toll the war has taken on both Doha and Abu Dhabi, the United States should work to keep these loans a priority. The United States should try to shape some of these decisions, for example urging Gulf investors to focus on reconstructing the agricultural sector, housing, and medical infrastructure rather than future projects that might deliver returns only to the investors rather than to the Syrian public.
Fourth, investment discussions should prioritize reforming Syrian institutions. The IMF has suggested that serious fiscal and financial-sector reforms—and real capacity-building, after 40 years of a corruption-riddled state-managed economy—are necessary for IMF lending. The World Bank, for its part, has already provided $146 million for electricity infrastructure, $225 million for water access and health services, and $20 million to strengthen accountable management of public funds. The last part of this package is key; international public financing must focus on a road map toward building transparency, accountability, and the rule of law, as these deficits will constrain economic recovery and the political transition. In addition, a dedicated Syria investment-guarantee fund, modeled on the World Bank’s Multilateral Investment Guarantee Agency vehicles for the West Bank/Gaza and Ukraine, could draw in foreign capital without requiring Syria to take on new financial obligations.
Finally, energy diplomacy. Washington should encourage the rehabilitation of the Haditha-Baniyas pipeline linking Iraq and Syria, which could eventually carry up to 2 million barrels a day. Such a pipeline would position Syria as a future energy transit hub connecting Iraqi and other Gulf oil reserves to the Mediterranean, bypassing the Strait of Hormuz entirely. Talks are already underway between Syrian and Iraqi oil executives; active U.S. diplomatic engagement now could pay real dividends for both Syria’s energy independence and the stability of Western energy markets down the road.
