What will happen to Syria’s war debts?

Syria is seeking to reintegrate itself into the global economy after spending decades as a pariah under the rule of Bashar al-Assad, raising the question of whether the new government in Damascus will be expected to repay the massive debts the previous regime incurred while fighting.

On Tuesday President Donald Trump announced the US would lift sanctions on Syria. This was in advance of the his meeting with the country's new leader Ahmed al-Sharaa, who previously led Hayat Tahrir al-Sham (HTS), the rebel group that toppled Assad's regime in December.

As the new government attempts to rebuild Syria's tattered economy, one matter needing to be addressed is the country's large debt pile. The Assad regime borrowed a significant amount of money, mostly from Russia and Iran, after the country's civil war began in March 2011.

Can the new Syrian government repudiate the debts Assad contracted after the commencement of hostilities on the theory that money is fungible and the proceeds of the borrowings, directly or indirectly, funded his attempt to suppress the ultimately successful rebellion?

It's not a simple question.

Few doctrines of international law are as strict as the one that goes by the title “Governmental Succession”. Governments in a country are presumed to inherit the rights and obligations of their predecessor administrations.

It does not matter, according to international law, how different one government's political philosophy may be from that of its predecessor. The obligation to honour the debts incurred by the prior regime is absolute, or nearly so.

The Bolsheviks may have taken over from the Tsar in 1917, Corazon Aquino may have ousted Ferdinand Marcos in the People Power Revolution in the Philippines in 1986, and Trump may have replaced Joseph Biden this year.

Each must inherit the obligations contracted by those who they replaced, even if they believed the borrowings were ill-advised or corrupt or both. There are not many exceptions to this strict rule of international law. The purported exception with the greatest emotional appeal is the doctrine of “odious debts”.

Imagine a kleptomaniacal dictator who borrows money in the name of the Republic of Ruritania, promptly steals said money and disappears into, say, the wilds of the French Riviera. Is it moral or legal, argue the proponents of the odious debt doctrine, to saddle the long-suffering citizens of Ruritania with the obligation to repay the loan when they received not the slightest benefit from the proceeds?

Legal scholars have debated the doctrine for more than a century without reaching a consensus, mostly because commentators cannot agree on what exactly makes a debt (or a debtor) so distasteful as to be deemed legally “odious”.

Consequently, it's unlikely the new Syrian government would be able to successfully use the doctrine to repudiate Assad's debt.

However, there is one type of debt most people would agree should not bind a successor administration: war debt.

The classic case runs as follows: rebels are fighting the incumbent regime for control of a country. The incumbent regime borrows money to buy the bullets fired at the rebels to preserve the incumbents' incumbency. The rebels win.

Can anyone argue the rebels, now the recognised government, should be obliged to repay the money borrowed for the sole purpose of keeping them from becoming the recognised government?

There are historical precedents. For example, the Mexican government in 1883 repudiated debts the Hapsburg Emperor Maximilian incurred during the time when he was seeking to maintain control over the country.

After the Boer War that began in 1899, Great Britain took the position that His Britannic Majesty was prepared to recognise debts incurred by the SA government before, but not after, the commencement of hostilities. The theory was that the victor in a belligerency was under no obligation to honour debts incurred by the vanquished party after the shooting had started.

More recently, Cambodia refused to pay debts to the US incurred in 1974 and 1975 when the US-supported Lon Nol government fought, and lost, a civil war against the Khmer Rouge.

If the “war debts” category is one of the few recognised exceptions to the strict principle of governmental succession, then might Syria's new leader be able to cite it, given that Assad borrowed funds while fighting?

Potentially, but there are more questions.

For one, should there be any difference in treatment between new money lent after the commencement of hostilities and past liabilities that fell due during the belligerency but were not paid because of a voluntary agreement? Both, after all, subsidised the conflict.

Ultimately, cleaning up Syria's debts will be a tricky process. But the new government may have a trump card.

Reuters