The tide has turned in the grueling Syrian Civil War. Opposition forces have taken another town in the North. United States has stated its willingness to provide non-lethal support for the rebels. The Syrian Opposition is already receiving arms from the likes of Saudi Arabia. Many believe that it is only a matter of time before Bashar Assad steps down from power and flees the country or is assassinated. Once the Assad family is no longer part of the picture negotiations between the remaining government and rebel forces may be possible. Baring that scenario, the increasingly well-armed opposition may simply win the war, much like what happened in Libya. Assuming that the war will come to an end in the next year or so, is it possible to profitably invest in post war Syria? How does one do fundamental analysis of such a situation? Here are a few thoughts on how to invest in post war Syria.
Invest in Post War Syria through Its Historic Trading Partners
When the war ends in Syria people will need to eat. Refugees will return. There will likely be international aid on a large scale. However, Syria has trading partners. Turkey, Jordan, Lebanon, and Iraq all share borders with Syria. Syria has been, to a degree, a client state of Russia. It remains to be seen how much influence Russia will retain if the Syrian government falls without a peace agreement. Local trading partners will likely resume business with their old business partners in Syria. Manufacturers, wholesalers, and trucking companies in Turkey will benefit and will likely investing post war Syria by beefing up their operations at home or investing directly in Syria. The same applies to Iraq, Jordan, and Lebanon. We previously wrote about Three Good Offshore Investment Ideas in the Western Hemisphere. A fourth good idea might be to invest in post war Syria. NASDAQ carries a Turkish ETF that outperformed most others across the world in 2012. If peace breaks out on the nation’s borders it could further stimulate the Turkish economy and raise the value of Turkish stocks traded as ADR’s in the USA.
Who Wins and Who Loses in the Syrian Civil War
If you want to invest in post war Syria there are two caveats. One is the famous “blood in the streets” statement by Baron Rothschild from the 19th century. The best time to invest is when there is blood in the streets even if it is your own. When things are darkest is the best time to pick up deals. However, the second caveat is to know who will win and who will lose in the broader context if the Syria Civil War continues, if the government wins, or if the rebels win. The background for this conflict and for much of the Middle East is religious. The main branches of Islam are Sunni, Shia, Sufism, Kharijite, Ahmadiyya, and Quranism and there are successively smaller sects. The largest group is the Sunni followed by the Shia. Although the Shia branch comprises only ten percent of all Islam they are the majority in the countries of Iran and Iraq and are the largest Islamic group in Lebanon. Syria is 87% Muslim and 74% Sunni. However, the ruling party is Alawite Shia is only 13% of the population. From a religious standpoint it will be a loss for Iran, Iraq, and Lebanon it the Shia led government of Syria falls and a Sunni majority takes over. It remains to be seen how relations will fare based on religious affiliation but to the extent that religion dominates, picking sound investments in the area will probably have to do with picking local entities that understand the culture and business of the region and its people.