In the summer of 2000, Bashar al-Asad inherited, as it were, the leadership of Syria from his father, Syria's long-ruling president Hafiz al-Asad. Halfway through Bashar al-Asad's first term, Syria finds itself in a rapidly changing regional environment, and it is undergoing a process of economic change, which, in the long run, may add up to a full transformation from etatism to a market economy. There are few signs to date, however, that the transition from the regime of Hafiz al-Asad to that of his son will actually imply the dismantling of the former's authoritarian structures. On the external-policy front, the first years of Bashar al-Asad's tenure were strongly marked by the breakdown, almost parallel to the change at the helm in Damascus, of the Middle East peace process, by the Iraq war, and by its regional repercussions. To foreign political observers, Syria has been of interest mainly because of its position in the Arab-Israeli conflict and peace process. This study analyses Syria's policies in its regional environment, but it gives equal important to changing economic structures and the leadership structure of the regime itself. Economic reform is clearly underway in Syria, but its reach and impact is limited by political factors. A new leadership generation is in place. But while these young leaders have a much deeper understanding of the country's reform needs, they are clearly not willing to risk their own hold on power. Also, the regional geopolitical situation has not made the task of reformers easier - rather, renewed tension in the Middle East has strengthened the hand of conservative elements in this regime. This short but detailed study of the political, economic and geopolitical factors that impact on Syria's path under its new leadership builds on the author's long acquaintance with the country and complements his earlier work on that country's politics and economy.