Once the center of the Islamic world, the Syrian capital is celebrating a cultural and economic rebirth—despite authoritarian rule. Amid the avant-garde galleries, hip restaurants, noisy souks, and Roman, Christian, and Ottoman architecture, Oliver August finds a city enthralled with its new freedoms

We have been waiting in our theater seats for half an hour when someone starts clapping. I join in, thinking, Hell, maybe this will persuade the actors to come onstage. We hope to see an adaptation of Richard III, subtitled An Arab Tragedy. Shakespeare has been rewritten to critique dictatorship in the Middle East—not something you see every day in Damascus. I worry that government censors have intervened at the last minute. But quite the opposite.

The clapping was initiated, it turns out, by what in the movie business they call a studio plant. When more and more hands join in, a side door opens, and in walks President Bashar Assad—the real one, not an actor—whose family has ruled Syria for longer than I have been alive. He waves awkwardly, his long neck tilted to one side, and sits down a few feet away from me. So this was the holdup. Tonight there are two kings, only one of them onstage. Most of the audience seems unsure which one to watch when the curtain goes up.

In the play, the homicidal Gloucester decides to have himself elected to the throne. This being the Middle East, the election is rigged. Puff-chested minions tell Glouces­ter that he has won ninety-nine percent of the vote. "What about the other one percent?" he cries. "Why did they not vote for me?" The audience guffaws. They can't help but look over at Assad. In 2007, he won 97.6 percent of the vote in a presidential "election." Nobody believed the result. Now he is throwing back his head in laughter and slapping his knee.

After the play, I retire with a group of students to a restaurant called the Journalists' Club, a hangout for writers of all stripes. It occupies a large ground-floor hall filled with smoke and chatter in a French colonial building. "It's extraordinary he came," the students say. Yes, but why? They cannot agree. Some believe reforms are on the way, as the president promised upon assuming power after the death of his father, President Hafez Assad, in 2000. Others see him as a brazen dictator so confident of his position that he can laugh at himself in public.

Does Bashar Assad's surprise patronage signal new cultural liberties or rather the co-opting of the arts into his political machine? To be sure, a transformation of some kind is taking place. Assad is relaxing state controls on the once-Socialist economy. The arts seem to be opening up, at least a crack, and the Old City is turning into something of a party town. The fact that we can have this discussion in public is a clear sign of change, though nobody refers to the president by name. Nobody except Khaled Khalifa, a renowned novelist. He sits at the next table and seems to be celebrating the fact that his latest book—banned in Syria—was short-listed for the inaugural Arab Booker Prize.

"What? Bashar?" he says loudly between drinks. "Wish I had been there. I would have told him to let some of my friends out of jail."