The U.K.’s recent lifting of sanctions on several major Syrian firms – particularly those connected to its former cornerstone oil and gas sectors – is part of a coordinated strategy by the West to secure the western flank of the Middle East that has unfettered access to the Mediterranean Sea. “That coastline encompasses Turkey, Syria, Lebanon, Israel and Egypt and is regarded as a strategic zero-sum game by both the West and the East, given the access it provides to the world’s sea routes and to land routes along in southern Europe and northern Africa,” a senior source who works closely with the European Union’s (E.U.) energy security complex exclusively told OilPrice.com last week. “The multiple advantages of securing influence over what happens down that coastline are magnified for whichever side has it by the fact that the other side doesn’t,” he added. “This is a key reason why the West removed [former Syrian President, Bashar] al-Assad and why it is now focused on rapidly expanding its investment imprint there, especially through the oil and gas sectors,” he said.
In fact, oil and gas was – and could be again – the foundation stone for Syria’s economic and political rehabilitation in the West’s view. Aside from the money that its firms could make from investments in key oil and gas projects there over the long term, under international law foreign oil and gas companies are entitled to station as many of their own staff – including security personnel – on the ground of the countries in which they operate to safeguard the relevant facilities. This was the primary mechanism through which Russia dramatically expanded its on-the-ground presence across Syria prior to the 2011 uprising and it formed the basis for the involvement of a greater military presence after that. The same pattern of creeping colonisation has been seen from China across the Middle East and in the Asia Pacific region, executed under the cover of its theoretically commercial project the ‘Belt and Road Initiative’. It is no coincidence, according to the E.U. source, that Russia’s President Vladimir Putin and his Chinese counterpart Xi Jinping are admirers of the British East India Company’s role in the expansion of the British Empire. Established in 1600, the huge firm functioned extremely successfully for nearly 300 years using trade and investment as the means to gain control over large swathes of Asia, including India and Hong Kong, with all such projects safeguarded by a British security force at one stage as large as 260,000 men. The additional benefit for the British East India Company and its home country was that its colonising activities more than paid for themselves in the profits from the business it transacted, and the West is hoping its efforts in Syria will do the same.
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If done in a systematic fashion there is no reason why they should not be, said the E.U. source, as the country still has sizeable oil and gas reserves and much of the adjunct infrastructure could be brought back to full working order over time. In this context, it should be remembered that at the time of the outbreak of hostilities in 2011, Syria had been producing around 400,000 barrels per day (bpd) of crude oil from proved reserves of 2.5 billion barrels. For a long period before that – prior to the recovery rate dropping off due to a lack of enhanced oil recovery techniques being employed at the major fields -- it had been producing nearly 600,000 bpd. Europe imported at least US$3 billion worth of oil per year from Syria up to the beginning of 2011, and many European refineries were configured at that time to process the heavy, sour ‘Souedie’ crude oil that makes up much of Syria’s output. The bulk of this this went to Germany, Italy, and France, from one of Syria’s three Mediterranean export terminals: Banias, Tartus, and Latakia. As an adjunct to this, a multitude of international oil companies were operating in Syria’s energy sector, including the U.K.’s Shell, Petrofac and Gulfsands Petroleum, France’s then-Total (now TotalEnergies), the China National Petroleum Corporation, India’s Oil and Natural Gas Corp, Canada’s Suncor Energy, and Russia’s Tatneft and Stroytransgaz.
The country’s gas sector was at least as profitable as its oil one, with proved reserves of 8.5 trillion cubic feet (tcf) of natural gas, and around 316 billion cubic feet per day (bcf/d) of dry natural gas produced, as fully analysed in my latest book on the new global oil market order. The expansion of the South-Central Gas Area by Stroytransgaz started at the end of 2009 and boosted Syria’s natural gas production by about 40% by the beginning of 2011. This allowed Syria’s oil and gas exports to generate a quarter of government revenues at that point, and to make it the eastern Mediterranean’s leading oil and gas producer at the time. After the fighting in Syria began in earnest in 2011, the first of the three major options to support its energy and financial infrastructure for whichever group took over was proposed by the U.S. This involved moving gas from Qatar through Saudi Arabia and Jordan, and then through Syria whereupon it could be moved into Turkey and sold on in the rest of Europe. The European option involved United Nations peace-keeping monitors in Syria, bringing in hydrocarbons industry experts from the UN Security Council member states, and letting the Qatar-Syria-Turkey, and Iran-Iraq-Syria-Turkey, pipelines develop organically over time. The Russian option focused on resuscitating the Iran-Iraq-Syria pipeline, moving Iranian, and later Iraqi and Syrian gas into Europe. After al-Assad survived the initial phases of the uprising – crucially supported by the Russian military -- he went with Moscow’s plan.
In November 2017, a revamped version of the original 2015 Russia-Syria Cooperation Plan was signed, encompassing the restoration of at least 40 energy facilities in Syria, including offshore oil fields, and much more as well, as also detailed fully in my latest book on the new global oil market order. Initially, the focus would be on expanding the power sector, based on a deal signed between Syria’s then-Electricity Minister Mohammad Zuhair Kharboutli and Russia’s Minister of Energy Alexander Novak. The plan covered the reconstruction and rehabilitation of the Aleppo thermal plant, the installation of the Deir Ezzor power plant and the expansion of capacity of the Mharda and Tishreen plants, with a view to re-energising Syria’s power grid and restoring the main control centre for the grid back to Damascus. This aligned with the statement in December 2017 from then-Russian Deputy Prime Minister Dmitry Rogozin that: “Russia will be the only country to take part in rebuilding Syrian energy facilities.” Aside from the four power plant projects that were to be optimised as a priority, the key infrastructure project was the repair and upgrading of the Homs oil refinery (Syria’s other was then in Banias). The work was led by Iran’s Mapna and Russian companies, with the initial target capacity being 140,000 bpd. Phase 2’s objective was 240,000 bpd and Phase 3’s was 360,000 bpd. The intention was that it could also be used to refine Iranian oil coming through Iraq if needed, before onward shipment into southern Europe.
Russia, and to a lesser degree China, will not stand idly by and let the West comfortably establish itself in Syria. Putin ordered his forces into the country in 2015 to prop up Bashar al-Assad’s rule as it had already identified Syria under the regime as being crucial to Russia for four key reasons, as also detailed in my latest book on the new global oil market order. First, it was the biggest country on the western side of the Shia Crescent of Power that Russia had been developing as a counterpoint to the U.S.’s own sphere of influence centred then on Saudi Arabia (for hydrocarbons supplies) and Israel (for military and intelligence assets). Second, it offered a long Mediterranean coastline from which Russia could send oil and gas products – or anything else it wanted – from itself or from its allies (notably Iran) to major oil and gas hubs in Turkey, Greece and Italy or into north, west and east Africa. Third, it was a vital military hub, with one major naval base (Tartus – and Russia’s only Mediterranean port), one major air force base (Khmeimim) and one major listening station (just outside Latakia). And fourth, it showed the rest of the Middle East that Russia could and would act decisively on the side of the autocratic dynasties across the region. It is little wonder, then, that 28 January saw the arrival in Damascus of Russia’s Deputy Foreign Minister Mikhail Bogdanov to meet the new President of Syria, Ahmed al-Sharaa. That said, al-Sharaa will be all too aware that it was the U.S. and U.K. that played the key role in removing his predecessor from office, so in the race to win the battle for influence in the new Syria, it currently looks like the West holds most of the aces.
By Simon Watkins for Oilprice.com
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