|Syria's Energy Future After the Upheaval|
Since last March, Syria has been the theatre of internal strife, violence and bloodshed. Although, naturally, much ink has been spilled on the regional and international repercussions of the events, the reaction of the international community and the future of the Syrian regime, the answer might very well be interlocked with the country’s energy needs. Recent events might also bear heavily on regional energy politics and a scenario where the regime’s final response is a reflection of its energy security state is not at all unlikely, as Syria’s location is strategic in terms of regional security and prospective energy transit routes.
Syria’s oil reserves are not important by global standards and have been in constant decline over the last 15 years. In January 2011, they were estimated at 2,500,000,000 barrels. Syria is not a member-state of OPEC or the Gas Exporting Countries Forum Organization. It produces around 390,000 bpd, of which 148,000 are exported daily, mainly to Europe and in particular France, Germany, Italy and the Netherlands. However small its reserves, oil is very important for the Syrian regime as oil exports are a principal source of foreign currency. According to the International Monetary Funds, oil reserves accounted for 22% of GDP in 2008 and that figure may very well increase given that tourism has been severely hit by the upheaval and is unlikely to be revived any time soon. Moreover, about 60% of Syria’s electricity is generated from oil.
Syria’s gas reserves define a similar situation. With reserves currently estimated at 240,700,000,000 cubic meters, all gas is used domestically. Most of it goes to electricity generation and what is left is used in reinjection as an enhanced oil recovery (EOR) technique. In late 2008, gas accounted for 31.2% of Syria’s electricity production. Interestingly, Syria is not self-sufficient in gas and until 2009 imported 13% of its consumption from Egypt through the Arab Gas Pipeline. Some of the electricity generated is exported, and in 2010 domestic output increased by 7.2% to 46.4 billion kilowatt-hours. It is worth mentioning that an important part of Syria’s power infrastructure was built with the support of the EU in the context of the Euro-Mediterranean Partnership, either by loans given by the European Investment Bank or by direct corporate foreign investments. Indicatively, the Greek company METKA SA and Italy’s Ansaldo were awarded a $650 million contract for the construction of a combined cycle power plant in Deir Ali, which is located to the south of Damascus. The same companies have been working on the construction of a gas-fired power plant in Deir Ez-Zor since 2010.
With oil revenues constituting a salient source of state income and Western multinationals and technology indispensable for exploration and production, the Syrian state is thus very vulnerable to potential oil sector pressures and embargo. Thus far, the latter recourse has been avoided, both because of European fears that it might constitute a ‘collective punishment’on a par with UN oil sanctions on Saddam Hussein’s Iraq and because of lucrative contracts that are already in place. For example, Royal Dutch Shell has been chastized over its recent Syrian oil exports as it is seen to work ‘hand in glove’ with the regime. In addition, amidst the recent turbulence, 12 international companies have bought terms of tender for exploration of oil and gas in Syria’s Exclusive Economic Zone (EEZ). At the end of the day an EU embargo might not even be necessary as the Syrian army has started to show signs of exhaustion and overstretch.
However, as long as oil is regularly produced and sold, the Syrian regime can always count on it as a source of strength that is currently used to violently subdue the ongoing internal protest. At the same time, even if European sanctions are finally imposed, Syria seems to have access to alternative sources of support and funding, at least in the short run. Iran, Syria’s most stable ally in the past three decades and sitting on the world’s third largest oil reserves, has allegedly pledged to offer Syria 290,000 bpd and $5.8 billion in economic assistance, although the deal has yet to be finalized.
In a gesture of solidarity, Iran has also agreed to sell oil to Syria in Syrian pounds. By the same token, Iraq has pledged to export 10,000 bpd to Syria, although this deal is also pending ratification. Lately there have also been reports that Iraq has finally resulted to providing Syria with no less than $10billion in direct and indirect financial assistance and energy exports.
Apart from domestic concerns, however, the recent strife in Syria also has an international and regional dimension in terms of energy politics. In the context of President Al-Assad’s ‘Four-Seas Policy’, Syria is projected to become a ‘regional transit hub for gas’, linking the Mediterranean, the Caspian, the Black Sea and the Arab Gulf, in a region seen as ‘the center of the world’. The future of Syrian politics will to a large extent define whether this vision is sustainable. As one of the countries projected to partake in the project, Turkey, is the potential destination of a significant project: the extension of the Arab Gas Pipeline from Syria’s Aleppo to Turkey’s southern city of Kilis that could later link to the prospective Nabucco project, if such a pipeline is ever materialized.
There are more plans for pipelines passing through Syria to Turkey and ending in Europe. Interestingly, Turkey’s integration with Syria is of more importance to the former, as its position is more strategic. Turkey has grown increasingly alarmed at Syria’s dealing with the uprising, has hosted opposition conferences and has stepped up its criticism of President Asad’s tactics. The latter has refused to concede any right to the Turks and, to the contrary, has toughened its stance vis-a-vis Turkey. As Bouthaina Shaaban, Asad’s Media Advisor, has recently stated during a visit by Turkish Foreign Minister Ahmed Davuto?lu, ‘if Davuto?lu is coming to Syria to deliver a decisive message, then he will hear even more decisive words in relation to Turkey's position’.
All this means that although Syria is important for Turkey’s goal of becoming a transit hub, a further escalation of the row between the two in combination with the prospect of European energy sanctions might bring about alterations to the region’s energy map. In addition, as noted by Turkish daily Zaman, if Turkey and Syria fall out, Turkey is likely to move closer to the US-Israeli axis.
In the case of Iraq, things are equally complicated. The latter is very likely to continue to be an energy ally of Syria, especially as in recent oil and gas auctions western firms were largely absent, replaced by Kazakh, Korean, Kuwaiti and Turkish companies. In late 2010, Syria and Iraq signed a memorandum of understanding for the construction of two oil and one gas pipeline. Two problems, however, mar potential long-term planning: a) Iraq is not likely to be a stable exporter for many years to come and b) the planned projects stipulated in recent memoranda of understanding might face difficulties in implementation. For example, the projected gas pipeline from Kirkuk to Banias will face a dead end if Europe refuses to buy that gas. The recently announced Islamic Gas Pipeline, which will start at the South Pars field and will take 3-5 years to construct, aims at carrying 30% more gas than Nabucco through Iraq, Syria, Lebanon, finally reaching Europe by crossing the Mediterranean.
But it too suffers from uncertainty caused by Europe’s unknown intentions. In addition, the money for the project might be hard to find. As Konstantin Simonov of the National Energy Safety Foundation notes, Iran and Syria have no money and foreign financial resources are unavailable to them.
All this means that Syria is facing a potential encirclement. With the army showing signs of fatigue and Asad’s regime receiving criticism from the EU, the Arab League, Turkey and most neighbors, the current situation is unsustainable.
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