The US and Great Britain are ramping up their efforts to secure the strategic advantage they created for the West in the Middle East by removing Russia’s key man in Syria, Bashar al-Assad, in December. A critical part of the political, economic, religious, and security fabric of the Middle East, it is also a crucial link from there to Africa in the south and to Europe in the West, by dint of its long Mediterranean coastline, as analysed in full in my latest book on the new global oil market order. The key to keeping Syria aligned with the West is to build up its economy with investment and on-the-ground help from Western firms, with a particular focus on the country’s previous main source of revenues – gas and oil exports. Handily for the West, such projects also legally allow for the stationing of ‘security’ personnel on these sites into which investment is being funnelled, along with any other assets that the companies involved might think fit to secure their operations. Alongside these, Washington and London believe lessons were learned from previous forays into Iraq and Libya, wherein the West’s efforts in those countries were increasingly regarded as neo-Crusader-like occupations by the indigenous populace, the longer they persisted. Consequently, moves are being made this time around to obviate such objections through the presence of Arabic states happy to work alongside their Western counterparts. Cue the United Arab Emirates (UAE), whose powerhouse enterprise Dana Gas last week signed a preliminary deal with Syria’s state oil company to look at redeveloping the country’s natural gas fields.

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Such fields were a foundation stone for Syria’s economy for years, along with oil, and it suffered less damage than its hydrocarbon counterpart during the 13-year-long civil war. Before the outbreak of hostilities, Syria’s gas output was around 316 billion cubic feet per day (bcf/d) of dry natural gas, with proven reserves of 8.5 trillion cubic feet (tcf). This had not gone unnoticed by Russia (along with its sizeable oil reserves and the strategic importance of its Mediterranean coastline), which had busily established a significant presence on the ground even before the civil war began in 2011. In fact, Stroytransgaz had begun the build-out of Syria’s South-Central Gas Area in 2009, which by 2011 had boosted the country’s natural gas production by about 40%. This allowed Syria’s combined gas and oil exports to generate a quarter of government revenues at that point, making it the eastern Mediterranean’s leading oil and gas producer at the time. Following heavy military intervention from Russia to shore up then-President al-Assad’s position, Russia and Syria agreed on the 2015 Cooperation Plan that covered the restoration of at least 40 energy facilities in Syria (an initial focus on gas, but also including offshore oil fields), together with the build-out of the power sector. The deal also covered the full 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. In short, from the West’s perspective, most of the groundwork for the expansion has already been done and paid for by Russia.

The same broadly applies to Syria’s oil sector, as another element of the 2015 Russia-Syria Cooperation Plan included the repair and capacity-boosting upgrading of the Homs oil refinery (Syria’s other was then in Banias). The Phase 1 target capacity was 140,000 barrels per day (bpd), Phase 2’s was 240,000 bpd and Phase 3’s was 360,000 bpd. The Russian intention was that it could also be used to refine Iranian oil coming through Iraq if needed, before onward shipment into southern Europe. Again, before the civil war began in 2011, Syria was a major oil producer, with output of around 400,000 bpd of crude oil from proved reserves of 2.5 billion barrels. Prior to that – before the recovery rate started to decline 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 over US$3 billion of oil per year from Syria up to the beginning of 2011, and many European refineries were configured to process the heavy, sour ‘Souedie’ crude oil that makes up much of Syria’s output, with the remainder being the sweet and lighter ‘Syrian Light’ grade. Most of this – some 150,000-bpd combined – 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 UK’s Shell, Petrofac and Gulfsands Petroleum, France’s then-Total, the China National Petroleum Corporation, India’s Oil and Natural Gas Corp, Canada’s Suncor Energy, and Russia’s Tatneft and Stroytransgaz.

With this infrastructure still largely in place, and gratifyingly paid for by Moscow, it is little wonder that U.S. President Donald Trump announced the lifting of Washington’s sanctions on   Syria’s gas and oil sector on 13 May. Great Britain and the European Union of 27 member countries had earlier done the same. Trump made the statement in Riyadh, which tied into his awareness of the necessity to keep other Middle Eastern states involved in Syria’s future this time around. Indeed, Saudi Arabia has argued that a stabilised Syria would also be beneficial to it, allowing the Kingdom to embark on its own projects in the country and to move its own exports – including energy – through the country and into Europe.  The same applies to the UAE – which, alongside Saudi Arabia, is one of the key Arabic countries Trump is keen to involve as stakeholders in Syria, and in his broader Middle Eastern strategy. This is focused on building a solid base of interconnected economic and then political relationships across the region, with the U.S. and its key allies at their centre. This was the original intention of the Abraham Accord deals between Arab states and Israel that Trump promulgated in his first term as president, as also analysed in full in my latest book on the new global oil market order. In this context, the UAE’s Dana Gas has a perfect pedigree from the West’s perspective, as it has been instrumental in major gas redevelopment projects in two other key targets for the West’s ‘new global oil order’ – Egypt and Iraq. In Iraq, it has been at the cutting edge of this geopolitical-energy nexus, operating successfully in the flashpoint semi-autonomous region of Kurdistan in Iraq’s north. Only recently, for example, it announced the beginning of gas sales from the region’s Khor Mor gas expansion project.

Ultimately, these latest moves in Syria should allow the U.S. and its allies to achieve three key results. First, it places these countries at the heart of Syria’s economic renewal programme, which should allow them to cement their position in the policy directions the country takes from here. Second, it ties in key Arab countries into the regeneration of one of the region’s longstanding key political, economic, religious and geographically important states. This should allow for an easier rollout of Trump’s new consensus across the region through further Abraham Accord-like deals. And third, it denies Russia all these advantages. And in the zero-sum games of geopolitics and energy diplomacy, this is a huge victory for the West.

By Simon Watkins for Oilprice.com

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