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US-Russian Agreement Over Syria Brings Oil Under $107

By Claude Salhani | Tue, 17 September 2013 22:43 | 0

The diplomatic rabbit that Russia pulled out of its hat (actually out of John Kerry’s hat) by suggesting that Syria could hand over its chemical weapons to an international body and thus avoid US air strikes on pro –government targets has injected some badly needed confidence – and temporary stability in the Middle East oil markets.

The news of a US-Russian agreement reached in Geneva regarding Syria’s chemical weapons arsenal by US Secretary of State John Kerry and his Russian counterpart Foreign Minister Sergei Lavrov along with the picture showing the two diplomats getting along in a very cordial manner was well received by the oil markets.

The news that there would be no punitive US strikes on Syria, at least for now, has brought the price of oil down to $107 per barrel from $110, where it previously was, somewhat reassuring a jittery and nervous oil industry.

Although Syria is not a major oil producer, there is always the fear that a new round of violence in the Middle East would perturb other sources of oil and send oil prices shooting upwards. The potential closure of the very strategic Strait of Hormuz comes to mind.

Hopefully, this new wave of optimism, borne from hopes that this latest episode in the long-running Middle East crisis can be resolved without turning to yet more violence will hold.  And with it, so too, will the lower price of gas.  

But lest there be some disappointment, the current price should not be expected to remain at this level too long. The situation in the Levant remains precarious although the worst has been avoided for now, the Syria crisis is far from being resolved.

Additionally, with winter just around the corner, prices are bound to rebound, even if just slightly.

Related Article: More to Oil Markets than Libya and Syria

The variants in the Syrian crisis are such that anyone of a multitude of issues could send the whole deal crashing.
At some point the upsurge of optimism will revert back to its habitual place amongst the perpetual pessimists.

Let’s look at the possibilities, or at least some of them.
The way in which the deal between Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov is set up much depends on the Syrian’s willingness to cooperate.

The first step is for the government of Bashar Assad to voluntarily remit to the United Nations a list of all their stockpile of chemical weapons in the country. And to do so within a week.

To start off, is it even feasible for Syria to do so within the seven-day framework insisted upon by the US, Britain and France?  Two questions jump to mind right away.

One:  How will the US/UN/EU and even Russia know for certain that the list remitted by the Syrians is indeed the full list?

Two: Given the fact that many areas are off limits to the government including some areas in Damascus and its suburbs, how will the Syrian government react to weapons stored in those zones?

Related Article: How Events in Syria Affect the Global Oil Markets

Assuming that the government may have some weapons hidden in zones under the control of the rebels, are they even likely to report those caches and risk having the rebels get their hands on them? Highly unlikely.

The Syrian regime’s attitude all along has been to weather the storm and hope for a better tomorrow. There is no reason for them to change their rules of the game this far into the game.

In conclusion, a better tomorrow for the Syrian regime may not mean a better tomorrow for the oil markets.                                                            

By. Claude Salhani

Claude Salhani is editor of ArabSpringNow.com and a specialist in the Middle East, terrorism and politicized Islam. He tweets @claudesalhani. His latest book, Inauguration Day, is available exclusively on line at amazon.com.

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