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The Implications of the EU’s Lifting Sanctions on Syria’s Oil

By Claude Salhani | Tue, 23 April 2013 22:32 | 0

In an astute political move the European Union lifted its embargo Monday on oil imports from Syria. Actually better make that an embargo lifted on oil imports from rebel held areas in Syria.

This is a de facto sidelining of the regime in power by the EU and recognition of the rebels as the legitimate representatives of the Syrian people. Which opposition group will represent Syria in future talks with the EU however remains as murky as the war many of the various factions engaged in the Syrian conflict are fighting.

Indeed, the forces queuing up to help President Bashar Assad vacate the presidency are numerous and far from united.

In any case, don’t expect to see Syria’s oil production, which has practically come to a complete standstill as a result of the war, to start flowing anytime soon.  Syria’s oil infrastructure, already antiquated and hurt by years of US and EU sanctions is in dire need of repair and modernizing.

The European change of policy towards Syria includes authorizing European companies to export to Syria materials needed to update their facilities, however due to the highly dangerous situation as a result of the fighting, it may be a while still before the Syrians can restart their production flowing.

Still, while the EU’s decision should be seen as good news from an economic perspective, in reality it is – at least for the moment – much more of a political message to the parties engaged in a violent internal strife that has pitted pro- and anti-regime forces in a fight to the finish. Nevertheless, the EU’s decision to lift the embargo sends a clear message to all sides and unequivocally gives the opposition support and legitimacy.

Related article: SYRIA: Theory for a Possible End Game

And perhaps even more importantly for long-term European business ventures in Syria, it gives them an important head start against rival US companies vying for business in Syria once the fighting subsides and it becomes safe enough to resume drilling and exploitation of Syria’s oil.
 
The EU decision is intended to allow exports of crude oil from rebel-held territories to Europe, and at the same time, allow the Syrian oil industry under rebel control to import badly needed technology, and to permit EU companies to invest in the Syrian oil industry.

Now that is all much easier said than done.  The modest Syrian oil industry, although it counted for a quarter of Syria’s annual budget, produced a mere 380,000 bbl/day.  Compare that to Qatar, a far smaller country, though with far more oil and therefor far richer, with its daily production of around 1.4 million bbl/day.

The EU decision however holds great political importance in the undertones it carries.  First it reaffirms the EU’s political stance regarding the government of President Bashar Assad in that the European Union regards the Syrian opposition fighting to oust the current regime from power as a legitimate representative of the Syrian people. This move truly gives the opposition political clout it badly needed and at the same time, assuming the fields can be secured to a point where production can resume, it offers the rebels a revenue stream, allowing them to purchase weapons in order to continue the struggle.

It guarantees the future Syrian government an immediate source of hard currency revenue, which any government that takes over at the end of the war will have urgent need of immediate funds to start reconstructing the battered nation.

Related article: Will Syrian Oil Developments Mirror Libya's?

And lastly, in what may be an unprecedented move in international affairs, declaring that it will deal with the rebels, reinforces the position adopted by Brussels vis-à-vis the government of Bashar Assad. Yet at the same time it also sends a message to the rebels that the Europeans will only deal with the more moderate forces in Syria, meaning that the EU may not accept to do business with more extremist Islamist groups.

The bad news here is that if the rebels manage to get production flowing again the country’s already battered oil infrastructure may yet find itself the target of the government’s artillery to deny the rebels what could turn out to be a major source of revenue.

By. Calude Salhani

Claude Salhani, a specialist in conflict resolution, is an independent journalist, political analyst and author of several books on the region. His latest book, 'Islam Without a Veil,' is published by Potomac Books. He tweets @claudesalhani.

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