January 15th, 2013

Syria Redrawing ME Energy Map

 

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Syria might not be a major oil or gas producer in the Middle East, but—depending on the outcome of the Syrian uprising—it may determine the shape of the future regional energy map. The country’s geographic location offers Mediterranean access to landlocked entities in search of markets for their hydrocarbons and to countries seeking access to Europe without having to go through Turkey. The opportunities presented to many in the region by the current Syrian regime could be lost in a post-crisis Syria. To others, new opportunities will emerge under a new Syrian regime.

The Egyptian Revolution and a Stalled Pipeline Project

The Arab Spring has already had an impact on the energy map in the Middle East. The Arab Gas Pipeline project, which from its inception more than a decade ago aimed to export Egyptian natural gas to Israel, Jordan, Syria, Lebanon, and eventually Turkey and Europe, was one of the early victims of the Egyptian revolution. The facilities and pipeline in the Sinai were sabotaged repeatedly, depriving gas-hungry Israel and Jordan of their supply of Egyptian gas and interrupting feeds to Syria and Lebanon along the same line.

The post-Mubarak regime in Egypt already cancelled its gas supply agreement with Israel on legal grounds—and for ideological reasons—while setting new energy priorities as it turns its focus primarily toward satisfying the domestic demand for energy. Gas exports will most likely be low on the priority list as Egypt seeks to reduce its use of fuel imports for power generation and household usage.

The derailed pipeline will also affect fellow Arab countries, which might have to look elsewhere—possibly closer to home for some—for new supplies. Turkey will have to put an end to two of its ambitions: reducing its dependence on Iranian and Russian gas to satisfy its domestic needs and using the Arab Gas Pipeline project to establish itself as a regional energy hub and preferred route for linking Middle Eastern gas producers to gas-hungry markets in Europe.

Indeed, tomorrow’s Syria has the potential to claim this privilege. The Syrian route to European markets could conceivably emerge as a serious future alternative to Turkey, depending on who the post-crisis government aligns with.

Baghdad vs. Erbil

Iraq, which is reemerging as a major oil exporter after more than three decades in energy limbo, is looking to diversify its export routes. It needs alternatives to the Persian Gulf and the Strait of Hormuz and to the export route via Turkey to the Turkish port of Ceyhan.

Historically, Syria offered that alternative route. Iraq accessed the Mediterranean through Syria when the Iraq Petroleum Company was in operation as part of the Kirkuk-Haifa pipeline before the company’s nationalization in the early 1970s and Syria’s confiscation of the portions of the pipeline running through its territory. The pipeline was later reopened only to be shut down again by Damascus at the start of the Iran-Iraq war (1980–1988) in a gesture of Syrian solidarity with Tehran.

The route flourished again for a short period of time after the end of the conflict, but during the 1991 Gulf War, Iraqi oil exports were struck by international sanctions, which shut the route down once again. Though the pipeline was bombed in 2003 by U.S. forces, the route remains viable for transporting Iraqi crude and potentially natural gas exports.

More recently, as tensions rose between Baghdad and the Kurdistan Regional Government over oil-exploitation rights in Kurdistan region, access to the Mediterranean via Syria became even more pressing for the Iraqi government. The current Kirkuk-Ceyhan pipeline passes through the area of Fishkhabour in the Kurdish-controlled governorate of Dohuk, where its safety could become contingent on Kurdish goodwill if relations between Baghdad and Erbil were to deteriorate further.

The fact that Baghdad and Ankara are also crossing swords over what Iraq describes as “Turkish meddling” in striking direct oil and gas export deals with the Kurdistan Regional Government, among other contentions, also adds to the vulnerability of the Turkish-operated portions of the pipeline beyond Iraqi territory.

And Baghdad is not the only one eyeing an oil-export route across Syria. For the Kurdistan Regional Government, change in Damascus also carries the potential of a new export route to the Mediterranean as an alternative to the Turkish route. Such a situation  would be especially likely to emerge if the Kurdish areas of Syria were to gain effective autonomy after the Syrian conflict is over. Such an alignment of interests between the Kurds of Iraq and Syria would offer the Kurdistan Regional Government an alternative to dependence on Turkey.

Iran’s Strategic Stakes

Iran has high strategic stakes in Syria, which it has not hesitated to defend both financially and militarily. Those stakes extend to the energy sphere, where only a friendly regime in Damascus could open the way for Iran to expand its natural gas exports westward in a post-sanctions era.

Tehran has long been pursuing a pipeline scheme that would feed Iranian gas to Iraq, where gas shortages will persist for the next few years, and Syria, where Iranian gas would replace the now-defunct Egyptian gas imports. Over the longer term, Iran aims to seek markets beyond the region, and the Mediterranean (via Iraq and Syria) offers Tehran—theoretically at least—access to Europe, when and if sanctions are lifted and Iran finds the resources and outside technical help to develop its gas wealth.

Russian Inroads

Russian stakes in the outcome of the Syrian conflict are also high. They go beyond the fate of the Assad dynasty, stretching to questions of who, in the future, will be exporting which gas, from where, and to which buyers. A friendly regime in Syria would take Russian interests into consideration, while a new regime that does not look at Moscow favorably will be an obstacle to Russia.

In trying to guarantee its share in the division of zones of influence—and interests—with other powers, Russia wants to make sure it has a say in the emerging East Mediterranean gas province, which involves Cyprus, Israel, Lebanon, and Turkey. Conscious of Europe’s declared attempts to free itself from dependence on Russian gas, Moscow’s objective is to make sure that any export schemes from the East Mediterranean to Europe will not compete with its own gas-export plans through the existing trans–Black Sea Blue Stream pipeline to Turkey and the upcoming South Stream pipeline to Europe.

Russia has been consolidating its business relations with Cyprus. Moscow was even negotiating a bailout scheme in case Cyprus fails to secure a deal from the EU. Russian companies are angling for the contract to develop Cyprus’s offshore gas, competing with the likes of Shell and Total.

Russia has also positioned itself in Lebanon and chosen local partners to be part of a project developing gas found off the Lebanese coast. Interestingly, Gazprombank, a subsidiary of Russia’s biggest government-controlled gas company (of which Russian Prime Minister Dmitry Medvedev was once chairman) has already established a presence in Lebanon as Gazprombank-Invest.

Gazprom has also been aggressively angling for a share of Israeli-discovered offshore gas reserves. Russian President Vladimir Putin did the company’s bidding himself with Israeli officials last summer, but Gazprom has not yet won a stake in one of the Israeli gas licenses, having recently lost out on one opportunity to Australia’s largest oil and gas company, Woodside.

Looking to a Post-Crisis Syria

Whatever regime emerges in Damascus after the Syrian uprising could redraw the energy map of the region. Competition for supplies and markets—and to control transit routes for energy resources—is high, and the shape of the future energy map will depend on who the regional and international winners and losers are.

For Iraq and Iran, a new regime that allies itself with Sunni Turkey or the Gulf states would come at the expense of future cooperation in the energy sphere and strike a blow against Iraqi and Iranian ambitions to have direct access to the Mediterranean without having to rely on Turkish goodwill.

The degree of autonomy that a new regime emerging in Syria would be able to grant Syrian Kurds—as well as the latter’s ability to carve out an autonomous region within the new state—will determine whether Iraq’s Kurds will be able to free themselves from the pressures of Ankara and Baghdad and establish a direct export route for their hydrocarbons via Syrian Kurdish territory.

Russia’s energy interests in the region would also require the emergence of a friendly regime that would take Russian interests into consideration. A new regime that is allied with the West would be an obstacle to Russia’s expanding presence across the emerging East Mediterranean gas basin and its ability to maneuver to protect its own share of the gas market against competing natural gas resources.

This article was first published by Carnegie Middle East Center on January 2, 2013

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