WEEKEND READ: Syria's redemption

Syria has suffered greatly as the pariah of the Middle East, though a new era appears to be dawning that will help unlock its, and Iraq's, oil wealth.

Stratfor.com
Turkey and Syria’s state-owned oil companies will establish a joint firm in 2008 to produce oil from fields in Syria, Turkey and other countries, the head of Turkey’s oil company TPAO told Reuters on July 17. TPAO general manager Mehmet Uysal added that the firm will begin by producing fields in Syria before it starts work in Turkey and other countries.

The deal comes at a critical time, as Syrian oil production is on a steady decline and the country runs the risk of becoming a net oil importer within a decade.

It is no coincidence that this energy announcement comes in the midst of Turkish-mediated Syrian-Israeli peace talks that aim to bring Syria out of decades of diplomatic isolation and reverse its steady economic decline.

Living as a Middle East pariah has not been good for the Syrian economy. Foreign investors have been skittish about putting their money in a country that has long been the target of international scrutiny and US sanctions. Without the needed investments in technology and capital, a bulk of Syria’s oil fields remain undeveloped.

Syria’s oil production peaked at 582,000 barrels per day (bpd) in 1996, then declined to approximately 393,000 bpd in 2007 and continues to drop. Even though the Syrian economy has been buoyed recently by high crude oil prices, the country’s declining oil production combined with steadily rising oil consumption paints a bleak future for Syrian energy independence.

But things are turning around. Through its negotiations with Israel, Syria is breaking out of its diplomatic prison and reintegrating itself in the Arab Middle East. The Syrians have already begun receiving natural gas imports from Egypt to help boost their domestic energy supply (and free up more oil for export) through a pipeline that further entrenches Damascus in a network of Middle East alliances tied to the West.

By joining with Turkey, Syria will end up with an energy firm with the technical expertise needed to explore new fields and intensify production to arrest the Syrian industry’s decline. Moreover, Syria’s oil fields are sitting just a few miles south of Turkey’s rapidly expanding transit and refining energy hub at Ceyhan on the Mediterranean Sea. By solidifying energy ties with Ankara, Syria will get direct access to an enormous European market that is more than eager to find new alternatives to Russian energy.

Currently, Syria exports a small amount of oil (approximately 184,000 bpd in 2007), with the majority of that crude going to Italy, Germany and France. If Syria wants to bring in more cash from oil revenues and boost exports to the West (not to mention energy-hungry countries in the East such as China and India, who have already been eyeing Syrian oil fields), it is going to have to boost energy imports from its neighbors so it can meet rising energy demand at home and free up more oil for export. The Egyptian-Syrian natural gas link is one example of Syria moving down this path. But the Syrians can also do their part to create a stable enough security environment in Iraq to bring online an oil pipeline that connects the Syrian port of Baniyas to Iraq’s core oil infrastructure.

The political foundation for these energy deals lies within Syria’s intent to rehabilitate itself in the international arena. It intends to do so by ending decades of animosity with Israel, re-engaging with the United States through security cooperation in Iraq, extracting itself from an alliance with Iran and cutting ties with militant proxies such as Hezbollah. This is a big list of expectations, but the negotiations are progressing and the Syrians are moving in a direction that has politically enabled the Egyptians, the Turks and even the Arabian Gulf states to start pouring their money into a country that has grown weary of living in diplomatic isolation.

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