The EU remains non-committal on the subject of oil sanctions against the Syrian government, despite lobbying from Syrian rebels, ongoing violence by the government against civilians, and increased enthusiasm from Washington for restrictions on Syrian oil exports.
Disrupting the regime’s oil revenue stream could be an important factor in bringing the 40-year Ba’athist regime to an end, and the EU’s role is key, as it imports most of Syria’s oil put up for export. The Syrian regime relies on oil for over 30% of export revenue, over which Assad enjoys wide discretion.
The US is more keen to press ahead with sanctions, with Secretary of State Hillary Clinton mulling a diesel import ban and meeting senior Syrian rebels. US sanctions against the regime have been in effect since 18 May, though EU sanctions would hit the regime far harder, as Europe is Syria’s main crude export market.
The UN has expressed disapproval of the government crackdown, having issued a statement condemning the violence and UN chief Ban Ki-Moon calling Syrian President Bashar Al Assad to report his “strong concern and that of the international community at the mounting violence and death toll in Syria over the past few days.”
More substantive resolutions are unlikely as Russia and China are wary of punishing regimes that crack down on regimes for cracking down on their populations.Â
A handful of EU countries raised the prospect of future energy sanctions on Syria at a meeting of the bloc’s Political and Security Committee (PSC) in Brussels on 4 August, but the suggestion was couched in vague language and did not gain much traction, accoring to an EUobserver report. The next ministerial meeting is scheduled for 2 September.
The EU is instead drawing up names of extra regime associates and of Syrian companies directly involved in aiding the repression to add to the bloc’s existing blacklist of 35 individuals and four entities. Italy has severed diplomatic ties, recalling it’s ambassador last week. Qatar has followed suit.
Syria currently exports around 150,000 barrels of oil per day (bpd), most of which heads for refineries in Germany, Italy and France that are able to deal with the country’s thick, sour crude. If EU sanctions were applied, the government would have to send their crude to less lucrative markets at a discount.
The government continues to lay seige to Hama, the country’s fourth city, despite hopes that an informal cease fire may break out during the Muslim holy month of Ramadan. Over 1,800 civilians are estimated by human rights monitors to have been killed since civilian uprisings against Bashar Assad’s regime began on 26 January.
Teh oil-producing town of Deir Ezzor is also seeing increased unrest, as rebels frustrated at an lack of external pressure on the nation’s oil industry look to strikes and sabotage at key oil fields as possible means of bringing the regime down. The country has a vast network of pipelines which are lightly guarded.
Western oil firms in the country are operating as usual, with Ken Judge, director of corporate development and communications at Gulfsands Petroleum telling Reuters “whilst security is maintained at these facilities, we will remain able to operate our business.” Gulfsands operates a production-sharing contract in Block 26, which it shares 50/50 with Chinese oil group Sinochem.
Gulfsands’s contract covers the Khurbet East and Yousefieh fields, where Gulfsands plans to increase production to 24,000 bpd by the end of this year from 21,000 bpd now.
Other Western operators in Syria include Shell, in partnership with the China National Petroleum Corporation and India’s Oil and Natural Gas Corporation, Total and Suncor, a Canadian explorer. Shell CEO Peter Voser confirmed to Bloomberg that the European supermajor will continue to pump oil and will comply with any sanctions.
Gulfsands and other producers will be loathe to see their exports sanctioned, given production costs estimated by Judge to be $2 a barrel and high Brent oil prices. Should the EU come around to issuing sanctions, oil companies may sue the EU for lost revenue. Operators also emphasise that their production sharing agreements should be honoured by any new government.
“I think we and the other operators in the country should be entitled to be confident that our existing contractual arrangements will be respected by any incoming government in the event the current Assad-led government is displaced or not re-elected,” Judge told Reuters.
Commentators have also questioned the wisdom of implementing sanctions beyond restrictions on exports. Robin Mills, an energy economist writing in the National, believes penalising western oil & gas producers would see the regime expropriating their contracts and handing them over to Russian and Chinese operators, reducing western leverage in the country in the longer term.
