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Syria: Oil sanctions on the horizon

Syrian opposition efforts to cut a big funding lifeline to President Bashar al-Assad’s regime may be about to yield fruit

EUROPEAN buyers of Syria’s Souedie crude are considering a boycott of the heavy oil that can be refined only in the Netherlands, Italy, Spain and France.

Anti-Assad forces have focused on the oil and gas sector as a crucial pressure point for a government that has been starved of its only alternative source of hard currency earnings – tourism – since widespread unrest hit Syria in mid-March.

Ausama Monajed, of the National Initiative for Change, claimed a boycott of oil exports would deprive the government of up to $8 million a day in earnings. “That revenue goes straight to the prime minister’s office making it easy to direct it to military and security operations,” he said.

The Syrian opposition in exile is making the case that sanctions are justified because oil revenues are being used directly to finance repression, with reports of more than 1,500 Syrians being killed in the security crackdown.

In late June, the government appeared to have pre-empted potential punitive actions against its oil sector, indicating a cut in exports of more than one-third for next-month delivery. State-run marketing company Sytrol is reducing July loadings of Souedie crude at Tartous port by 37% compared with June, according to Bloomberg, to 87,058 barrels a day (b/d).

According to analysts, pushing more Souedie crude through domestic refineries will free up increased volumes of light, more easily marketable, Al-Furat oil for export. Although David Butter, regional director for the Middle East at the Economist Intelligence Unit, says that, as yet, there is insufficient evidence to say this is a definite government strategy.

Syria produces around 370,000 b/d, according to the International Energy Agency (IEA). About 190,000 b/d of Syrian oil production, mainly heavy, emanates from state-owned Syrian Petroleum. The country consumes 220,000-240,000 b/d and exports around 140,000 b/d, mostly Souedie crude.

So heavy-oil exports present a sitting target for sanctions, which could be implemented without a UN or EU mandate, requiring only an informal agreement between the four countries able to process Soudie crude to halt imports.

But whether this will alter the Syrian regime’s behaviour is questionable. Advocates of sanctions suggest targeting the country’s main source of export revenue will erode the capacity of the Syrian military to crush opposition in cities such as Hama and Homs.

“As oil revenues, in conjunction with declining output, have fallen as a percentage of the budget, they have increased tax on big business groups, so targeting oil would hit the regime,” says Andrew Tabler, a fellow at the Washington Institute for Near East Policy.

But piling further economic pain on ordinary Syrians may not prove any more successful in restraining the Assad regime’s harsh treatment of protestors than it was in ousting Saddam Hussein from Iraq. Because of the importance of oil in the budget – accounting for 25% of income – the pain would be scattered far wider than the security forces alone.

“Oil revenues go to the government and they use it as they wish,” says Joshua Landis, director of the Center for Middle East Studies at the University of Oklahoma.

Syria has already thrown a lot of money at the country’s poor to dampen the protests. It has increased subsidies on kerosene and raised around 2 million public-sector salaries by up to 30%. Cutting off oil revenues could hurt everyone, and the regime may still spend whatever it deems necessary on security.

Oil remains one of the few levers at the disposal of Western governments looking to exert pressure on Assad. But if his leadership is to be seriously weakened, it must lose support from the mainly Sunni merchant class that has, so far, shown no willingness to topple the president.

Growing signs of capital flight suggest some are voting with their wallet, but for now at least, Assad can count on the loyalty of Syria’s business elite – and buy itself time as it seeks to crush an opposition that still shows no sign of petering out.

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