Time to pipe up

Competition over energy resources has played a major role in the power struggles of the Middle East over the last half century. However, its importance in the Syrian conflict remains difficult to adequately assess.Syria lies at a crossroads of energy export routes and various pipelines, existing or under plan, across its territory. The most significant of these projects involve countries such as Iran, Iraq, Qatar and Turkey.

One of the pipelines being planned is the Islamic Gas Pipeline (IGP), which should see the transport of gas from Iran to Iraq, Syria and Lebanon, and from the port of Tartous in Syria to European markets. The agreement over this project was signed in early 2011 by the four countries. In its first stage leading it to Tartous, the pipeline will be 2,000-kilometers long and will cost $2.5 billion to build. When completed, it will have the capacity to transport 110 million cubic meters of gas a day from Iran, including 20 million cubic meters that will be sold to Syria and 25 million to Iraq. This pipeline would bypass Turkey.

Interestingly, the gas is supposed to come from a field shared by Iran and Qatar — named South Pars in Iran and North Dome in Qatar — that is considered to be the largest gas field in the world.

Qatar, which has developed its side of the field much more rapidly, is also reported to have a project to build a pipeline that will transport its gas through Turkey and from there to European markets. The pipeline will have the advantage, for Qatar, of bypassing the Strait of Ormuz. However, Qatar is considering two options, one that would run through Saudi Arabia, Jordan, Syria, and then Turkey, while the other would go through Saudi Arabia, Kuwait and Iraq to Turkey.

Although these facts point to strong competition between the two countries, it is difficult to draw from them clear conclusions as to their impact on the struggle in Syria.

Iran, for instance, is not yet a serious competitor for Qatar because, for obvious political reasons, European countries have refused to sign any long-term contracts with Tehran. In the absence of purchasing contracts from the EU, which is by far the largest market for natural gas, Iran will be unable to be a serious competitor. Also, the capacity of the pipeline will be relatively small compared to the consumption of the European Union, which is currently at 1.5 billion cubic meters a day, set to grow rapidly in coming years.

Meanwhile, the Qatari pipeline will not necessarily use Syrian territory and Doha would first need the approval of Saudi Arabia — never too enthusiastic when it comes to helping its small neighbor and rival — for either of the two options it considers. It is also worth noting that in the years preceding the conflict no negotiations were reported to have taken place between Syria and Qatar on the project, in spite of the very good relations existing at the time between the two governments.

There are also two arguments that diminish the importance of the energy geopolitics in the Syrian conflict. The first is that if Iran were to develop an important gas export capacity, its first and main competitor would be Russia. Indeed, Europe is currently highly dependent on Russian gas and Moscow uses this as a lever of power in its relations with the EU. Russia was actually one of the main opponents to the defunct Nabucco pipeline, which would have transported gas from Iran and Azerbaijan through Turkey to Europe.

Also, if energy had such importance in the conflict in Syria, one would have expected the Syrian regime to highlight it much more frequently. In the two years of the uprising, the Syrian authorities have almost never mentioned the issue of the gas pipelines as a reason for the involvement of regional countries in the conflict.

There is little doubt that the Syrian conflict will have consequences on regional energy projects. It is difficult, however, to make the case that this issue is the main reason for the regional competition over the struggle in Syria.

 

Note: This article appeared first in the November 2013 edition of Executive Magazine

Paving a new silk road

The signing of several economic agreements on January 16 between Iran and Syria confirmed the persistently strong strategic relations between the two countries.

However, contrary to a widely held belief, and to the claims of the two governments, bilateral trade ties have historically been very limited. Hence, in 2010, according to Syrian government statistics, bilateral trade between Syria and Iran reached $312 million — this was lower than trade between America and Syria, despite various economic sanctions imposed by successive United States administrations on Damascus since at least the late 1970s.

The trade balance was largely to the benefit of Iran, which exported $297 million in goods to its long-term ally and imported only $15 million from Syria.

Bilateral investments are also paltry and do not exceed a handful of projects by Iranian investors in the Syrian manufacturing sector — mainly a petrochemical venture located south of Damascus and two car assembly plants based near Damascus and Homs. And while Syria joined the Greater Arab Free Trade Area in 2005 and signed a free trade agreement with Turkey as early as 2007, it signed a preferential trade agreement (PTA) with Iran only in 2011.

It is difficult to comprehend why the two countries failed for so long to expand their ties but a number of objective factors can explain this.

The two economies do not complement each other — the main export item for both countries is crude oil, while their main import items are oil derivatives, manufactured products and industrial equipment that are not produced in significant volumes; they do not have a contiguous border, as Iraq — which has had an extended period of poor relations with both countries — stands between them; there are no historical trade links comparable to the relations existing between Syria and Turkey from the Ottoman period or between Damascus and the Hejaz; since the Iranian revolution in 1979 the governments of the two countries have systematically prioritized their political and military ties at the expense of most other types of relations.

In recent years, a number of events helped change this dynamic, including the fact that economic issues started to take on increasing importance in the decision-making process in Damascus.

Several large tenders by the Syrian government were awarded to Iranian contractors in the energy, manufacturing and water sectors. These have included the construction of several power plants by Iranian companies, including a 470 megawatt (MW) combined-cycle plant awarded last year to Mapna; a water sewage project in the region of Latakia awarded in 2009 to Mirab, an engineering firm, for an amount of $64 million; segments of a water irrigation scheme worth $31 million in the area of Aleppo awarded to contractor Sabir and; the construction of 10 grain silos awarded to Tosee Siloha, a civil engineering house.

Another important turning point has been a change in relations between the two countries and Iraq, which has stabilized to some extent and whose government is now close to the Iranian authorities.

The improvement in ties with Baghdad helped both Syria and Iran envisage the PTA between them, and also to look at other ventures that use Iraqi territory. This has included, for instance, a quadripartite deal inked in early 2012 involving the sale of some 1,300 MW of electricity from Iran to Iraq, Syria and Lebanon. While Baghdad will receive 1,000 MW, Damascus and Beirut will share the balance.

More significant is the scheme to build a gas pipeline dubbed the “Islamic Pipeline”, a route that will carry gas from Iran’s South Pars Gas Field through Iraq and Syria. The 56-inch pipeline will be some 2,000 kilometers long and will have a daily capacity of 110 million cubic meters. The construction costs are estimated at between $2 billion and $2.5 billion. The long-term ambition of Tehran is to expand the pipeline in order to reach the crucial European market.

While the Syrian uprising brought back to the fore the security aspects in the relation between the two governments, it is likely that the potential “loss” of Syria, will not only be a major strategic setback for Iran but also mark a rapid end of promising economic opportunities that had just begun to unfold.

Note: This article appeared first in the February 2013 edition of Executive Magazine