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Re: Syria - Pipeline



--On 02 November 2000, 20:57 -0600 alert@stratfor.com wrote: 

> Stratfor.com's Global Intelligence Update - 03 November 2000
> _________________________________________________
> 
> _________________________________________________
> 
> Summary
> 
> Oil may once again flow in the pipeline connecting Iraq and Syria.
> The pipeline could produce up to $1 billion in revenue for the
> Syrian government. This would help stabilize the economy and
> President Bashar al-Assad's political base but dampen his
> government's appetite for economic reform.
> 
> Analysis
> 
> Syria and Iraq have agreed to re-open the petroleum pipeline
> between the two countries in November 2000. The Middle East
> Economic Survey reported the pipeline, closed since 1992, would
> open in the middle of the month and export about 200,000 barrels of
> Iraqi crude per day. The opening would be a boon to Syrian
> President Bashar al-Assad. Pipeline profits will help keep the
> Syrian economy afloat and Assad in power.
> 
> The line reaches from Kirkuk, the heart of Iraq's northern
> oilfields, to the Syrian port of Banias. The pipeline had a
> capacity of over one million barrels per day (bpd), but Syria shut
> it down in 1982 at the start of the Iran-Iraq war and it fell into
> disrepair. Politically estranged for nearly two decades, Syria and
> Iraq have fixed the pipeline and their bilateral relations over the
> last few years. The biggest step was opening an Iraqi interests
> section in Syria in February of this year the first diplomatic ties
> between the two countries in 19 years.
> 
> Syria won't actually export Iraqi oil. Rather, Damascus will
> receive about 200,000 bpd of Basra Light crude, to process in local
> refineries. Syria will then export an equivalent amount of Syrian
> Light crude. The kicker is that Syria will buy the Iraqi oil at
> reduced prices, but will export Syrian oil at market prices.
> 
> _______________________________________________________________
> 
> For more on the Middle East, see:
> http://www.stratfor.com/MEAF/default.htm
> _____________________________________________________________
> 
> Iraq won't maximize its profits on the deal, but simply finding
> another export route for its oil is well worth it. U.N. sanctions
> forbid opening the pipeline, but the Security Council is unlikely
> to punish Syria.
> 
> How much Syria will pay for Iraqi oil is unclear, but Baghdad has a
> similar arrangement with Jordan. Amman has no oil resources, and
> imports 94,000 bpd from Iraq at sweetheart prices averaging about
> $9.50 per barrel, according to the U.S. Department of Energy. Quite
> a discount, when current oil prices hover around $30 per barrel.
> 
> A conservative estimate might put Syria's purchase price at $15 a
> barrel. That leaves about $15 of profit for the Syrian government
> per barrel of oil at current prices. This comes to nearly $1.1
> billion in annual revenues, which will undoubtedly go straight into
> Syrian government coiffeurs. This amount is about 5 percent of
> Syria's gross domestic product (GDP), according to World Bank
> figures.
> 
> President Assad is most likely to use the windfall to finance his
> new job creation plan, announced in early October. The five-year,
> billion-dollar plan is to create 440,000 jobs for unemployed youth
> between the ages of 18 and 24. The plan seemed ludicrous when first
> announced; Syria simply didn't have the money to fund it. But
> Damascus may have the cash when the pipeline opens. This is good
> news for Syria's youth and for Assad's somewhat tenuous hold on
> power.
> 
> Syria's economy definitely needs help. GDP has plunged by more than
> 20 percent since 1995. The country had two years of recession
> caused by low oil prices and a severe drought. Growth should resume
> in 2000, but only at a rate of about 2.2 percent. But the
> population is growing fast about 4 percent a year and economists
> estimate Syria needs an annual growth rate of about 5 percent to
> make progress.
> 
> __________________________________________________________________
> 
> For more on Syria, see:
> http://www.stratfor.com/MEAF/countries/Syria/default.htm
> _____________________________________________________________
> 
> Low investment, an overvalued currency, government subsidies, and a
> hard currency shortage have crippled the economy. Large, state-
> owned corporations continue to control 40 percent of the national
> wealth and strategic sectors of the economy, including oil,
> electricity and banking. The Syrian government claims the
> unemployment rate is 5 percent; some Western observers say the rate
> is four times that high.
> 
> The existing economy relies primarily on oil exports, which account
> for 55-60 percent of export earnings and one-third of GDP,
> according to the U.S. Energy Information Agency. But production has
> declined over the last 5 years; many of the fields have reached
> maturity and further exploration is slow. Some predict Syria will
> need to import oil within a decade.
> 
> The other major source of income for the Syrian government and the
> one that keeps it in power is the profit from drug smuggling
> through Syria and Syrian-controlled Lebanon. Syria cut back its
> drug production in the mid-1990s under heavy U.S. pressure, but
> Damascus still acts as a transit station for narcotics flowing to
> Europe from Central Asia, as well as into Egypt and North Africa,
> Israeli intelligence sources estimate the Syrian government rakes
> in about $1 billion a year, according to the Jerusalem Post. Hafez
> al-Assad used the money to enrich allies and buy off opponents; the
> younger Assad is likely to follow his lead.
> 
> With oil money to keep the masses quiet and drug money to appease
> his potential rivals, Assad may have bought his regime a measure of
> stability. But that may be bad news for the Syrian economy in the
> long term, as the money may allow Assad to postpone difficult but
> desperately needed economic reforms.
> 
> _______________________________________________
> 
> (c) 2000 Stratfor, Inc.
> _____________________________________________
> 
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> -- 
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=======================================================
'I like getting into hot water - it keeps me clean.'
Chesterton
-------------------------------------------
'The truth which sets men free is often the truth they would rather not
hear.'
-------------------------------------------
Fiorella Sultana De Maria,
New Hall College.
Telephone: (01223) 524 588
Mobile: 07939 135760



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