Oil Race in Syria and Iraq
The defeat of ISIS and the demise of this quasi-state is going to change the conflicts in Iraq and Syria. The conflicts between the previously neutral or previously partnered sides now take center stage. In the last months we saw tensions rising between the Syrian Arab Army and Syrian Democratic Forces, between Iraq and Iraqi Kurdistan, between Russia and the US. These conflicts are rooted in both economic and military-political reasons. The Caliphate’s defeat would bring a scenario where all the sides that had come into control of certain territories by military means would try to keep them during the post-war negotiations concerning the fate of Syria and Iraq. The struggle for cementing the positions leads the sides to race for control of territories with strategic or economic value. Syria is a clear example of this, with the race to Resafa or with the race to the Syrian-Iranian border circumventing At Tanf leading to clashes between Russia-backed and the US-backed forces. We see it now with the race for the oil of Deir ez-Zor province. Despite all the territorial or strategic needs, the oil is the lynchpin in all this. The oil is a chief concern for Russia and the US from an economical standpoint, hence the presence of Russian and US oil companies in the region. There is nothing surprising about the fact that the key events in these wars are playing out near the largest oil fields formerly controlled by the Caliphate, and that oil would play an important part in forming the borders of the post-war establishment in the region.
Following the occupation of Iraq in 2003, the US oil companies rushed in after the troops, and, as part of “Restoration of Iraq” campaign, started pulling oil in the interest of the new masters of Iraq. In due time the other companies were allowed into the market, like French Total and Russian Lukoil, for example. The Caliphate’s appearance in 2013-2014 changed everything in the oil sector of Iraq. Captured by the Caliphate militants, some oil wells and factories stopped working legally, instead working for the “Global Jihad”, with a number of countries ready to help transferring the Caliphate’s oil for damping prices. This supplied the regime in Raqqa with considerable money, which was used to maintain its army, recruit numerous allies and prepare various jihad-inducing events. Nevertheless, even during the war against the Caliphate, the companies in the territories controlled by the Iraqi and Iraqi Kurdistan governments still produced oil, including Russian ones.
In 2017, the Russian state-owned company Rosneft entered Iraqi Kurdistan, with the help of its Chinese friends. That’s nothing unusual for Rosneft in the Middle East. The recent privatization of Rosneft was done by, among others, Qatar QIA fund. This happened despite Qatar being in prime opposition to Russian-Iran coalition, until the conflict between Saudi Arabia and Qatar had made the Emir of Qatar change his tune. Nevertheless, the Qatar deal didn’t work out because of political and economic reasons. CEFC China Energy tried to make a deal with Qatar as intermediary, but complications arose due to problems with controlling its organs. This led to possible sequestration of company accounts, so Russia had to close the deal with credit under the risk of serious economic and reputation damages. This once again proves that Qatar isn’t the most reliable partner in the Middle East, and that risk should always be accounted for when dealing with China, both in this case and in the case of joint projects in Kurdistan. Otherwise the expenses might end up too high. Considering China’s economic interest in the region and its potential role in restoration of Syria and Iraq, China and Russia will be partners and competitors in the region at the same time. This is inevitable in a political and economic sense, and the results of this cooperation will depend on their respective leaderships.
Anyway, this complication did not stop Rosneft from entering Iraqi Kurdistan. Rosneft opened an office in Erbil and commenced work on big infrastructure projects, which neither the US, nor Baghdad liked, the latter deeming the deal “illegal”. Both Russian and the US oil companies are operating in an unstable region on the brink of war, where local governments struggle for control of oil deposits. The recent retaking of Kirkuk and nearby oil deposits by Iraqi Army and Shi’ite militia demonstrates the acuity of struggle, which concerns both local governments and oil companies. In this regard the economic interests of oil companies have to take the military-political contradictions into account. The US project of autonomous/independent Kurdistan is met with resistance from Iraq, Iran and Turkey. Russia tries to stay out of this, supporting relations with both Baghdad and Barzani. Baghdad is not satisfied with this and tries to do everything it can to sway Russia to give more support to the official Baghdad’s position of opposing Barzani and US intentions. Russia does not relent, and while it officially supports the territorial integrity of Iraq, Russia cooperates with both sides of the conflict: Iraq gets weapons from Russia, but at the same time Russian oil companies enter Kurdistan with the approval of Erbil.
The conflict in Kirkuk, having led to clashes between Iraqi government forces and the Peshmerga, threatens these plans. If the conflicts were to intensify, Baghdad and Tehran attempts of diminishing Barzani’s influence would jeopardize Russian oil companies in Kurdistan. Although there is still a possibility that if the territory changes hands, Russia will manage to make a deal with Baghdad in order to continue working in the region, doubly so, considering that Iraq understands Russia’s support is vital for Iraq to keep its territories intact. The cooperation of Russia, Iran and Iraq as part of Bagdad Information Center and other organizations leaves them open to balance out their positions. It is also worth remembering that Iran, being Russia’s main partner in the coalition, has a lot of influence over Iraq’s government. Russia will remain in the region no matter what happens between the Iraqis and the Kurds, with Russia distancing itself from them as much as possible and urging conflicting sides to negotiate within Iraq’s territorial integrity framework, letting the US and Iran deal with each other in Iraq.
Russian oil companies reported fully reestablishing their operations in Syria back in summer of 2015, when stabilizing the situation in the region had been deemed necessary to continue working. Now the situation is far from fully stabilized, even though the situation has changed considerably in two years of Russian presence in Syria.
The oil and gas sector in central Syria is largely under control. The recovery efforts are starting to take place there, as without these resources Assad won’t be able to see through the recovery of the Syrian economy even with help from Russia, China and Iran. Russia’s oil sector showed interest in developing Syria’s oil deposits last summer, and some sources stated that Russia is promised, apart from the military bases, up to 25% of Syria’s oil and gas sector as compensation for support in the war.
The US won’t help, so Damascus expects the countries mentioned above to participate and help in reestablishing control over the oil fields of Eastern Syria and their reintegration into Syria’s economy. Russia and Iran help the Syrian Arab Army, and China promises to invest considerably after the situation stabilizes. It is important to bear in mind, however, that the US and its allies have their own ideas about Syria.
According to the US, the Syrian conflict should continue even after the Caliphate is defeated, which we can see in southern Syria, where the US are occupying At Tanf, and north-eastern Syria, where the US uses the Kurds to take control of oil deposits in the north of Deir ez-Zor province. The recent successes of the Syrian Democratic Forces, having taken control of Omar oil fields and the conflict near Koniko gas fields, where Russian aviation hit the ISIS militants and also “clipped” Syrian Democratic Forces units there, reflect on the contradictions regarding the control over oil in Deir ez-Zor. The US needs the oil to economically secure the Kurdish project in Rojava, as this would make it more independent from Damascus. Assad and his allies are committed to reestablishing Syria’s control over the oil deposits: this would provide a basis for the post-war restoration projects, while Russia and China would satisfy the interests of their own oil companies, which would develop the deposits after the war is officially over. In this scenario, Iran would be able to build a “Shi’ite belt” from Tehran to Beirut across Syria.
Of course, there is no possible way to pull oil efficiently when there is a war going on nearby. High-profile companies tend to avoid such risks. Even using PMCs to secure the facilities wouldn’t guarantee total security, as it wouldn’t rule out threats of terrorist and suicide attacks, and the forays of not quite finished off Caliphate units. On this count the race for Deir ez-Zor’s oil will not only define the temporary border between Syrian Arab Army and Syrian Democratic Forces, but also will clear the region out of the considerable Caliphate forces there, which would have hindered the economic restoration of the oil deposits and facilities. As far as the Caliphate concerned, losing these deposits makes no difference, as Russian aviation in the region makes its impossible to pull and transport oil, diminishing the oil earnings in the Caliphate’s budget that’s been shrinking since 2016.
The rest will depend on whether the agreement with the Kurds is reached. If, in view of Russian efforts, Assad and the Kurds will come to terms in Damascus or Astana, then some temporary economic solutions will be put in place, with the Kurds deciding to forgo the separatist sentiment supported by the US in favor of their new role in the post-war Syria. If the agreement is not reached, then relatively soon the border between Syrian Arab Army and Syrian Democratic Forces may become a frontline, while the Syrian Army will not only aim to occupy the Tabqa region, but also to push the Kurds out of the oil deposits they would have had captured during the current race. A similar thing happened with the oil deposits near Kirkuk. This would heavily concern Russia, as it not only would threaten the post-war interests of Russian oil companies, but also would raise even more tensions with the US, who would take advantage of the conflict and hinder Russia’s attempts to end the war in Syria. Russia will try to evade escalating the situation, but if push comes to shove, I think Russia will take Assad’s side. Especially so, if the US tries to realize the final scenario of dismembering Syria’s territory using the Kurds.
Therefore political and economic conflicts between the sides fighting against the Caliphate are present and escalating even in Syria and Iraq. This is somewhat similar to the end of 1944 and the beginning of 1945, when with every loss the Third Reich took, the conflicts between the USSR, the US and the British Empire started rearing their heads more and more.
Now the sides of the conflict are concerned with the post-war political and territorial organization of Iraq and Syria, and also with securing positions to let them realize their strategic and economic plans in the region after the war. As Russian and Chinese companies demonstrated, some do not even wait for the war to end, and try to secure their positions even before everything is safe. This is a risk, but if Iraq and Syria remain wholesome states with singular governments, the risk will pay off, in my opinion. The US try to force the matter of control over the oil in Deir ez-Zor and Kirkuk by using the Kurds. Hence the escalation in the regions. The US considers the escalation to be an advantage in opposing Russia, Iran and China, therefore ending the war against the Caliphate will not mean achieving peace in the region. The oil in Iraq and Syria will be the main factor of conflict in the Middle East.
Source: Colonel Cassad