Damascus struggles with chronic petrol shortages

Iran, which used to send oil to its Syrian allies on credit, is asking for upfront cash payments, citing its own problems.
Sunday 21/04/2019
At a standstill. Taxi drivers push their cars that ran out of fuel to a petrol station in Damascus, April 16.    (AFP)
At a standstill. Taxi drivers push their cars that ran out of fuel to a petrol station in Damascus, April 16. (AFP)

BEIRUT- After two weeks of a haunting petrol crisis, the worst in the country’s history, Syria has surrendered, lifting subsidies and allowing two stations to emerge in Damascus selling petrol at international prices.

Until early April, the price of one litre of petrol was 225 Syrian pounds (SP) (43 US cents). It will now be selling at 600 SP ($1.16) — more than double the cost.

For two weeks, massive queues obstructed traffic in Damascus as drivers waited for up to 16 hours to fuel their cars. Soldiers were stationed at petrol stations entrances to regulate traffic and orders were given that each car was eligible to receive at most 20 litres of petrol every five days.

Attempts at dividing weekdays between cars that had odd numbered registration and those with even numbers failed and chaos ensued. Some of those with financial means bribed attendants with 10,000 SP ($19.41) per fill-up or bought petrol from Lebanon. Those who couldn’t afford waited and waited.

The handwriting has been on the wall since early 2019, when the Syrian government passed a “smart card for petrol consumption,” regulating it at 400 litres per month.

Two years earlier, the public sector was forced to reduce consumption of petrol by 50%. Exceptions were given only to vehicles owned by the Ministry of Defence and ambulances. It was clear that the once oil-producing country was on the verge of an oil bankruptcy after eight years of war.

One year before the war started in 2011, oil sales used to generate $3.2 billion for the Syrian Treasury, accounting for 25% of revenue. Seemingly always in abundance, the government sold petrol at subsidised rates to Syrian citizens, packaging it as part of the services of the socialist state, which has been in power since 1963.

Subsidised products were supposed to compensate for mediocre salaries presented by the Ba’ath Party. In addition to petrol, they subsidised heating fuel, cooking fuel, bread and sugar. In 2008, fuel subsidies were partially lifted, raising prices 300%. Authorities explained that much of the subsidised commodity was being smuggled to Lebanon, causing great harm to the Syrian economy.

This time the situation is very different. Most of the oil wells were occupied by the Islamic State (ISIS) in 2014-15, which sold oil to Damascus via smugglers and intermediaries, at reduced prices. When forced to evacuate their self-proclaimed caliphate last year, ISIS destroyed most of the wells, reducing production to 0.05% of capacity.

Repair has been painstakingly slow because of a shortage of funds and Syria is currently producing no more than 24,000 barrels of oil per day, which doesn’t meet the country’s domestic needs of 136,000 barrels per day.

An additional problem is the widening geography that the Syrian government needs to accommodate, after retaking large sections from the armed opposition, including East Ghouta, Deir ez-Zor, Aleppo and southern Syria. Damascus needed to provide only for four cities that were under its direct control from 2012-18. As its territorial reach widened, so did its obligations, which required plenty of money to restore basic services to the liberated areas — money Damascus did not have.

Iran, which used to send oil to its Syrian allies on credit, is asking for upfront cash payments, citing its own problems after US sanctions were reimposed in November.

No other country dares sell oil to the Syrians, fearing automatic US sanctions. Countries or companies that deal with Damascus could be fined $250,000-$1 million, depending on the violation.

Syrians had pinned their hopes on getting petroleum-related products from the Arab world, after an initial rapprochement started late last year, with the visit of former Sudanese President Omar al-Bashir to Damascus, followed by the reopening of the UAE Embassy in Damascus.

That did not lead to economic aid or engagement, due to pressure from the United States. Syrian authorities recently accused Egypt of blocking oil shipments to Syria via the Suez Canal, in compliance with US sanctions.

In March, the Syrians made their first U-turn, allowing industrialists to import fuel and to sell it at black market rates of 92 cents per litre. The government rate remained 57 cents per litre but its tankers have been empty since mid-February.

Now, they have allowed the sale of petrol at international unsubsidised prices, raising anger among a population grinded with war and where an average salary in the public sector is no more than $100.

At the new prices, they can neither buy petrol nor fuel. One suggestion is to keep subsidies for government employees and students, letting the private sector buy both commodities at international prices.

“At the end of the day, lifting subsidies is a must,” said Amer Elias, a political analyst in Damascus and member of the ruling Ba’ath Party. “It needs a lot of preparation, however, which includes the redistribution of taxes and raising salaries throughout the public sector.”

He added: “Either we get a war cabinet that runs a war economy or else this war will not end as we wanted it to.”