Russia’s economic agenda in Syria

Friday 25/09/2015
Will have to wait. A 2013 file picture shows oil pumpjacks at the Rumeilan oilfield, Qamishli province.

Beirut - Russia’s military involve­ment in Syria seems to have a hidden economic agenda, especially in terms of the Mediter­ranean country’s offshore oil and gas reserves but, considering the Syrian civil war, Moscow’s invest­ment plans need to wait and focus on coastal, predominantly Alawite areas.

Russian investments in Syria amount to $19 billion, the Damas­cus Chamber of Commerce said in 2011. The figure is widely believed to have increased by $1 billion since 2011, the year the Syrian uprising against President Bashar Assad’s re­gime started before quickly turning into a war.

The investments focus on land oil and gas projects, although the war has slowed Syrian plans to develop offshore reserves.

Syrian Foreign Minister Walid Muallem said September 17th that Russia had stepped up supplies of weapons and ammunition to the Syrian Army. He told state televi­sion the Syrian government would be prepared to ask Russian forces to fight alongside its troops if needed, though he said there were no such soldiers there yet.

The Russian government the same day said its military support for Damascus was to help the Syrian Army fighting terrorism, safeguard­ing Syrian statehood and preventing a “total catastrophe” in the region. Washington, which wants Assad gone from power, said it believes Russia is undertaking a significant military build-up that could exacer­bate the war but noted it would not mind seeing Russia join the inter­national alliance fighting terrorist Islamist militants in Syria.

The Syrian port city of Tartus hosts a Soviet-era naval supply and maintenance base, under a 1971 bi­lateral agreement. Since Russia for­gave Syria of $9.8 billion of its $13.4 billion Soviet-era debt and became its main arms supplier, Russia and Syria have conducted talks about enlarging the base. Since 2009, Rus­sia has been renovating the Tartus naval base to allow access for larger vessels.

Estimates that Russia invests $20 billion in Syria seem too far-fetched, according to Jihad Yazigi, a Beirut-based Syrian writer on his homeland’s economic and political affairs.

“Russian investments in Syria are generally weak, although the two countries enjoy good bilateral trade, which amounted to $1.1 billion in 2010,” said Yazigi, editor-in-chief of the Syria Report.

Otherwise, Russian investments in Syria focus on gas and oil. In De­cember 2011, Damascus signed a major oil and gas deal with Russian company Soyuzneftegaz allowing for offshore drilling, development and production in Syria’s territo­rial waters for the first time, he said. The deal permits the exploration of 2,190 square kilometres in the Medi­terranean. Soyuzneftegaz will cover the costs, which are estimated at about $90 million.

Another example is the $27 mil­lion investment by Russia’s Tat­neft in oil wells in eastern Syria, which the Islamic State (ISIS) has captured. The Russian regional oil company, whose production base is in Tatarstan, has a production-shar­ing agreement with Syria’s state-owned General Petroleum Corpora­tion, which is on a European Union blacklist under a sanctions regime aimed at isolating Assad. Tatneft had halted operations in 2011.

Syria possessed 2.5 billion bar­rels of crude oil as of January 2013, which makes it the largest proved reserve of crude oil in the eastern Mediterranean, according to Oil & Gas Journal estimates. In 2010, the US Geological Survey predicted that as much as 1.7 billion barrels and 122 trillion cubic feet of natural gas could be recovered.

“There were talks for building a $100 million hotel by a Russian company in Latakia, but not much progress has been reported due to the war,” Yazigi said. “Meanwhile, you do not see Russian investments in banks, real estate or industry, for example; Russian companies that invest abroad usually do so in en­ergy projects.”

Yazigi warned that Russia, which is under Western sanctions due to its involvement in the Ukraine con­flict, might not be capable of giving economic help to Assad’s regime. In July, Syria accepted a $1 billion credit line from Iran, he recalled. “It came on the heels of Russia’s re­jection to do the same, almost cer­tainly due to Russia’s own economic woes.” Russia’s economic ambitions in Syria seem poised to await better circumstances but, in any event, the ambitions are not likely to exceed the coastal strip, which is domi­nated by Assad’s Alawite minority confession.

“In an interview conducted with him by Syria’s quasi-official daily Al- Watan on September 14th, the com­mercial attaché at the Russian Em­bassy in Damascus, Igor Matviev, talked about many things, including plans for building a ‘village’ for Rus­sian exports in Latakia,” Yazigi said.

“It was interesting that he men­tioned Damascus once and Latakia ten times. It is up to you to judge what this would mean.”