On June 20, China's state-owned energy and chemical giant,
Sinopec, named a new manager for
its subsidiary in Syria. The move, coming nearly a decade after the company suspended its
activities in the war-ravaged nation, has ignited speculation that Beijing is
finally ready to re-engage in Syria’s oil sector.
اضافة اعلان
Despite the risks, Beijing’s maneuver wasn’t entirely unexpected.
Several international oil companies are
contemplating a return to the Syrian market. And yet, even with fresh management in
place, the path forward for Sinopec, like its peers, is littered with
uncertainty.
Dating back to 2008
Sinopec's initial tryst with Syria's oil sector dates to 2008,
when the company
acquired Canadian-owned Tanganyika Oil, leading to the formation of its Syrian subsidiary, SIPC Syria.
Sinopec's current holdings, which include fields in Syria’s northeast like Oudeh,
Tishreen, and Sheikh Mansour, collectively yield 21,000 barrels of oil daily.
The civil war forced Sinopec to terminate its activities in 2013
The country’s civil war forced Sinopec to
terminate its activities in Syria in 2013. But oil production in the self-governed
northeast – local actors have been producing oil there for years – appears to
have motivated Sinopec to reconsider its position. In 2016, the company reportedly sent experts to survey its holdings
and to discuss the future of their fields with the Kurdish-led autonomous
administration.
Those talks stalled, and Beijing’s engagement in the war-torn
country remained modest. While several Chinese companies have
expressed interest in investing in the country, Syria’s poor economic performance has
discouraged most serious offers.
“This is not political,” said Gulfsands CEO John Bell. “We are trying to find an indigenous solution to a humanitarian crisis that has gone on for too long.”
Sinopec's recent decision to appoint representation on the ground
in Syria isn’t linked to improved circumstances; the country’s northeast
remains unpredictable. Instead, it seems to be driven by the broader efforts of
prominent global oil entities to lay the groundwork for a measured return to
the Syrian market.
UK-based Gulfsands Petroleum, which has substantial assets in
northeast Syria, is by far the most active. To expedite a return to operations,
the company has
pushed a plan that
would allocate revenue from oil sales to finance humanitarian aid projects
across the country.
“This is not political”
“This is not political,” said Gulfsands CEO John Bell. “We
are trying to find an indigenous solution to a humanitarian crisis that has
gone on for too long.”
Despite the rationale, the initiative hasn’t been endorsed by key local,
regional, and international actors, a lack of progress Bell calls a “travesty.”
Sinopec has arguably more influence than Gulfsands in the region, but it’s not
clear a Chinese company can be any more successful in moving things forward.
Sanctions imposed on the Syrian regime have made it difficult to
engage in oil-related investments in the country. But Chinese businesses tend
to have more tolerance for risk than their peers, as evidenced by the
significant flow of oil to China from Iran. In addition to the financial and energy benefits of engagement
with Tehran, Beijing’s sanctions-defying actions strengthen its image as a
major power willing to do business where others won’t.
A warning from the US
In Syria, sanctions are also an issue but they are not the only
obstacle. In 2019, the United States
warned businesses against attending an annual trade fair in Damascus, saying
participants would expose themselves to possible US penalties. China's
ambassador to Syria, Feng Biao, dismissed the threats, calling the fair “a
source of power for the Syrian people and a window to develop Syria's economy.”
Fifty-eight Chinese companies attended, he said.
But attending trade fairs is low risk. Investing vast resources to
pump oil in a volatile region ups the ante considerably. To succeed, Sinopec
will need to reach agreements with both the Syrian regime and the de-facto
authorities that control and manage the region.
While similar efforts failed in 2016, much has changed since then.
Chief among them is the deteriorating economic situation across Syria, which,
paradoxically, creates incentives for all parties. Syria needs investment, and
China needs oil.
Still, two thorny issues require negotiating. The first is finding
an arrangement that would allow the autonomous administration to keep
generating revenue from the respective oil fields. In Gulfsands’ Block 26, also
in the northeast, local actors have produced more than 41 million barrels of
oil since 2017, worth an estimated $2.9 billion.
Those talks stalled, and Beijing’s engagement in the war-torn country remained modest. While several Chinese companies have expressed interest in investing in the country, Syria’s poor economic performance has discouraged most serious offers.
The second is securing buy-in from international actors,
particularly the US, which has boots on the ground. Given the current state of
Sino-US relations, this seems unlikely.
Proceed anyway
China may be willing to proceed anyway. Reaching an agreement
would not only bolster Sinopec's earnings but would pave the return for other
Chinese companies that once played pivotal roles in Syria's oil sector, such as
Sinochem, China National Petroleum Corporation, and its subsidiary, China
Petroleum Technology and Development Corporation. Moreover, it could serve as a
catalyst to entice other Chinese businesses to explore opportunities within
Syria's borders.
While the allure of reengaging in Syria's oil sector is obvious,
the path forward for Sinopec is rocky. The appointment of a new manager for its
assets in Syria suggests that, at the very least, China is interested in
keeping its options open. But with so much up in the air, Beijing may find
itself compelled to exercise patience until circumstances align more favorably.
Dr. Haid Haid is a Syrian columnist and a consulting
associate fellow of Chatham House’s Middle East and North Africa program.
Twitter: @HaidHaid22
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