SYRIA - Iraq-Syria Pipeline Accord.

During a visit to Damascus, Iraqi Foreign Minister Hoshyar Zebari was on Dec. 12, 2007, quoted as saying the Syrian and Iraqi governments had agreed to accelerate efforts to re-activate this pipeline. He said this followed steps taken by Damascus to help the US-backed Iraqi government on the security front. He said a contract to study the pipeline was awarded to a Russian company, which he did not name.

Zebari said: "The Russian company is already performing surveys, but they're going slow. We discussed this and agreed that the work needs to speed up". The pipeline would expand Iraq's limited crude oil export options. Syria, faced with declining oil output its own and isolation by the West, is eager to earn hard currency from transit fees.

The Iraqi government in early 2008 held talks with a number of firms regarding development of the 'Akkas gas field in Anbar province, north-west of Baghdad and just 40 km from Syrian border and close to existing government-owned facilities in Syria. Damascus wants to import the gas from 'Akkas by pipeline. Syria is also to import gas from Iran and Russia through Turkey, with Egyptian gas expected to reach this market in March 2008 through a pipeline extension from Jordan (see gmt12SyriaGasTrade-Mar17-08.

The Iraqi crude oil pipeline issue had been controversial since early 2000. The Ba'thist regime of Syria, then headed by President Hafez al-Assad, had responded favourably to a geo-political overture from the Ba'thist dictator Saddam Hussein, who had wanted to end an old dispute with Damascus and boost two-way trade on a full scale in open defiance of a comprehensive UN embargo against Baghdad.

The two Ba'thist leaders agreed on a special oil deal before Assad died in June 2000 and was succeeded by his son Bashar. The latter followed up on that deal and, despite the UN embargo and repeated US/UK opposition, the volume of Iraqi crude oil supplies to Syria increased to reach 200,000 b/d in late 2000/early 2001.

The Iraqi crude, for which Syria paid at market prices less a discount of about $15/barrel, was most suited for the country's two oil refineries. Built in the 1940s, the Syrian refining system had been configured to use Iraqi crude (see background in down12SyriaExpRefMar20-06).

Syria now imports heavy fuel oil (HSFO) from Iraq and exports gasoline to Iraq by land trucks. But the volumes in two-way trade have dropped in recent years. Syrian imports of Iraqi HSFO now average about 10,000 b/d, supplementing about 20,000 b/d of seaborne imports, to run some of the country's thermal power stations.

Syria is having gas-fired power plants under construction to reduce the country's pollution and reduce its dependence on oil-fired electricity. This shift and other uses of natural gas will increase the need for Syria to import gas from neighbouring countries, with Syrian demand for this clear source of fuel expected to out-strip local production in the coming decade despite a rise in domestic output in a few years (see gmt11SyriaFieldsMar10-08).

Syria also exports electricity to Iraq and to Lebanon. But the amounts vary and occasionally Syrian exports are suspended when domestic requirements rise and the output of the country's hydro-power plans decline. Syria's link to the two neighbouring countries is part of an Arab inter-connection system which ties the electricity grids of Egypt, Jordan, Syria, Iraq, Lebanon and Turkey. Occasionally, Syria imports electricity through this system as well.