Wants to bypass Hormuz – with oil pipeline through Syria

 

Lama Alshehaby/TT

 

Published 12.26

 

The oil refinery in Baniyas in western Syria. The picture was taken on May 1 this year. Photo: Omar Sanadiki/AP/TT

The Iran war and the crisis around the Strait of Hormuz have shaken the global oil markets.

Now Syria hopes to open an oil pipeline from Iraq to the Mediterranean and thereby establish itself as a power factor in the energy market. But the challenges are many.

Since Syria's interim president Ahmad al-Sharaa took power in December 2024, the country's relationship with the United States has strengthened. Trump has removed Syria from the terror list and sanctions have been eased, opening up new business opportunities. At the same time, the oil market is shaking as a result of the war between the United States and Iran.

In mid-July, a letter of intent was signed in Washington DC to rebuild an oil pipeline between Kirkuk in northern Iraq and Baniyas in western Syria, which was destroyed in 2003 during the Iraq War. The aim is to create a direct export route for Iraqi oil to the Mediterranean.

“If it works economically, it is a sound idea in principle, since it benefits both countries,” says Aron Lund, a Syria expert and Middle East analyst at the Swedish National Defense Research Institute (FOI).

Alternative route

The unrest around the Strait of Hormuz has increased interest in alternative transport routes among oil-producing countries, including Iraq and the United States, Lund emphasizes.

“The fact that it is coming right now is about building an infrastructure to be able to deliver oil from the countries around the Persian Gulf to Europe and other countries, which Iran cannot stop,” he says.

The old Kirkuk-Baniyas oil pipeline was about 900 kilometers long and was put into operation in 1952, but was closed in 1982 as a result of the conflicts between Damascus and Baghdad during the Iran-Iraq war. The pipeline remained closed until 2000, when limited oil flows resumed. It was badly damaged during the 2003 Iraq war and has been out of service since then.

The reconstruction is expected to take two and a half years, Syrian sources told Al Jazeera. The US State Department estimates a capacity of about 2 million barrels of crude oil per day.

Total flow through the Strait of Hormuz averaged about 15 million barrels per day last year, according to the International Energy Agency (IEA).

Challenges for investors

Thina Saltvedt, oil expert and chief analyst at Nordea, describes the agreement as a “serious proposal,” but emphasizes that it requires enormous investment. The question is also who will take the financial risk for the project in an insecure country like Syria.

– That is some of the information that we have not received yet, she says.

Middle East analyst Aron Lund also says that investments of this size require a long-term perspective.

– If you build such an oil pipeline, you have a very long perspective to get your money back. Syria is not a country that has a long perspective right now.

Lund points to the remaining IS threat in Syria, political tensions in Iraq and the risk that the project will become unprofitable if the US and Iran reach a new agreement.

Regional energy corridor

The new Iraqi-Syrian oil pipeline would not replace the Strait of Hormuz, but it could reduce dependence on the strait in the event of war or conflict, according to Aron Lund.

For Syria, the initiative is about establishing itself as a regional energy corridor and strengthening the country's energy security. Oil producer Iraq wants to circumvent the disruptions in the Strait of Hormuz and increase its export quota within OPEC, says Saltvedt.

For the EU, such a pipeline would mean a shorter shipping route for Iraqi oil via the Mediterranean. But it is uncertain what type of oil and what volumes might reach Europe, she points out.

Iraq accounted for 5.8 percent of the total volume of oil imported by EU member states last year, according to the European Council.

Facts

Iraq oil pipeline to the Mediterranean

Iraq, the second largest oil producer in OPEC, has been hit hard by the shutdown in the Strait of Hormuz. The country's oil production fell to 1.9 million barrels per day in June, compared with around 4.2 million barrels per day in February.

In mid-June, Iraq presented plans to increase its oil exports via Syria to around 50,000 barrels per day. By the end of the same month, around 1,000 tankers carrying Iraqi oil had passed into Syria.

On July 17, Iraq and Syria signed two letters of intent to rebuild a historic oil pipeline between the countries. The pipeline was built in 1952, but has been shut down since the US invasion of Iraq in 2003.

The new pipeline is estimated to have a capacity of about 2 million barrels of crude oil per day, according to the US State Department.

Sources: Reuters, CNBC, Al-Jazeera.