Syria’s Unreported Energy War – Part Two

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As part of the previous article, reductions in fuel and electricity supplies in Syria were described as reaching ”a breaking point.” Shortly after the last article came out, the situation hit that breaking point.1.Volume 3, Issue 1 : The Week in Review For over a week, the country was paralysed as a bout of cold weather hit while supplies of diesel and gasoline started running out. Black market prices soared, factories stopped working and images from Syria’s major cities of lines of cars kilometres long waiting for gasoline went viral on social media. The immediate situation was relieved by February 13 as new shipments of fuel started to arrive,2.Promises to improve electricity after the arrival of 136 thousand tons of oil to the Syrian ports : Enab Baladi but the underlying problems still exist.

Shortages and rationing had already been a problem in Syria before the Islamic State (IS) overran the gas fields in Homs this past December.3.Volume 3, Issue 1 : The Week in Review Domestic fuel supply issues became more acute after the fall of Palmyra, increasing electricity rationing up to 20 hours a day in some areas and forcing black market prices of gasoline and diesel to increase.4.Volume 3, Issue 1 : The Week in Review While electricity rationing had seen a marked increase in December and January, gasoline and diesel rationing mostly held steady until late January. Difficulties in the supply of gasoline and diesel received little attention, though the warning signs where present.

Refugees who fled the Iraqi city of Mosul due to the fighting between government forces and Islamic State (IS) group jihadists, queue for heating fuel at the UN-run al-Hol refugee camp in Syria’s Hasakeh province, on January 29, 2017. / AFP PHOTO / DELIL SOULEIMAN

In early 2017, reports emerged that operations at the major port of Tartous were nearly stopped due to diesel shortages,5.Tartous: lack of fuel threatens economic facilities to stop : D.N.N and by late mid-January some news sources claimed only 10% of industrial diesel needs were being met.6.Sadkob believes only 10% of the needs of plants for diesel .. Industrialists propose the establishment of a company to import … Debbs to «home»: No problem to raise support for the availability of Article : Al – Watan On January 21st, the Ministry of Oil cut diesel supplies to Hama by 27%.7.https://goo.gl/dW1ODu Then on the 26th, the governor of Hama cut family diesel allowances by 60%.8.https://twitter.com/Jacm212/status/824644580008165377 9.Al – Watan On January 28th, reports came out that “hundreds” of factories in the Damascus area had stopped work due to diesel shortages and the price of diesel jumped by 15% in a few days to 400 Syrian Pounds (SYP) a litre.10.Hundreds of factories stopped production with the absence of diesel and litres exceeding 400SYP : Aliqtisadi The situation became so concerning that on January 31 the Syrian Government approved an extraordinary measure to allow private industrialists to import diesel themselves directly from Lebanon, though this wouldn’t be finalised for several weeks.11.The government allows the industrialists to import their fuel needs : D.N.N

Damascus, 2017. The message reads: “My love, I brought you a gallon of fuel.”

This measure would later be extended to cover the agricultural sector as well.12.The government allows the industrialists to import their fuel needs : D.N.N The measure was a ”watermark” signalling the severity of the crisis, as Syria has clamped down on imports to avoid the leakage of much needed foreign currency, which would flow out of Syria to finance imports.13.Insurance of fuel oil for the agricultural sector, like industrialists : D.N.N Syrian misfortune was compounded when unusually late cold weather hit the country, forcing the government to reprioritise electricity and diesel supplies to rural areas to protect crops, while competing demand for diesel to provide heating shot up.14.The Assad regime classifies “Magi”, “Alandoumi” and dates of luxuries and prevents importation : Alsouria 15.https://twitter.com/Jacm212/status/786586827910111233

Over the following week this perfect storm manifested itself in a rise of domestic fuel costs and extreme shortages. Prices for gasoline and diesel exploded, with reports that the black market price of gasoline hit 1000 SYP a litre in some places,16.Al – Watan 17.https://twitter.com/Jacm212/status/827226258211749889 18.Al-Ba’ath 19.During The Exposure To The Waves Of Frosts And Floods … Various Damages In The Crops Of Tartous .. No Compensation For Farmers : Panorama Tartous
a hefty sum in a country where the estimated average monthly wage is only 28,000 SYP.20.https://twitter.com/HamaNews1/status/82828103331337830421.https://twitter.com/Jacm212/status/829374985160507392 22.https://twitter.com/HamaNews1/status/83040581334066790523.https://www.facebook.com/L.N.N10/posts/1302318913147451?comment_tracking=%7B%22tn%22%3A%22O%22%7D For comparison, official prices are 225 SYP for a litre of gasoline and 180 SYP for diesel.24.Economist: Syrian family became under the threat of poverty by 119 thousand pounds : Alsouria Images and video of lines of cars waiting for gasoline, some allegedly three kilometres long, emerged on social media. Surprisingly these images and videos showed that shortages were present even in the coastal provinces of Syria, which have historically been bastions of support for the government and enjoyed less rationing.25.Five sectors rose prices in 2016 adversely affected the Syrian citizen للمزيد: https://www.enabbaladi.net/archives/122646#ixzz56uY58Nfw – Enab Baladi Transport was largely shut down26.https://twitter.com/Jacm212/status/828717234239467520 27.https://www.facebook.com/photo.php?fbid=221637534910169&set=a.175254332881823.1073741828.100011917725383&type=3&theater%20https://www.facebook.com/akhbaralaan/videos/1313136655399049/ 28.https://www.facebook.com/Moadamieh.news.network1/photos/a.161332610714766.1073741828.161092110738816/749821738532514/?type=3 and drivers’ strikes such as those in Suweida only worsened the situation.29.The shortage of fuel oil causes a stifling crisis in the transportation of Tartous .. The fuel is sold on the black market : Tishreen 30.Al – Watan31.After gas, water and electricity … the crisis of diesel fuel is rising strongly – Economy2Day On February 11, Prime Minister Imad Khamis issued a proclamation ordering government bodies to reduce fuel consumption by 50%, excluding hospitals, bakeries and the Ministry of Defence.32.A strike by Swaida drivers prevents employees and students from moving – Al – Watan Shortly thereafter, the first shipments of fuel from 200 billion SYP in new fuel contracts began to arrive, and shortages started to ease up.33.Khamis recommends cutting fuel consumption by public bodies in half : Aliqtisadi 34.https://www.facebook.com/dimashq.now/posts/1151228571669420

Key findings

In comments to Parliament, Minister of Oil and Mineral Resources Ali Ghanem finally gave updated numbers for energy demand and production in Syria as follows:35.The bottlenecks and congestion in front of petrol stations in Damascus and the promised “petrol” steamship have not yet arrived : Alsouria

Domestic Production:

  • Oil- 3,000 barrels a day
  • Liquefied Petroleum Gas(LPG- propane/butane)- 40 tons a day
  • Natural Gas- 6.6 million cubic meters a day (prospectively)

Demand:

  • Gasoline, diesel and other petroleum derivatives- 9.5-10 million litres a day (or, 57-60,000 barrels)
  • Heavy Fuel Oil- 6,500 tons a day (47,600 barrels)
  • Natural Gas- 1,300 tons a day (14.8 million cubic meters)

This meant that to meet current demand, Syria needs around 101-104,000 barrels of oil and 8.2 million cubic meters of gas a day in imports. Given the language used in his statement, and previous statements over the past few months which put gas production lower and demand higher, the need for gas is likely higher than currently stated.36.People’s Assembly discusses the performance of the Ministry of Oil .. Ghanem: Oil supplies will improve starting next week and will be reflected on the distribution of derivatives : SANA Statements by Prime Minister Khamis to Parliament – in which he blamed Iran for not sending fuel for three months – also revealed the prices paid by Syria for fuel imports, allegedly $550 USD a ton or an around 20% markup due to issues with ”sanctions.”37.Minister of Electricity from the “People’s Assembly” platform: new contracts to secure the fuel .. And a special office to monitor the fairness of codification … Kharbotli to «homeland»: Fighting corruption is a right demand, which is working in the ministry : Al – Watan In January, Iran provided Syria with a new $500 million loan to finance fuel imports.38.The bottlenecks and congestion in front of petrol stations in Damascus and the promised “petrol” steamship have not yet arrived : Alsouria Taken alongside the prices stated by Khamis and estimated domestic consumption, supplies will likely last two and a half months assuming no gas is imported. In total, minister Ghanem recently said Syria will need more than $3.4 billion to cover oil product needs.39.A new credit line provided by Iran to the Assad regime worth one billion dollars : Micro Syria

Economic Fallout and What Might Come Next

Economic repercussions are likely to extend far into 2017 as a result of the crisis. More immediately, the disruption caused by shutting down hundreds of factories and the country’s transport network will be costly. The combination of late frost and lack of fuel caused billions of SYP in losses to crops in the northwest of the country, destroying 90% of some fields.40.The whole government is seeking $ 3.4 billion a year for fuel : Eqtsad The crisis has been worsened by reports of farmers cutting down fruit trees to provide firewood for heat and difficulties securing diesel to run irrigation pumps.41.Frosting and damage without protective umbrella and supportive! : Kassioun42.A project for refining the raw sugar in the company Sugar Suklab : Al-Thawra43.The frost wave destroys 60% of bees in Hama : Aliqtisadi44.The people of eastern Berri cut their fruit trees for heating. Electricity is absent : Tishreen45.The arrest of the cutters of pistachios in two pictures! : Al – Watan These losses will impact food prices this spring and summer. On a more granular level, fear of future shortages coupled with the shock from the crisis and the sudden influx of fuel is likely to incentivise people to hoard fuel supplies while they can, which will distort the market.

The Iranian loan discussed above provides Syria with funds to import enough oil for two and a half months. After that, Syria will need a new injection of funds to stave off further shortages. In light of this, Syria may take several measures to extend energy stockpiles; for instance, shifting electricity generation to fuel oil as opposed to natural gas. This is because Syria lacks the means to import liquid natural gas (LNG), which is used for electricity generation, in large quantities. Syria may also attempt to shift some remaining domestic gas production to fill cooking gas needs as importing LPG for cooking gas would be costly and inefficient. This would be an attempt to reduce and stabilise prices which have impacted the civilian populace.

While this will increase fuel oil demands, the government may try to lower oil demand and push down import costs to private actors. To lower demand, ration levels are unlikely to reach the levels they were at in the Autumn, however a new normal will be established between current ration levels and the Autumn levels. This is most likely to occur with diesel and gasoline rations, which could allow the government to stretch out the funds to import fuel.

The recent government decision to let industrialists, and later the agriculture industry, import diesel directly from Lebanon and push much of Syria’s diesel importation costs down was significant. While this is arguably a prudent move by the government, it is one that should have been taken sooner. Due to this measure, future fuel supply issues are unlikely to be as severe as the February crisis because private actors with means will be able to provide for themselves. However, this won’t solve all of Syria’s diesel needs if government imports dry up, nor will it solve fuel demands. This will also cause foreign currency to bleed out of Syria at a faster pace, which will increase pressure on the already poorly-performing SYP.

Comments, primarily from Prime Minister Khamis and Minister Ali Ghanem, have repeatedly mentioned plans to increase domestic production of oil and gas.46.Al Watan They have commented on plans to revitalise and restart production in the Homs fields once they are liberated from IS, stating that this would happen soon. While bringing any more domestic production online will be important, and effort should be put toward doing so, Syrians should not be expecting large production increases from the Homs fields. Besides destroying the Hayyan gas processing plant, IS has been destroying remaining infrastructure in anticipation of future government advances.47.https://twitter.com/ahmadalissa/status/83079749207367270648.https://twitter.com/QalaatAlMudiq/status/83400115348243661349.https://twitter.com/QalaatAlMudiq/status/83364614664401715250.https://twitter.com/QalaatAlMudiq/status/833444267209158656 The full extent of the destruction is not yet known, but repairs and development are likely to take a long time even in the best of circumstances. Further, the tightness of the current situation makes remaining domestic energy assets crucial. This was highlighted when IS shelling of the Ebla gas processing plant, which was noted in the last issue to be “dangerously close to the front lines”, temporarily cut off 65% of Syria’s electricity generation capacity.51.Darkness envelops Damascus because 65% of the power-station’s generating capacity is out : Aliqtisadi 52.http://tishreen.news.sy/?p=76103 53.Electricity System announces increased rationing hours “significantly” : Enab Baladi

While the above measures will allow Syria to move forward, Syria will eventually need further aid from its allies to finance its basic needs. Perhaps more importantly, Syria needs a larger economic intervention to prevent the continuing deterioration of the economy. Wars are not only fought on the battlefield; Syria’s allies should start paying deeper attention to the needs of the home front as well.


This is part two of a three part series on the war for oil and gas on Syria’s home front – read part one here

References   [ + ]

1, 3, 4. Volume 3, Issue 1 : The Week in Review
2. Promises to improve electricity after the arrival of 136 thousand tons of oil to the Syrian ports : Enab Baladi
5. Tartous: lack of fuel threatens economic facilities to stop : D.N.N
6. Sadkob believes only 10% of the needs of plants for diesel .. Industrialists propose the establishment of a company to import … Debbs to «home»: No problem to raise support for the availability of Article : Al – Watan
7. https://goo.gl/dW1ODu
8. https://twitter.com/Jacm212/status/824644580008165377
9. Al – Watan
10. Hundreds of factories stopped production with the absence of diesel and litres exceeding 400SYP : Aliqtisadi
11, 12. The government allows the industrialists to import their fuel needs : D.N.N
13. Insurance of fuel oil for the agricultural sector, like industrialists : D.N.N
14. The Assad regime classifies “Magi”, “Alandoumi” and dates of luxuries and prevents importation : Alsouria
15. https://twitter.com/Jacm212/status/786586827910111233
16. Al – Watan
17. https://twitter.com/Jacm212/status/827226258211749889
18. Al-Ba’ath
19. During The Exposure To The Waves Of Frosts And Floods … Various Damages In The Crops Of Tartous .. No Compensation For Farmers : Panorama Tartous
20. https://twitter.com/HamaNews1/status/828281033313378304
21. https://twitter.com/Jacm212/status/829374985160507392
22. https://twitter.com/HamaNews1/status/830405813340667905
23. https://www.facebook.com/L.N.N10/posts/1302318913147451?comment_tracking=%7B%22tn%22%3A%22O%22%7D
24. Economist: Syrian family became under the threat of poverty by 119 thousand pounds : Alsouria
25. Five sectors rose prices in 2016 adversely affected the Syrian citizen للمزيد: https://www.enabbaladi.net/archives/122646#ixzz56uY58Nfw – Enab Baladi
26. https://twitter.com/Jacm212/status/828717234239467520
27. https://www.facebook.com/photo.php?fbid=221637534910169&set=a.175254332881823.1073741828.100011917725383&type=3&theater%20https://www.facebook.com/akhbaralaan/videos/1313136655399049/
28. https://www.facebook.com/Moadamieh.news.network1/photos/a.161332610714766.1073741828.161092110738816/749821738532514/?type=3
29. The shortage of fuel oil causes a stifling crisis in the transportation of Tartous .. The fuel is sold on the black market : Tishreen
30. Al – Watan
31. After gas, water and electricity … the crisis of diesel fuel is rising strongly – Economy2Day
32. A strike by Swaida drivers prevents employees and students from moving – Al – Watan
33. Khamis recommends cutting fuel consumption by public bodies in half : Aliqtisadi
34. https://www.facebook.com/dimashq.now/posts/1151228571669420
35, 38. The bottlenecks and congestion in front of petrol stations in Damascus and the promised “petrol” steamship have not yet arrived : Alsouria
36. People’s Assembly discusses the performance of the Ministry of Oil .. Ghanem: Oil supplies will improve starting next week and will be reflected on the distribution of derivatives : SANA
37. Minister of Electricity from the “People’s Assembly” platform: new contracts to secure the fuel .. And a special office to monitor the fairness of codification … Kharbotli to «homeland»: Fighting corruption is a right demand, which is working in the ministry : Al – Watan
39. A new credit line provided by Iran to the Assad regime worth one billion dollars : Micro Syria
40. The whole government is seeking $ 3.4 billion a year for fuel : Eqtsad
41. Frosting and damage without protective umbrella and supportive! : Kassioun
42. A project for refining the raw sugar in the company Sugar Suklab : Al-Thawra
43. The frost wave destroys 60% of bees in Hama : Aliqtisadi
44. The people of eastern Berri cut their fruit trees for heating. Electricity is absent : Tishreen
45. The arrest of the cutters of pistachios in two pictures! : Al – Watan
46. Al Watan
47. https://twitter.com/ahmadalissa/status/830797492073672706
48. https://twitter.com/QalaatAlMudiq/status/834001153482436613
49. https://twitter.com/QalaatAlMudiq/status/833646146644017152
50. https://twitter.com/QalaatAlMudiq/status/833444267209158656
51. Darkness envelops Damascus because 65% of the power-station’s generating capacity is out : Aliqtisadi
52. http://tishreen.news.sy/?p=76103
53. Electricity System announces increased rationing hours “significantly” : Enab Baladi