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United Nations

Iraq Stokes Sanctions Fire with Crude Oil Pipeline to Syria

Strategic Insights

— 2 min read

Iraq has taken a significant step in its efforts to challenge the UN sanctions regime by pumping crude oil into a pipeline running to the Syrian terminal at Banias, according to industry sources. The pipeline, reportedly flowing at about 150,000 barrels per day, is expected to fill up by Thursday, allowing Syrian state oil company Sytrol to take the crude to run through its refineries. This development has raised concerns that Syria may be cooperating with Iraq in flaunting UN sanctions, which could lead to a serious erosion of UN authority and potentially constitute a direct provocation of Washington.

Key Takeaways:

  • Iraq has begun pumping crude oil into a pipeline running to the Syrian terminal at Banias, reportedly at a rate of about 150,000 barrels per day.
  • The pipeline is expected to fill up by Thursday, allowing Syrian state oil company Sytrol to take the crude to run through its refineries.
  • The UN sanctions regime is under threat, with the oil-for-food program holding up relatively well despite some exports to Jordan and smuggling through Turkey.
  • US and other diplomatic sources have said that a reopening of the Iraq-Syria pipeline would be acceptable if the funds involved are handled by the UN under the oil-for-food scheme.
  • Syrian President Bashar Assad's motivations for this move are unclear, and it may be a case of mild brinkmanship.
  • Iraq's pipeline adventure is the latest in a long line of attempts to challenge the sanctions regime, including requiring contract holders to pay a 50[cent]/bbl "premium" directly to Somo's account.
  • Iraq has proposed a price cut of 30[cent]-50[cent] off the current official price of Kirkuk to European destinations, which may be seen as an attempt to ease matters for customers.
  • The three UN overseers charged with ensuring that Iraq crude is sold at a fair market price are unhappy with Iraq's proposal and may counter with their own proposal.

Statistics:

  • 150,000 barrels per day: the reported flow rate of the pipeline.
  • 50[cent]/bbl: the "premium" that Iraqi President Saddam Hussein's government has demanded that contract holders pay directly to Somo's account.
  • 30[cent]-50[cent]: the proposed price cut off the current official price of Kirkuk to European destinations.
  • 65[cent]: the price difference between Kirkuk and Russian export blend Urals.
  • 40[cent]: the quality discount for Kirkuk against Urals.
  • 100,000 b/d: the amount of crude and products being exported from Iraq to Jordan under the oil-for-food program.
  • 3[cent]: the f.o.b. price of the Turkish Mediterranean port of Ceyhan.

Sources:

  • Industry sources
  • US diplomatic sources
  • Oil Daily
  • Axel Busch
  • Antoine Halff

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