News
10/12/24
Assad’s ouster removes key outlet for Iran’s crude
Dubai, 10 December (Argus) — The removal of Syrian president Bashar al-Assad
from power over the weekend has not only dealt a major blow to Iran and its
designs for the Levant region, but it has also eliminated a critically important
outlet for Tehran's sanctions-hit oil. Long considered Iran's top Arab ally,
Assad enjoyed significant military and economic support from Tehran over the
past decade, as Iran saw him as the focal point for its regional influence.
Syria also provided the main supply routes to Lebanon's Hezbollah militia, the
crown jewel in Iran's so-called ‘Axis of Resistance'. Part of Iran's assistance
was in the form of shipments of crude and refined oil products to help Assad's
regime meet fuel demand in the areas under its control. Once a 600,000 b/d-plus
producer, Syria's crude output has been on the decline over the past three
decades. Just before the start of the civil war in 2011, production had already
slipped below 400,000 b/d. Today, it is less than 100,000 b/d, and only around
16,000 b/d of that comes from fields in areas under the former government's
control. This left Assad's regime — itself restricted by western sanctions —
critically short of crude to feed its two refineries in Banias and Homs, even
though both have been operating below capacity because of damage sustained
during the civil war. Iran helped plug the gap by sending crude and products to
the 140,000 b/d Banias refinery on Syria's Mediterranean coast on an ad hoc
basis. Iranian crude exports to Syria averaged around 55,000 b/d in
January-November this year, down from 80,000 b/d in 2023 and 72,000 b/d in 2022,
according to data from trade analytics firm Kpler. Vortexa puts shipments higher
at 60,000-70,000 b/d so far this year and 90,000 b/d in 2023. Iran has also been
sending around 10,000-20,000 b/d of refined products to Syria in recent years,
according to consultancy FGE. Wait and see Iran's oil exports to Syria have
mostly been in the form of grants to support the Assad regime. The government's
collapse could put an end to these flows for the time being, while Tehran takes
a wait-and-see approach to what comes next in Syria. The first sign of that came
over the weekend when the Iran-flagged Lotus , which left Kharg Island on 11
November destined for Banias, reversed course just as it was about to enter the
Suez Canal. The tanker is now headed back through the Red Sea without specifying
a destination. Although supplies to Syria make up a very small share of Iran's
overall 1.6mn-1.8mn b/d of crude exports, Tehran may not want to lose it as an
outlet for good, given the difficulties of finding a replacement while sanctions
remain in place. "The flow will stop, at least for the time being," said Iman
Nasseri, managing director for the Middle East at FGE. "But Iran will want to
continue supplying this oil to Syria, or else it may be forced to cut production
by anywhere between 50,000-100,000 b/d if it is unable to ultimately place those
barrels in China." Argus estimates Iran produced around 3.33mn b/d in
September-November. Alternatively, Iran could opt to build the volumes it holds
offshore in floating storage. "We usually see the same tankers shuttling between
Iran and Syria," according to Vortexa's senior oil analyst Armen Azizian. "If
that trade subsides, we could see some of these tankers unemployed or put into
floating storage, which would rise, at least in the short-term," he said. Lotus
is one of these tankers, having made the trip to Syria and back five times in
2023, and twice so far in 2024. The crude cargo it is carrying now "could be
returned to Iran and put into onshore tanks or go into floating storage off
Iran," Azizian said. By Nader Itayim Send comments and request more information
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