Oil-for-Food Scheme in Syria: Funding Projects or Stealing Resources?

It seems that the attempts of countries and organizations to float the Syrian regime globally again have not yet brewed. It is difficult to reach its final stage due to a joint European-American rejection of the Assad regime's return to the international or even regional fold, for reasons that may be politically complex. Still, they will remain complex and will not pass without a price.

Speaking of the price, a British company called Gulfsands Petroleum, one of the largest companies researching Syrian oil, came up with a new-old proposal, the most prominent title of which is "Oil-for-Food"; that is, Syrian oil is extracted and sold globally, and food projects are provided in return for all Syrian regions.

Meanwhile, diplomatic sources described the company's proposal as unrealistic, as it is challenging to bring the conflicting Syrian parties together at one table.

 

Suspicious Scheme

In light of the worsening economic crisis in Syria, Al-Monitor revealed in a report on July 11, 2022, that the British oil company, Gulfsands Petroleum, had proposed a scheme to manage Syrian oil revenues according to the "Oil-for-Food" principle.

"The British company had proposed coordinating this project under the auspices of the United Nations and the active countries in Syria to use the oil revenues to finance humanitarian, economic, and security projects in all Syrian regions," it stated.

"The scheme also aims for the return of international oil companies to work in Syria with the deposit of the proceeds of oil sales in an internationally managed fund under the supervision of the United Nations instead of being given to the Assad regime. Subsequently, these revenues are transferred to fund food programs or infrastructure development that ensures food production," it added.

Commenting on this, a member of the company, John Bell, confirmed that "the scheme had been submitted to the White House and the US and British Foreign Ministries, and is currently being discussed," noting that it was designed to resemble previous initiatives that were implemented in countries subject to sanctions, such as Iran and Iraq.

In a statement to Al-Monitor, Bell indicated that, according to the proposed scheme, a third of the oil revenues would go to energy companies, and this will require the approval of the Syrian parties concerned (the Syrian regime and the Syrian Democratic Forces).

This also means that the United States, Britain, Russia, and Turkiye will be interested in accepting and often participating in this scheme, despite its application on the ground varies greatly, especially since the Assad regime's commitment to international projects has not succeeded, as it has consistently violated all the laws and conditions of the United Nations.

Bell said that all oil facilities could be reconstructed to produce more than 500,000 barrels of oil per day, estimating that their total annual revenues would exceed $20 billion at current oil prices.

The idea of using oil revenues to fund humanitarian aid and rebuild destroyed infrastructure only in areas controlled by the Syrian Democratic Forces was raised during the era of former US President Donald Trump.

Indeed, Delta Crescent Energy was granted a waiver to develop and modernize oil fields in northeastern Syria before the Biden government refused to extend it last year.

 

Corruption and Mismanagement

The same scenario was applied by the United States to Iraq at the end of the last century, when the Oil-for-Food program was established in the Security Council in 1993, with the aim of meeting the humanitarian needs of Iraqis, after a harsh siege imposed by Washington and its allies on the Baghdad government after its invasion of Kuwait in August 1990.

This program, which amounted to $64 billion, allowed Iraq to sell limited quantities of oil under the supervision of the United Nations between 1996 and 2003 in order to purchase materials needed by the people, but the program is full of corruption and mismanagement, and millions of dollars have been embezzled.

According to the report of an independent commission of inquiry led by the former president of the US Federal Reserve, Paul Volcker, more than 2,200 institutions (US, Russian, French and Chinese) from more than 60 countries are involved in manipulating this program.

The program began in December 1996 and ended in November 2003, eight months after the US invasion of Iraq.

Al-Monitor quoting former US diplomat Robert Deutsch said that the Oil-for-Food program that was in Iraq was plagued by many loopholes, and Saddam Hussein was using it as a means of cheating and controlling.

However, Bill insisted on the company's new scheme and the possibility of its success, saying: "We believe that our initiative has many differences from the disastrous Iraqi Oil-for-Food program, despite of course we will ensure that any lessons learned from this program are incorporated into our initiative."

On the other hand, the Middle East Economic Survey indicated that Gulfsands Chairman Michael Kroupeev was seen in the past as having ties to the Russian authorities, which makes the matter a complicating factor, despite the company's denial of these allegations.

Others indicate that Gulfsands Petroleum has an interest in promoting the proposal because its large oil field in northeastern Syria, Block 26, is its only major asset.

Gulfsands Petroleum was a marginal player in the Syrian oil market before the war began, extracting only 24,000 barrels per day in 2010, equivalent to 6% of total oil output.

 

Difficult To Apply

On her part, the co-chair of the Syrian Democratic Council (SDF), Ilham Ahmed, said in a meeting organized by the New Lines Institute that there is a lot of speculation in the oil sector and that nothing has been decided yet.

"I seriously doubt that the United States will accept an approach of this kind because of the damage that will affect its reputation around the world and its accusation that it is marketing to steal Syrian natural resources, especially since the economic return in that process will be very limited due to the small size of the block and Syria's oil resources in general," she added.

From the point of view of the researcher at the Anatolia Center for Studies, Hasan al-Shaghel, "the Oil-for-Food plan cannot be implemented in Syria for several reasons, the most prominent of which is that such an initiative needs international consensus."

"In addition to the difficulty of implementing this plan in light of the political division that exists in Syria and the vastly different areas of control for each of the parties to the conflict," according to the researcher.

"The third reason is that Syria does not possess large reserves of oil, as the maximum capacity for oil production did not exceed 600,000 barrels per day; while at the present time, oil wells suffer from damage as a result of improper use of them, and they cannot produce more than 200,000 barrels of oil," Mr. al-Shaghel added.

The researcher noted that "the Oil-for-Food program had been implemented in Iraq in 1993, but Iraq at that time was producing 3 million barrels of oil daily, its share in the global market is large, and its shortage is causing a global crisis, what forced the global powers to accept the implementation of this plan at that time."

"There are reports that the British Gulfsands Petroleum Company belongs to businessmen affiliated with the Syrian regime and Russia, and they were among those who were working within foreign companies in Syria. Now they are seeking to return to the Syrian oil sector by joining Gulfsands Petroleum, taking advantage of this particular time because the world is in great need of oil and gas," Mr. al-Shaghel said.

It is noteworthy that from the discovery of oil in Syria (1968) until 2010, the value of its revenues was not included in the general state budget, which is estimated at billions of dollars under the pretext of the military buildup against “Israel.”

The oil fields are currently divided between the parties to the Syrian conflict. The regime controls very small oil fields at the southern end of the Euphrates River in Raqqa Governorate and is not economically reliable.

Meanwhile, the Syrian Democratic Forces control most of the oil fields in the cities of Hasaka and Deir ez-Zor in northeastern Syria. As for the Syrian opposition forces stationed in northwest Syria, they do not control any oil reserves.

Syria's proven oil reserves are estimated at the latest statistic for 2015 at 5.2 billion barrels.

The Syrian government estimates that the country's total oil production was 86,000 barrels per day in 2021, roughly a quarter of the 353,000 barrels per day produced in 2011, which represents nearly a quarter of the regime's revenue.