SYRIA - Reviving Iraqi Export System.

This system has become one of the geo-political bargaining chips between the US and Israel, on the one hand, and Iraq, Russia and Syria on the other. Syrian President Hafez Al Assad loves to play geo-political games despite his health condition.

Damascus and Baghdad want to reactivate the system for the export of 300,000 b/d of Iraqi crude oil through Banias - "as soon as possible because the pipeline is ready", a high-ranking Syrian official tells APS - and for its expansion to 1.4 million b/d at a later stage.

Washington is the key. The project, both its immediate and later phases, would depend on approval by the UN's Sanctions Committee and this requires a new resolution from the US Security Council, which the US can veto. UN Resolution 986 says Iraq can only use the crude oil export routes of Ceyhan (Turkey's Mediterranean terminal for a pipeline from Kirkuk) and Mina Al Bakr (Iraq's terminal on the Gulf).

Saudi Arabia and fellow GCC states are under pressure from President Clinton to get OPEC to raise production to bring spiralling oil prices down before the risk of a global recession becomes higher (see OMT No. 11, pages 1-2).

Iraq wants its OPEC quota increased to more than 3m b/d and its exports raised to more than 2.5m b/d, from about 2.2m b/d at present. If Saudi-led OPEC fails to deliver by March 27-28 and if WTI rises above $34/b, Clinton may soften to the Iraq-Syria pipeline offer.

Washington needs Assad's goodwill for a successful conclusion of peace talks between Israel and each of Syria and Lebanon. Clinton needs it now because the Democratic Party wants to win the US presidential elections in November 2000 (see News Service of this week's APS Diplomat).

Moscow wants to see the UN sanctions against Baghdad relaxed as soon as possible so that Russian companies can begin developing a huge oilfield in Iraq - TotalFina/Elf of France wants to move into huge Iraqi oilfields as well. Stroytransgaz, an aggressive Russian company partly owned by Gazprom, has been negotiating with Syria and Iraq to implement the pipeline project.

In July 1998, the governments of Iraq and Syria signed an agreement for the reopening of the system's line to Banias. Since then some repairs have been done. In mid-1999 experts from both sides checked the whole system and Iraq sent additional engineers to Syria to complete the repairs. Now the Syrian government says the pipeline is ready to pump 300,000 b/d of Iraqi crude oil to Banias at any time.

The pipeline's first phase came on stream in 1934. It had a 12-inch pipe with a capacity of 60,000 b/d. It was doubled in 1951 with the completion of a 16-inch line. In 1952, another 580,000 b/d pipeline to Banias came on stream. A 30-inch extension to the Tripoli terminal was completed as well. Syria earned considerably from transit fees when the pipeline operated at full capacity. But political rivalries between Damascus and Baghdad caused the system's operations to be interrupted on several occasions.

In July 1998, the governments of Iraq and Syria also signed an agreement to build an oil refinery in Banias as a joint venture. It was proposed to have a capacity of 140,000 b/d, 10% of the planned expansion of the pipeline, and to be using Iraqi crude (see DT No. 11).

There is limited trade between Iraq and Syria, resumed after the two governments on June 12, 1997 signed contracts to export Syrian food products and for the use of Syrian ports for Iraq-bound imports of food and medicines. But there has been little transit through Syria. The first Syrian business delegation to visit Iraq arrived in Baghdad in May 1997, shortly after their border (closed 15 years earlier) was reopened. The two countries' diplomatic relations were severed in 1980.