Tags: Syria | oil | Russia | Muslims

Why Is Syria Important for Oil Prices?

By Michael Kling   |   Friday, 06 Sep 2013 10:27 AM

Although Syria doesn't produce much oil itself, its neighbors produce a lot of it. A spreading sectarian conflict that drags in neighboring countries could disrupt their oil production and critical pipelines and waterways.

That's why war in Syria and a possible U.S. strike have oil markets on edge and prompted oil prices to increase. So far the increase isn't huge — about $5 a barrel.

Still, the civil war could embroil other nations in regional war with Sunni Muslims on one side and Shiite Muslims on the other

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Saudi Arabia is supporting the Sunni-dominated rebels. Iran, Hezbollah, the Lebanese Shiite army, as well as Russia, is backing President Bashar al-Assad's government.

A conflict could shut down critical infrastructures like the Sumed pipeline, the Strait of Hormuz and the Suez Canal. Also, important pipelines sit just across the border to the north in Turkey.

Although Syria probably would not disrupt oil transportation infrastructure, some experts fear other nations or organizations might target them in retaliation to a U.S. strike, according to CNNMoney.

Besides the Syrian civil war, oil production is down in other parts of the world for other reasons, CNNMoney notes.

Production is down 1.2 million barrels a day in Iran due to sanctions over its nuclear program, 1.2 million barrels a day in Libya due to labor strikes and pipeline attacks, 300,000 barrels a day in Nigeria because of theft and attacks and 250,000 barrels a day in Iraq from pipeline attacks and technical problems.

Although not a major oil exporter, Syria has 2.5 billion barrels of proven crude oil reserves, the largest in the eastern Mediterranean after Iraq, reports the International Business Times, citing Oil & Gas Journal estimates.

Exploration has ground to a halt and international oil companies have left the country because of the war. Russia is the only outside player still helping Syria develop its oil and gas resources.

Syria estimates it has up to 50 billion tons in oil shale resources, which helps explain Russia's support for Assad's regime, according to the Times.

"From a purely economic perspective, there are several agreements between Syria and Russia for various goods and materials," Assad said in a recent interview, according to the Times.

"As for a loan from Russia, this should be viewed as beneficial to both parties; for Russia it is an opportunity for its national industries and companies to expand into new markets."

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