Syria looks to Libya oil deal as blueprint to access vital revenue stream

Libya's oil deal — now seen as a beacon of hope in troubled times — was struck in a country split between rival governments.  One government was based in Tobruk and the other in Tripoli.

The exact way in which it was agreed remains opaque, with elements of it likely to have been reached under the table rather than in open talks.

But enough is known about the Libyan negotiations to provide a potential playbook for Syria which has similar internal divisions. Libya's oil deal happened with help from other Arab countries and major world powers.

They arranged meetings between close associates of Abdul Hamid al-Dabiba, the head of government, and General Khalifa Haftar, the army commander. The head of the National Oil Corporation, Mustafa Sanallah, was also replaced by Farhat Bin Qadara.

Haftar's sons played key role

It all began with well-placed relatives to the leader of Libya's military in Tobruk.

General Haftar has two sons, who played key roles in setting up talks, according to Western diplomats following Libyan affairs. One of the sons — responsible for military issues — opened the way into discussions with al-Dabaiba via a relative of the rival leader.

The other, who has oversight of political matters, was supportive of another major figure — Fathi Bashagha, the prime minister in eastern Libya, elected by parliament.

Meanwhile, the chance to change leadership at the country's oil corporation opened up in the middle of last year.

Mustafa Sanalla had been kept in place due to backing from Washington and London, which prevented the former head of Libya's Government of National Accord, Fayez al-Sarraj, from replacing him.

Times changed when the US needed Libya to increase its oil output after the world energy market was rocked by Russia's invasion of Ukraine.

There was also a more localised political change, with Libyan forces prioritising stability at home via more funding for the country's institutions over the UN-supported transition programme toward more elections.

Read more: Libya's oil wealth: A blessing and a curse

This was when Farhat Bin Qadara was pegged for the top oil job.

He was working for Libya's central bank having returned from defection to the UAE during the rule of Muammar Gaddafi. Bin Qadara had maintained a good relationship with General Haftar as well as a relative of Dabaiba, who had also turned against Sanallah.

Remarkable deal opens investment

These conditions helped to faciliate a deal between the range of parties controlling eastern, southwestern, and central Libya.

Dabaiba appointed Bin Qadara to run the National Oil Corporation in a move that was possible even after months of political tension between the rival parliament in Tobruk and its alternative government headed by the former interior minister, Fathi Bashagha, with the support of Khalifa Haftar.

It also followed flare-ups in political tension.

In the spring of last year, groups loyal to Haftar surrounded major oil facilities in the east to put pressure on Dabaiba. Libya's exports of crude oil and condensate had fallen from one million barrels per day to about 400,000.

After Bin Qadara was put in control of the NOC, with the support of local forces and wider factions, he raised Libyan production to 1.2 million barrels per day, with plans to take it up to three million barrels a day. He also has plans to lift gas production.

International agreements have started to follow.

On the sidelines of a visit by Italy's prime minister, Georgia Meloni, her country's oil major, Eni, signed a contract to invest in Libyan gas.

Bin Qadara said that the agreement is "a clear indication that the oil sector is free from risks and ready to compete strongly so that our country will return to the ranks of the most prominent oil producing countries in the world."

The Syrian situation

Syria once produced 400,000 barrels of oil a day. As war took its grip on the country from 2011, control of the industry became fractured. Various factions were in control of a large part of this wealth, including some opposed to the government and even the Islamic State (IS).

Western sanctions imposed on the country meant foreign oil companies left.

The Syrian Democratic Forces (SDF), supported by the US, control a quarter of the country's territory, including the resource-rich eastern Euphrates region, which has 90% of its oil reserves and over 50% of its natural gas. It is also home to much of the infrastructure owned by foreign companies, according to contracts signed with Damascus.

Since the beginning of the crisis, Syria's oil industry has missed out on $91.5 billion in revenue and daily production of around 89,000 barrels, according to the country's former oil minister, Bassam Tohme, most of which would have come from SDF areas.

Oil agreements with Russia

After Russia's military intervention in late 2015, its companies started to sign contracts with Syria to invest in oil and gas there.

These deals included a protection arrangement with an organisation called Evro Police, linked to the Russian businessman Yevgeny Prigozhin, who is close to President Vladimir Putin and is best known for running the Wagner Group private army. It will defend oil and gas facilities in return for 25% of their revenue.

It is estimated that Wagner had up to 2,500 fighters in Syria who participated in the fighting, and some of them were transferred to Libya and then to Ukraine.

Estimates of Wagner's forces in Libya range between 3,000 and 5,000, on the side of General Haftar.

At the beginning of 2018, Wagner launched an attack on a gas production facility belonging to the Conoco company, east of the Euphrates, a site under the control of the SDF, but they were subjected to American bombing which killed 200 of them.

In 2019, the US President Donald Trump announced the withdrawal of his forces from the area surrounding the Syrian border with Turkey, located east of the Euphrates, which put the SDF under Turkish pressure. But in October, Trump agreed to keep 900 troops in Syria.

He said, "A small number of soldiers will remain in the areas that contain oil. We are keen to secure and protect the oil."

SDF signed a deal with the American company Delta Crescent Energy to invest in oil after obtaining an exemption from the Treasury Department from the sanctions imposed on Syria, but when President Joe Biden's administration took power, it did not extend the agreement.

Billions of dollars in opportunity and  the 'three nos'

According to a document from the British company Gulfsands Petroleum, the value of oil revenues lost from a field it owns in northeastern Syria since 2017 has now exceeded $3 billion. The field, known as Block 26, was illegally returned to regular mass production by the SDF at about 20,000 barrels a day in 2017.

Northeast Syria's production is currently estimated to be four times that amount, at about 80,000 barrels per day, which means lost revenues amounting to about $6.4 million per day at an average price of $80 a barrel. The total value of the oil lost to the region through such production since 2017 is estimated at around $12 billion.

As the Arab world and Turkey seek to move toward normalised relations with Syria, talks are being had to set up official oil production east of the Euphrates in part to fund humanitarian efforts that have emerged.

Read more: Don't throw good Arab money after bad in Syria

They come alongside moves to issued exemptions from sanctions applied by the West and the amendment of Security Council resolutions to open up the oil industry as part of early recovery negotiations for Syria.

Some have called this initiative "oil for aid", Gulfsands refers to it as "Project Hope."

Gulfsands officials stated that production could be raised to 500,000 barrels per day, which could generate between $15 billion and $20 billion in annual revenue, and "these revenues can be directed to financing hundreds of medical and educational facilities and economic initiatives, as well as creating thousands of job opportunities."

According to the United Nations, 14.6 million Syrians need aid, and 90% of them live below the poverty line. It is estimated that 5.4 million people inside Syria and about 5.6 million Syrian refugees in neighbouring countries need assistance.

As the oil deal in Libya showed, success of such an initiative will depend on compromise on all sides, including the international community.

Moscow supports the Syrian government's restoration of control over all territories and "recognition of its legitimacy."

European countries and America are still sticking to three nos before seeking a political solution under UN Resolution 2254: no lifting of sanctions, no end to the international isolation of Damascus and no normalisation of relations with the Syrian government.

Read more: Syria: A microcosm of global polarisation

Observers hope a compromise can be reached for the benefit of the long-suffering Syrian people with Libya offering them, and the world, a beacon of hope for progress in dark times.