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 more
than a 600,000 barrels per day (bpd) 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 bpd. lately, it was less
than 100,000 bpd, and only around 16,000 bpd 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 bpd Banias refinery on Syria's Mediterranean coast on an ad hoc
basis.
Iranian
crude exports to Syria averaged around 55,000 bpd in January-November this
year, down from 80,000 bpd in 2023 and 72,000 bpd in 2022, according to data
from trade analytics firm Kpler.
Vortexa puts shipments higher at 60,000 to 70,000 bpd so far
this year and 90,000 bpd in 2023. Iran has also been sending around 10,000 to 20,000
bpd of refined products to Syria in recent years, according to consultancy FGE.
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 November 11, 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 1.6 million to 1.8 million bpd 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.
Iran will want to continue supplying this oil to Syria, or
else it may be forced to cut production by anywhere between 50,000 to 100,000 bpd
if it is unable to ultimately place those barrels in China. 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.
