Possible effects of an intervention in Syria on transportation

In the two years that have passed since the EU (Regulation 442/2011) and the US (Executive Order 13582) imposed sanctions on Syria in 2011, the evidence has been mounting that US intervention in the country is inevitable.

While we wait for what looks like being a question of hours, or at most days, to see how effective any US action has been it is worthwhile asking how such intervention would affect the world economy, or more accurately, the recovery of the world economy.

In terms of the production and supply of crude oil Syria itself barely represents a threat to international trade.

In 2011, the peak year for oil production in the country, Syria only produced 385,000 barrels of oil per day, around 1.5% of world production, with 92% of its exports going to Europe, mainly Spain, France and the Netherlands. Currently the production has fallen to 50,000 barrels per day, barely 0.5% of world production. At present Syria is not internationally relevant in terms of the production and supply of crude oil. 

Whilst Syria is not a major figure in the international scene in terms of oil supply, the effect of geopolitical shock and the risk of contagion of the surrounding countries, which are the main players in the production and supply of oil, is the real reason that a possible US intervention would impact the world economy.

The countries surrounding Syria account for around 35% of world crude oil supply; any threat or instability in the region has a negative impact on oil prices. In fact, the mere possibility of US action is already affecting oil prices.

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The mere possibility then of the US intervening in the war between the Basher Al-Assad regime and those opposed to it, along with the inherent instability in the region caused by the conflict, is causing oil price rises as a result of unjustified – or possibly fully justified – fears of possible contagion in the countries of the region. Any possible action in Syria from those countries, which could include Iran, with a production of nearly 3.721 million barrels of crude a day, together with the threat of the closure of the Hormuz Strait, through which around 40% of world oil passes (20 million barrels per day), with the US making it clear it won’t tolerate any such interferencealong with possible measures from such international players as Russia (10.45 million barrels/day) and China (4.27 million barrels/day), would then clearly lead to a definitive rise in oil prices.

The effect of this situation as regards transportation, including transport by road, sea, inland water, rail and bunkering, all of which are already suffering independent of the Syrian situation, and with a continuously growing demand for fuel, means that it is clear that an increase in oil prices will negatively impact the world economy. Transport, of all types, was responsible for 57% of world oil consumption in 2009, and is expected to reach 61% by 2035.

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Therefore, whilst the world waits for confirmation of US action in Syria, and with other major international players with the power to influence oil prices positioning themselves, it remains to be seen if the current oil price increases are due to unjustified fears of contagion, or if in fact these fears will be confirmed.

Alfonso San Simón, Lawyer, San Simón & Duch.