CAIRO, Nov. 27 (UPI) -- Iran and Venezuela's recent agreement to help build an oil refinery in Syria not only tightens the international network of petroleum trading, but also strengthens ties between those politically opposed to the United States, energy and security analysts say.
At the beginning of November, Damascus signed a memorandum of understanding with Venezuela and Iran for the two countries to help build an oil refinery that would be responsible for one-third of Syria's production.
Although the 140,000 barrels-per-day refinery is not immense on an international scale, it represents a significant increase for Syria, which has only two refineries whose combined capacity is about 250,000 bpd.
The deal also highlights the importance of refinery capacity to oil-producing nations. Iran, the world's fourth-largest oil producer, can refine 1.6 million barrels per day, and must import gasoline to meet domestic demand.
"Iran needs to develop more refinery capacity as it falls further behind domestic demand for oil products, especially gasoline. Given that the Ahmadinejad government cannot cut the large domestic subsidies, it has had to use increasingly large budgetary outlays to import more gasoline," said Kent Moors, director of the Energy Policy Research Group at Duquesne University in Pittsburgh.
The agreement also bolsters Iranian plans for a euro-denominated and Tehran-based international oil exchange, Moors said.
"Having a widening regional network will serve to create a better base price," he said.
Iran is not the only country in this deal that could use a boost in refining capacity. Since 1996, Damascus has faced a decline in oil production and exports, which has dipped sharply since 2003. Experts attribute the sharp decline to a petroleum infrastructure in dire need of restoration.
"Syria has a languishing program, one that requires immediate attention. Several U.S. companies involved in field and infrastructure projects have left the country following pressure from D.C.," Moors said.
James Phillips, an expert on Middle East security at the Heritage Foundation, sees the Syrian motivations in a similar light.
"Syria's economy is its Achilles heel. It followed a Soviet-style socialist model that has hamstrung economic growth," Phillips said.
"Western countries have shied away from investing in Syria due to its support of terrorism against Israel, Lebanon, and lately Iraq. By reaching out to Iran and Venezuela, it seeks to bolster its economy and continue its hostile foreign policy," Phillips said.
The United States has long listed the Syrian government, led by the President Bashar Assad, as a state sponsor of terror, and has criticized Syria for allowing insurgents to cross the border into Iraq, as well as for the influence Damascus exerts on the politics of Lebanon.
"The Assad regime is very isolated," Phillips said. "It seeks allies wherever it can find them, especially among the most anti-American countries because the U.S. is leading international coalition to pressure Syria to halt support of terrorism and stop interfering in internal affairs of Lebanon and Iraq. All three countries seek to strengthen themselves and others opposed to U.S.," he said.
Venezuela's interest in helping build a Syrian refinery stems from the Venezuelan national oil company's need for technical assistance and experience in refining its own crude oil, which is a similar quality, Moors said.
The increased capacity could also be used by the three countries in swap agreements, which would allow Syria to import oil from one place for local use, and in exchange export the same amount of oil from another, more geographically convenient, location, for a fee.
A burgeoning relationship between Iran and Iraq, especially involving petroleum, may also be behind Iran's investment in Syria's refinery capacity.
"There is always the political element, but I regard this as primarily an oil move. Significant developments have taken place between Baghdad and Tehran on the oil front, developments the U.S. has not been able to do anything about. Memoranda of understanding have been signed to provide Iraqi-sourced crude for Iranian processed oil products," Moors said. "Having one or more refineries capable of processing heavy and sour crude grades will allow Damascus to participate in wider swap arrangements over a wider regional area."
Syria and Iraq restored full diplomatic relations on Nov. 21. While there has been trade between the two countries, diplomatic relations were severed in 1982, as a result of Syria's support of Iran in the Iran-Iraq war.
"Existing oil pipelines between Iraq and Syria are currently shut down, but that would also be a possibility later," Moors said. "There has been little success in interdicting the bulk of oil smuggling across the border anyway."
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