LOS ANGELES, April 15 (UPI) -- The coalition's shutdown of a crude pipeline linking northern Iraq with the Syrian port of Banias for now has pulled the plug on the ties that Damascus had forged with Saddam Hussein's regime in the energy sector.
Defense Secretary Donald Rumsfeld confirmed Tuesday that a pipeline linking the two neighboring countries had not been destroyed but had been shut down because for years it had been surreptitiously pumping Iraqi oil in violation of U.N. sanctions.
"I said we have been told that they have shut off a pipeline," Rumsfeld told reporters in Washington. "Whether it's the only one, and whether that has completely stopped the flow of oil between Iraq and Syria, I cannot tell you. We do not have perfect knowledge. We do know that they were instructed to shut it down, and they have told us that they have."
The shutdown and potential loss of a reported 200,000 barrels per day of illicit Iraqi crude exports seemed to have a minimal impact on crude prices Tuesday as traders focused instead on the likelihood of OPEC reducing its overall exports when they meet in Vienna on April 24.
May crude settled 66 cents higher at $29.29 per on the New York Mercantile Exchange.
The United States has long considered Syria to be among the rogue nations that threaten the stability of the Middle East, however Syria also has interests in common with its oil-rich neighbor -- other than allegedly supporting terrorism.
According to the U.S. Energy Information Administration, an apparent under-the-table agreement between Saddam's government and Syria created a situation in which Iraq shipped crude to Syria where it was refined for consumption by the Syrians. At the same time, Syria was able to earmark more of its modest crude production for export.
"These exports earn Syria extra hard currency revenues, plus provide Saddam Hussein with potentially significant revenues outside the U.N. food-for-oil program," the EIA noted last month. "Since Iraq remains under U.N. sanctions, with oil exports allowed only ... via approved export routes, the use of the Kirkuk-Banias line represents a potentially serious breach of U.N. sanctions against Iraq."
Iraq and Syria, in fact, signed an agreement in 2001 to actually replace the aging pipeline and possibly jointly build a refinery at Banias to handle the Iraqi crude flowing in from Kirkuk.
The future status of the pipeline has been thrown into question due to Saddam's departure from power and the legal vacuum that now exists in Baghdad. Since Damascus is in the United States' proverbial doghouse and Iraq has outlets to the sea other than Banias, there is no guarantee that Syria will be included in the coalition's near-term plans to revive Iraq's oil industry.