The U.S. involvement in the Syrian civil war is causing unprecedented geopolitical instability in the Middle East. With the interests of Saudi Arabia, Qatar, Turkey, Iran, and Russia at stake, the Syrian catastrophe poses yet another potential hazard to global stability. The energy market is anticipating an oil price rise, with possible long-term energy market volatility, as political conditions in the region worsen.
The ongoing civil war in Syria has already destroyed the foundations of the economic stability of this nation of 22 million people. Since the beginning of the war, GDP has been cut almost in half from $60 billion to $33 billion, with a fourfold shrinkage of foreign currency reserves from $17 billion to $4.5 billion, and a collapse of oil production to 5% of pre-war volume. The official unemployment rate stands today at 2.5 million and rising, excluding another 2.5 million war refugees, over 1 million of whom fled to neighboring Turkey, Lebanon, Jordan and Iraq. As Elizabeth Ferris, co-director of the Brookings-LSE Project on Internal Displacement, pointed out to WEJ, “There are some economic considerations that need more attention. For example, it’s widely recognized that Syrian refugees in neighboring countries are an economic burden on people in the host countries (rents are increasing, for example, and government expenditures on health and education have definitely increased).” Both the IMF and the World Bank are withholding any definitive prognosis on the prospects of the Syrian economy, due to the lack of verifiable information and the obscurity of the Syrian Arabic Republic’s political future.
The major factor of uncertainty is the degree of U.S. involvement in Syria, which is presented as a response to use of chemical weapons by Bashar al-Assad in the suburbs of Damascus on August 21. The official White House position is based on the argument of preventing further use of chemical weapons in Syria and any other potential conflict zone. As Secretary of State John Kerry said to the House of Representatives Foreign Affairs Committee on September 4, “There is a 100% chance that if we don’t do something, they [chemical weapons] will be used again.” But considering the geopolitical location of Syria and the strategic interests of U.S. allies Saudi Arabia, Qatar, and Turkey, the reasoning behind the U.S. involvement looks quite different.
Thomas Moore, Senior Fellow and Deputy Director of the Proliferation Prevention Program at CSIS, told WEJ, “U.S. strategy appears to rest on selective targeting from a distance of command and control, with a hope that it will provide opportunities for regime collapse.” The collapse of Bashar al-Assad’s regime would provide the opportunity for installing a new government that would be friendly to the strongest economic players of the region, Saudi Arabia and Qatar. Many experts cite Qatar’s ambitious project of a pipeline from Qatar to Turkey, proposed by Sheikh Hamad bin Khalifa al-Thani in 2009. The general idea of that project is to unite the capacities of the world’s biggest gas field with the strategic Nabucco pipeline project, which transports natural gas from Central Asia via Turkey to the EU market. The creation of a direct pipeline from Qatar to Turkey would make Qatari LNG an irreplaceable factor in the EU’s ambition to diversify its energy supply, weakening its dependency on Russian gas.
On the other hand, Jeremy Shapiro, a Visiting Fellow in the Foreign Policy program at the Brookings Institution, pointed out to WEJ, “The Saudi and Qatari economic motivations are not the U.S. motivations, and at this point the U.S. is a huge gas exporter.” Daniel Byman, professor at Georgetown University’s Security Studies Program, agrees that U.S. priorities do not include economic stimulus: “There is no serious economic motive for U.S. policy. Syria’s total market was minuscule even before the civil war.” U.S. officials and think tank experts agree that the U.S. goal is to maintain stability in the region, preserving the status quo in the energy market. As Byman put it: “The United States wants to see Assad go, wants to prevent terrorists from gaining ground, wants to prevent the conflict from spilling over, and wants to respect the security concerns of key allies. And it wants to do this at low cost and minimize the role of any U.S. ground troops. Hard to square all of this.”
The Iraq Lessons Should Not Be Soon Forgotten
In 2003, before the U.S. intervention in Iraq, the Brent crude oil price stood at $28.90 per barrel; it grew dramatically over the course of the almost perfect military operation. In 2004 it reached $ 37.70, followed by $53.60 in 2005, and a record high of $145 in July 2008. This unprecedented rise in oil prices proved that the market reacts to any prolonged political instability in the oil-rich Middle East. By the same token, market analysts predict a jump of oil prices to $150 per barrel from today’s $110, merely from a first missile launched from the U.S..Sixth Fleet in the Mediterranean towards the Syrian borders.
The difference today speaks for much higher political risks, which would undeniably be transformed into market volatility. In 2003, Iraq stood alone against the might of the U.S. Army, limiting the risks of broader military conflict. Today, the geopolitical constitution of the region resembles a spider’s web. Syria’s closest ally, Iran, has been the potential target of U.S. military action for almost a decade. Combined with the Saudi and Qatari interest in reassembling the region in accord with Sunni political ambitions, realization of which dictates confrontation with Alawite-led Syria and Shia Iran, the chances increase for a big Middle East war. Even the slightest chance of military spillover from Bashar’s Syria into any of the neighbors would shock the international energy market. CSIS’s Thomas Moore agrees with the economic dangers for the region and beyond: “I think there is every indication that the United States never wanted to take the steps that will unfold in the next weeks. This war, however predicated and conducted, has very few net benefits, in particular on the economic ledger.”
During the G20 summit, Chinese government officials urged the U.S. to consider the potential risks that go beyond the region and literally would affect every global economy. "Military action would have a negative impact on the global economy, especially on the oil price: It will cause a hike in the oil price," said one official.
Even if the United States considers its goal as punishing the use of chemical weapons with “limited” actions, the reality of the conflict could escalate to a dramatic level of political uncertainty and economic instability. The energy ambitions of a few Persian Gulf states might have greater repercussions for the global energy market, the burden of which would be carried by all global economies.
Evidently the American administration understands this, and that is partly why the United States agreed to Russia’s plan to settle the conflict, which involves placing Syria’s entire arsenal of chemical weapons under the control of international organizations.
Text: Anton Barbashin