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How the American deal for Syria’s oil died

Biden appears to be revoking a Trump-era waiver that put the U.S. in the middle of a battle over Syria's crude resources.

Analysis | Middle East

The Biden administration is ending the only U.S. sanctions waiver for the Syrian oil industry, and will instead focus on reopening international aid to the Kurdish-led autonomous region of Syria.

Al Monitor first reported last week that the United States has decided not to renew the license for American company Delta Crescent Energy to develop Syrian oil fields, allowing it to expire at the end of May.

Responsible Statecraft was able to confirm the decision from Newlines Institute senior analyst Nicholas Heras, as well as two additional sources, one of them in direct contact with State Department officials and another close to Syrian Kurdish leadership.

None of the sources said the decision was final, but all claimed that it was overwhelmingly likely.

Delta Crescent Energy wrote in an email to Responsible Statecraft and identical Twitter thread that it had not been “informed of any plans by the State Department to reverse course” on the oil policy.

 The oil issue dates back to 2018, when a U.S.-backed, Kurdish-led rebel group called the Syrian Democratic Forces captured Syria’s largest oil fields from ISIS. 

Even as American troops patrolled the area, U.S. sanctions blocked foreign companies from developing those oil fields. The Trump administration eventually granted a sanctions waiver in 2020 to Delta Crescent Energy — which inked a deal with the Kurdish-led authorities to develop the fields there — in order to keep the oil away from the Syrian government, as well as its allies Iran and Russia.

The Biden administration has now decided to axe the oil deal, reportedly. The decision would end a controversial Trump administration policy, but also eliminates one of the few legal routes for the Syrian Kurds to deal with the outside world, placing them back under strict sanctions.

“Maximum pressure”

“The Biden team is moving on from maximum pressure, and the oil thing was always an appendage of maximum pressure, trying to pressure the Iranians and their allies to capitulate,” said Foreign Policy Research Institute director Aaron Stein, who explained that the administration is now “narrowing the missionset” in Syria to “ISIS and stabilization assistance.”

The Syrian government, of course, is desperate to regain access to the oil. It is facing serious fuel shortages, exacerbated by sabotage attacks that have been blamed on Israeli forces.

The oil issue also appears to be tied to Yaroubiyah, a crossing on the Iraq-Syria border. The border station was previously used to bring international aid to Kurdish-held areas, but Russia and China used their UN veto power to close the aid route in July 2020.

Russia is now pushing to phase out the last U.N.-approved crossing from Turkey into rebel-held territory as well, The New Humanitarian reported on Tuesday.

“The Biden team seems to believe that it's better to focus energy and political capital on opening Yaroubiyah rather than facilitate oil deals,” said Heras.

A recent U.S. delegation to Syria informed the Kurdish-led autonomous administration that U.S. stabilization aid cut by the Trump administration would resume, Al Monitor first reported.

The Biden administration said that its focus was shifting from oil to stabilization, “which [the Kurdish-led leadership] found positive,” a Syrian who works on stabilization projects confirmed to Responsible Statecraft.

Another source close to Syrian Kurdish leadership confirmed that the U.S. delegation had specifically brought up the re-opening of Yaroubiyah along with the oil.

Ending the oil project, however, brings back an older contradiction in U.S. policy. While U.S. stabilization aid flows to the Kurdish-led autonomous region, that same region remains under the strict U.S. economic sanctions imposed on all of Syria in 2011.

Because of the sanctions, locals have been forced to use environmentally-destructive backyard refineries and to sell their oil at below-market rates through smugglers. Even then, oil revenues made up about 60 percent of the budget for the autonomous administration in 2019.

The Kurdish-led administration was poised to massively increase that revenue Sources told Al Monitor that there were $2 billion in oil deals lined up through the waiver, and Delta Crescent Energy confirmed the report to Responsible Statecraft on the record. Meanwhile, U.S. stabilization aid to Syria was budgeted at $230 million when then-President Donald Trump cut it.

“Support for our allies in [Northeast Syria] has been overwhelmingly bipartisan. The Obama Admin established the policy for this license, the Trump Admin authorized activity pursuant to the policy, and we expect the Biden Admin to sustain the policy,” Delta Crescent Energy wrote in its email. “We would just ask for people attempting to politicize this to simply listen to the facts and understand that our allies in [Northeast Syria] have suffered enough from politicized decisions and need predictable support from the United States.”

“Helping with reconstruction”

The project has its origins in retired Delta Force commander Lt. Col. James Reese. His private security company TigerSwan had been in Syria since 2016, according to the Syrian source who works on stabilization projects.

“They were sort of a security company, but also exploring other business options,” the Syrian source said.

In April 2018, Reese spoke to Fox News after returning from Syria, where he had been “helping with reconstruction.” Later that year, the New Yorker reported that TigerSwan was protecting demining operations in Raqqa.

It is unclear exactly how Reese became involved in oil. Delta Crescent Energy declined to give a specific timeline of the project, simply stating that its “relationship with the leadership in [Northeast Syria] goes back many years and has been well-documented by other reporters.”

But a source with knowledge of the project, speaking on condition of anonymity, claimed that the Kurdish-led autonomous administration approached Reese first, asking him to help create an economic development plan after the Trump administration cut stabilization aid.

CNN reported last year that Delta Crescent Energy entered discussions with the Trump administration over the oil issue in late 2018.

Brett McGurk, then the U.S. special envoy for the counter-ISIS campaign, was skeptical that it would be legal to extract Syrian oil without the permission of the central government.

“I worked this issue with [former Secretary of State Rex Tillerson], who knows something about oil, and it's not possible for us to exploit those oil resources unless we want to be oil smugglers,” he later told an October 2019 panel hosted by the Foundation for Defense of Democracies. Tillerson is a former CEO of ExxonMobil. 

“The only way to possibly do this legally, would be an escrow arrangement through the Russians that would loop in the Syrian government,” McGurk explained. “You would put the resources in some sort of escrow for ultimate development once the civil war concluded. That wasn’t possible. The Russians weren’t really open to that, and I think they would be even less so now.”

McGurk left the Trump administration in December 2018. He returned to government this year, serving as coordinator for the Middle East and North Africa at the National Security Council.

“The oil is secure”

Two months after McGurk left the administration, Reese — along with former Amb. James Cain and longtime oilman John P. Dorrier, Jr. — incorporated Delta Crescent Energy. They applied for a sanctions waiver in September 2019.

The next month, Turkey invaded Syria. Trump considered pulling U.S. troops out of the country entirely, but Sen. Lindsey Graham (R–S.C.) convinced him that controlling Syria’s oil was a worthwhile reason to continue working with the SDF.

“We're keeping the oil, we have the oil, the oil is secure, we left troops behind only for the oil,” Trump told reporters alongside Turkey’s President Recep Tayyip Erdoğan.

Many in the Trump administration believed that the Syrian government was on its “last legs economically,” and so denying it access to oil could help force “internal regime change,” Stein said.

The Trump administration eventually granted Delta Crescent Energy its waiver in April 2020, which Graham announced publicly in a July congressional hearing.

The waiver was controversial at the time. Cain was a long-time Republican activist, while Dorrier had donated to Graham’s campaign. State Department official Joel Rayburn admitted to Congress that the Trump administration lobbied only for Delta Crescent Energy to get the waiver.

“Companies like Exxon and Chevron don’t do this kind of thing,” Cain told the Financial Times earlier this year. “It’s too pioneering; too adventuresome…some might say too risky.”  

The project also attracted international flak. Turkey, Russia, Iran and the Syrian government all accused the United States of plundering Syria’s natural resources.

Meanwhile, the U.S. military has distanced itself from Trump and Graham’s comments. In early 2020, the U.S.-led coalition began training a local militia called the Critical Petroleum Infrastructure Guard to protect oil fields under the SDF flag.

U.S. forces were still paying this militia a visit three to five times a week in April 2020, according to a U.S. government report.

A spokesman for U.S. Central Command spokesman told Responsible Statecraft earlier this month that U.S. forces supported the SDF’s oilfield guards in order to “deny ISIS access to critical resources and revenue that could be used to buy arms and conduct operations.”

“Syrian oil is for the Syrian people and we remain committed to the unity and territorial integrity of Syria,” he said.

The State Department declined to comment. The Washington office of the Syrian Democratic Council, the political branch of the SDF, did not respond to a request for comment.

(Andry VP/Shutterstock)
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