Opinion: Expansion Of The Syrian War Could Send Oil Prices Higher
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JERUSALEM (MarketWatch) — It’s getting out of hand. What began as an internal Syrian tragedy and later produced an epic European crisis is fast becoming a multinational conflict in a theatre dangerously close to oil’s biggest global wellspring.
Five years after its eruption, the civil war in which 470,000 have reportedly died and more than 10 million have been displaced, has had limited impact on financial markets, reflecting a marginal economy’s small industry and lack of natural resources.
Yet as the conflict steadily escalates, this is prone to change.
The Syrian war was transformed last fall after the Russia built an air base in western Syria and Russian jets began methodically bombing President Bashar Assad’s enemies, soon delivering him gains on the ground.
The Russian intervention’s military rationale is simple.
The bombing first focused on rebel-held Aleppo, prewar Syria’s commercial heartland. Having last week brought that ravaged metropolis under Assad’s siege, the bombing proceeded north, drawing attention when Syrian troops under those bombers fired missiles into hospitals killing scores of civilians.
Meanwhile, Russian engineers emerged at the opposite end of northern Syria, in Qamishli, outside Iraq, where they are now expected to repeat the trick they already did out west, upgrading a local airstrip so it too can accommodate Russian bombers.
After helping Assad restore his grip on the north, the Russians will proceed south, to Daraa, where the war began in March 2010, off the Jordanian border. This way, Moscow will have provided Assad bridgeheads in three of his country’s four corners, from which his ground forces can proceed inland.
Moscow’s aim, then, is to restore Assad’s grip on Syria and turn it into a de facto Russian protectorate.
This scenario is a nightmare from the viewpoint of Turkey, which has fought 12 wars with Russia in recent centuries.
Worse, while Russia’s Syrian buildup threatens Turkey externally, Moscow’s backing of Syria’s Kurds threatens Turkey domestically. A ploy aimed at dividing Assad’s Sunni enemies along ethnic lines, the Syrian Kurds’ empowerment might result in their joining their already restive brethren across the Turkish border. This is why Turkish artillery fired into Syria at Kurdish outposts this week.
The bellicose rhetoric with which Moscow and Ankara now speak while pressing triggers is potentially a prelude to harsher action. For now, the Russian bombers and Turkish howitzers are shooting from afar. However, Russian divisions are but a three-hour flight away, and Turkey’s formidable army is camping along the Syrian border.
Turkey’s call on Tuesday for its allies — namely, the U.S. – to jointly invade Syria is an ominous statement of intentions. Ankara feels provoked, humiliated and threatened, and is willing to go to war.
Prospects for escalation rise further, considering that Russia and Turkey are led by a pair of authoritarians whose decisions are not always subject to fearless executive debate.
All this new escalation, while politically explosive, would have been financially benign had it been about Turkey and Russia alone. It isn’t.
Targeting oil’s wellspring
Lurking behind the Russian-Turkish confrontation are Saudi Arabia and Iran, which crouch over the world’s second and fourth largest oil reserves, alongside the fifth, sixth and seventh, Iraq, Kuwait and the United Arab Emirates.
The Riyadh-Tehran enmity is now open and festering. The Saudis are financing and arming the Sunni rebels that Russia is bombing, and Iran feeds Hezbollah and has sent oil, cash, advisers, and special units to Assad.
Moreover, the Saudis, led in this by the bellicose, 30-year-old Defense Minister Mohammad bin Salman Al Saud, are also threatening to join an invasion. This prospect was substantiated last week by Turkish Foreign Minister Mevlut Cavusoglu’s statement that Saudi warplanes will soon land in Incirlik, the Turkish air base from which American, French and British aircraft are bombing the Islamic State.
Syria’s potential invasion by foreign armies might generate unpredictable confrontations.
Should Saudi troops march in Syria they might learn that the enemy’s counterattack would target not them, but their land. Targeting the Saudis means targeting their oil wells, especially as long as the next American president has not succeeded Barack Obama, whom the Saudis and Turks now blame for having abandoned them to Russia’s devices.
Russia will not attack Saudi Arabia. Putin is cynical, but he is rational. That can hardly be assumed about Iran’s National Guards, who might be tempted to fire missiles across the gulf, or about ISIS, which will happily unleash suicide attacks on Saudi wells, or even about the soft-spoken Assad, who if feeling cornered might send his MiGs south.
The Saudis, for their part, if suffering defeats after invading Syria, might be tempted to attack Iranian fields, which are easily accessible for its missiles and aircraft. Iraq’s oil fields, now split between the Iranian-backed Shiite south and the American-backed Kurdish north, would also become fair game in such a brawl, as would Kuwait’s and the UAE’s.
That is when oil prices CLH6, +0.03% would rising again, paradoxically serving the financial interests that such an escalation’s antagonists share, from Riyadh to Moscow.
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