The removal of Syrian president Bashar al-Assad from power over the weekend has not only dealt a major blow to Iran and its designs for the Levant region, but it has also eliminated a critically important outlet for Tehran's sanctions-hit oil.
Long considered Iran's top Arab ally, Assad enjoyed significant military and economic support from Tehran over the past decade, as Iran saw him as the focal point for its regional influence. Syria also provided the main supply routes to Lebanon's Hezbollah militia, the crown jewel in Iran's so-called ‘Axis of Resistance'.
Part of Iran's assistance was in the form of shipments of crude and refined oil products to help Assad's regime meet fuel demand in the areas under its control. Once a 600,000 b/d-plus producer, Syria's crude output has been on the decline over the past three decades. Just before the start of the civil war in 2011, production had already slipped below 400,000 b/d. Today, it is less than 100,000 b/d, and only around 16,000 b/d of that comes from fields in areas under the former government's control.
This left Assad's regime — itself restricted by western sanctions — critically short of crude to feed its two refineries in Banias and Homs, even though both have been operating below capacity because of damage sustained during the civil war. Iran helped plug the gap by sending crude and products to the 140,000 b/d Banias refinery on Syria's Mediterranean coast on an ad hoc basis.
Iranian crude exports to Syria averaged around 55,000 b/d in January-November this year, down from 80,000 b/d in 2023 and 72,000 b/d in 2022, according to data from trade analytics firm Kpler. Vortexa puts shipments higher at 60,000-70,000 b/d so far this year and 90,000 b/d in 2023. Iran has also been sending around 10,000-20,000 b/d of refined products to Syria in recent years, according to consultancy FGE.
Wait and see
Iran's oil exports to Syria have mostly been in the form of grants to support the Assad regime. The government's collapse could put an end to these flows for the time being, while Tehran takes a wait-and-see approach to what comes next in Syria. The first sign of that came over the weekend when the Iran-flagged Lotus, which left Kharg Island on 11 November destined for Banias, reversed course just as it was about to enter the Suez Canal. The tanker is now headed back through the Red Sea without specifying a destination.
Although supplies to Syria make up a very small share of Iran's overall 1.6mn-1.8mn b/d of crude exports, Tehran may not want to lose it as an outlet for good, given the difficulties of finding a replacement while sanctions remain in place.
"The flow will stop, at least for the time being," said Iman Nasseri, managing director for the Middle East at FGE. "But Iran will want to continue supplying this oil to Syria, or else it may be forced to cut production by anywhere between 50,000-100,000 b/d if it is unable to ultimately place those barrels in China."
Argus estimates Iran produced around 3.33mn b/d in September-November.
Alternatively, Iran could opt to build the volumes it holds offshore in floating storage.
"We usually see the same tankers shuttling between Iran and Syria," according to Vortexa's senior oil analyst Armen Azizian. "If that trade subsides, we could see some of these tankers unemployed or put into floating storage, which would rise, at least in the short-term," he said.
Lotus is one of these tankers, having made the trip to Syria and back five times in 2023, and twice so far in 2024. The crude cargo it is carrying now "could be returned to Iran and put into onshore tanks or go into floating storage off Iran," Azizian said.
