After investigating Delta Crescent Energy (DCE) – particularly its peculiar oil field development agreement with the Syrian Democratic Forces (SDF), the Financial Times recently reported on the company’s “murky” dealings in Syria, exposing close links between the oil firm and the highest echelons of the former Washington administration.
Although Syria has been heavily sanctioned by the US since passage of the Caesar Act in April 2020, the US Treasury Department granted a rare license allowing little known DCE to operate in the country. Many observers speculate that this is thanks to very close relations between DCE and the Trump administration, particularly with the US Ministry of Defense.
The company, incorporated in Delaware in 2019, was founded by former Delta Force officer James Reese, former US Ambassador to Denmark James Cain, and John P. Dorrier Jr., a former executive at GulfSands Petroleum, a UK-based oil company that had previously worked in northeastern Syria. The company has also reportedly donated to Republican candidates but has denied using political influence to secure the license.
These questionable ties have amplified suspicions that this was one of the reasons the White House decided to keep US troops in Syria—to maintain control over the northeast oil-producing region. Adding to this, a controversial deal between DCE and SDF in which DCE is set to develop the oil fields under the military alliance’s control, came about in August 2020 after former US President Trump had repeatedly vowed that the US would “secure the oil.”
Former US President Trump had repeatedly vowed that the US would “secure the oil.”
The Trump administration’s decision has opened up many legal and moral questions. It exposed a dubious practice exercised during Trump’s presidency, as he erased the lines between private and national interests by using the army for the protection of a private entity operating in Syria, a country which had been sanctioned by his administration.
While former Pentagon Spokesperson Jessica McNulty denied the allegations and said that the Department of Defense “does not have an affiliation with any private companies in regard to the oil fields in northeast Syria,” many experts weren’t convinced by the statement.
David Butter, Associate Fellow at Chatham House, told Inside Arabia that based on his impression, it seems that the lobbying by DCE may have played a part in Trump’s decision to retain some US forces in Syria, as the involvement of a US firm presented a persuasive argument for keeping the troops there.
US military presence in the oil-producing northeast region of Syria has often been justified under the pretext that US troops are deployed to secure critical petroleum infrastructure from falling back into the hands of the Islamic State’s (ISIS). But since ISIS has been defeated, this reasoning has become rather unconvincing.
Back in 2019, former Defense Secretary Mark Esper offered a more probable explanation when he stated that the US presence aims to “deter Syrian government and Russian forces to operate these oil fields.”
Moreover, the agreement between DCE and SDF also falls in line with Washington’s goal to support Syrian Kurds who were a key US ally in the regional fight against ISIS. Thus, by having the Kurdish-led SDF benefit from Syria’s oil sector, the US could reduce its financial support to them.
The agreement between DCE and SDF also falls in line with Washington’s goal to support Syrian Kurds who were a key US ally in the regional fight against ISIS.
Yet, the notion that the US should stay in Syria to ensure that the oil produced is not generating revenue for the Assad government is not compelling to Benjamin Friedman, Adjunct Professor at Elliott School for International Affairs. Friedman told Inside Arabia that the “idea that the US would profit from oil, while never really true, and was used to convince Trump to keep troops in Syria, since he has a simplistic and mercantile view of these matters.”
Ever since the Syrian Democratic Forces captured the oil-producing northeastern province in 2017, the oil has been the prime source of revenue for the militia and the Kurdish administration. However, many of these fields are legally owned by the Syrian state or in partnership with companies, including Total and Shell.
Prior to the civil war, Syria produced around 380,000 barrels of crude per day but now most of the Syrian oil fields have become non-operational as their infrastructure has been destroyed in the ongoing civil war. According to information circulating in the media, the SDF-held region currently produces around 30,000 barrels daily, and in light of the agreement between the SDF and Delta Crescent Energy, the oil production will increase by nearly 60,000 barrels per day, bringing in an estimated daily income of US$3 million.
However, Karam Shaar, a Syrian economic analyst and non-resident scholar at the Middle East Institute, doubts that Syria’s northeast is only yielding 30,000 bpd as suggested in the Financial Times article. He reckons that the current level of production is around 100,000 bpd. “The Syrian Democratic Forces never reveal the actual level of production, especially as some of the oil is extracted by tribal leaders in the area so the SDF themselves might not actually know,” he told Inside Arabia.
Although the Kurdish administration expressed their keen interest to work with American company DCE, which has so far been the only company to receive a license to work in Syria, many analysts and media pundits have questioned the nature and legality of this cooperation, including the American presence in war-torn Syria.
While some observers advocate that the agreement does not necessarily breach international law, as it has been created with the private company as an investor and not directly with the US administration, others oppose this view. The Syrian Foreign Ministry, not surprisingly, described the deal as illegal and aimed at “stealing” Syria’s crude; also stating that the SDF has no legal status to sign an agreement with any foreign entity.
Friedman, an expert in international law, also does not think that US companies can use the permission of the local Kurdish authorities to legally produce oil, as they are not an internationally recognized government of the territory. In his opinion, “It’s arguably plundering without the permission of the sovereign government of Syria.”
“The US has no legal mandate to exploit the oil of a sovereign country. The UN continues to recognize the Damascus government as the sovereign authority over northeast Syria.”
In a similar vein, Joshua Landis, Director of the Center for Middle East Studies at the University of Oklahoma, explained to Inside Arabia that “the US has no legal mandate to exploit the oil of a sovereign country. The UN continues to recognize the Damascus government as the sovereign authority over northeast Syria. It does not recognize US authority in the region or the authority of the local government established by the US.” Indeed, according to Geneva Conventions, also ratified by the US, pillaging another country counts as a war crime.
Moreover, Landis points to the fact that the US government’s process for selecting DCE to exploit Syria’s oil wells was shrouded in mystery. “There was no competitive bidding, as there should have been. DCE heads were noted donors to the Republican Party,” he added.
Although DCE said it aims to increase oil production in the region, this would require huge investments, and it is highly uncertain whether the DCE founders will be able to attract other investors, due to the country’s instability. Furthermore, while the company’s plan is to sell the oil on international markets, many speculate how this would proceed.
According to the Financial Times, the oil is prized by smugglers, who transport it to Northern Iraq or distribute it within Syria, including to the sanctioned Assad regime. Some of the crude is reportedly shipped to a refinery in the city of Homs which is under Syrian governmental control.
While US authorities are not particularly happy with this scenario, reports suggest that the US has turned a blind eye to these black-market operations with its estimated US$3 million a day. By doing so, the US is actually undermining its own principles and legislation, such as stipulated in the Caesar Act.
Many observers also wonder how the payments for oil exports will proceed, knowing that neither SDF nor the autonomous Kurdish administration have financial or banking institutions through which financial transactions can be completed.
In Shaar’s view, the entire situation is shady. To his knowledge, no one really knows the answers to pressing questions, such as: when the deal expires, where the company operates, and what the shares are.
“There were many corrupt deals within the Trump administration but what is more important here is how the current administration could prevent corruption in the northeast . . .”
Speaking to Inside Arabia, Ibrahim Al-Assil, a scholar at the Middle East Institute, said that he would wait for official reports regarding any possible impropriety in the deal between DCE and SDF, but he wouldn’t rule out the possibility. “There were many corrupt deals within the Trump administration but what is more important here is how the current administration could prevent corruption in the northeast while creating channels to allow the civil administration in the region to sell the oil and use the revenue in legal ways,” Al-Assil said.
Chatam House’s David Butter suspects that whatever arrangements DCE has with the SDF, they will come under scrutiny by the new US administration as it considers its options in Syria. “Whatever the Biden team decides to do, I doubt whether DCE will weigh heavily in their calculations,” he said, adding that he does not know what, if anything, DCE has done on the ground yet, and whether it has been actively involved in the production and marketing of oil from that region.
Hence, it is very likely that this controversial oil deal may turn out to be another American promise to the Kurds that will go unmet, therefore reinforcing the widespread perception of the US as an unreliable partner, which may have far reaching consequences.