Country profile: Syria

Syria is the only significant crude oil producing economy in the Eastern Mediterranean region, which includes Jordan, Lebanon, Israel and the Palestinian territories. Regional integration, particularly in the energy sector, while increasing, is complicated by the ongoing Arab-Israeli conflict. In 2005, Syria’s total energy consumption was primarily made up of petroleum, followed by natural gas. Hydroelectricity, the sole source of renewable energy, accounts for a small percentage of total energy consumption.

According to the International Monetary Fund, despite declines in oil production, Syria has begun to recover from a pattern of low economic growth as a result of structural reforms and increased opening of the highly centralized economy. In addition, capital inflows from the large Iraqi refuge community, growth in the non-oil sector, and high global oil prices for its modest quantities of oil exports buoyed the economy in the short-term. However, increasing imports of refined products is expected to offset much of the benefit of record crude prices in the near-term. Overall, oil revenue as a percentage of GDP fell by 10 percentage points to an estimated 4.5 percent between 2003 and 2006.

In May 2004, the U.S. government imposed unilateral economic sanctions against Syria, under the provisions of the Syria Accountability and Lebanese Sovereignty Restoration Act, although the direct economic effects have been modest, due to the small volume of U.S. trade and investment with Syria. (U.S. energy companies operating in Syria were not forced to divest their investments in Syria although some have chosen to do so). Increased international pressure on Syria, politically and economically, further deterred foreign investment from the West, particularly in the oil sector, although financial liquidity in the Gulf countries, China and Iran has offset this some.