Update: Pompeo-Backed Oil Company Loses Syria Contract

Kurdish-led rebel group was counting on billions from oil firm protected by US troops

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For more than a year, a little-known American oil company, whose founders include a decorated former high-ranking Delta Force officer, has been developing and modernizing Syria’s Deir al-Zour oil fields in the country’s Kurdish-controlled northeast under a special license granted by the Trump administration that exempted it from sanctions.

On Wednesday, the Biden administration decided it would not renew the waiver that allowed the firm, Delta Crescent Energy, to exploit the oil resources of the U.S.-protected Kurdish region, according to the Associated Press, citing a U.S. official “familiar with the decision.”

The company began its operations to modernize oil production at Deir al-Zour in April 2020 while the governing Syrian Kurdish authority arranged to export crude through neighboring northern Iraq and from the Iraqi port of Umm Qasr, according to two sources familiar with the company's operations. Earlier this year, Syrian Kurdish officials signed two oil sales contracts worth a total of $2.3 billion, one to a Turkish oil trader and the other with Iraqi commercial vendors, the sources told SpyTalk.

The Syrian Democratic Council, which governs the self-declared autonomous region, hoped these and future oil sales would provide its main source of revenue to help support the region's five million inhabitants amid the dangers and depredations of the Syrian civil war, now in its 11th year. The administration's decision not to renew the waiver for Delta Crescent means it is highly unlikely the sales will go forward, the sources said. 

The Delaware-registered company’s Treasury Department license to operate in Syria was set to expire on Memorial Day, May 31, a year and one month since it was first issued under a waiver from U.S. sanctions against the Syrian regime of Bashar al- Assad. 

The decision was a test of President Joe Biden’s intentions as he struggles to extricate the United States from Middle Eastern conflicts and shift the focus of U.S. foreign policy to Washington’s competition with China and Russia. But the turbulent Middle East is not a region that can be easily ignored.

The region demonstrated its capacity to turn Biden’s head earlier this month when Israel and Hamas went to war again, the fourth time in ten years. After an Egyptian-brokered ceasefire took hold last week, Secretary of State Antony Blinken flew to the region, where he pledged more U.S. assistance and diplomatic involvement, not less.

The complexities of situation in Syria, however, make the intractable Israeli-Palestinian conflict look simple. As a result of Syria’s civil war, the country is a patchwork of zones controlled by a half-dozen militaries. Assad’s forces, backed by Russian troops and airpower, command the Mediterranean coast and its ports, as well as the capital Damascus and its environs; rebels control the northwest of the country; a Turkish proxy militia has taken over the villages along northeastern border; Kurdish forces, with support from U.S. troops, control the northeast region except for the border; and Iranian-aligned militiamen are operating in the far eastern reaches of the country. In addition, Islamic State fighters are trying to reconstitute their former caliphate in eastern Syria.

Equally complex are the numerous considerations involved in any decision on the future of U.S.-protected oil operations in Syria. The Syrian Democratic Forces (SDF), the Kurdish military that provides security for the region where the company operates, are closely aligned with the United States in its continuing fight against ISIS. Trained by a force of some 900 U.S. Green Berets and backed up by U.S. air power, the SDF served as the main ground forces in the fight, taking thousands of casualties before the terror groups’s so-called “caliphate” fell in 2017. Their fight against ISIS remnants continues to this day.

In recognition of the SDF's contribution, the Obama administration in 2013 issued a statement that allowed "U.S. persons seeking to engage in oil-related transactions that benefit the National Coalition of Syrian Revolutionary and Opposition Forces, or its supporters," which included Syrian Kurdish forces, to apply for Treasury Department licenses. The statement cited President Barack Obama's 2011 executive order that offered such applicants a waiver from U.S. sanctions against the Assad regime.

President Donald Trump came under withering criticism in 2019 after he announced the precipitous withdrawal of U.S. forces from Syria’s northeastern border region, a move that gave Turkish troops and their proxies a green light to establish a narrow security zone inside Syria. Turkey said it carried out the operation to prevent Syrian Kurdish terrorists fighting for an autonomous Kurdish region inside Turkey from carrying out further cross-border attacks.

Turkish and Syrian Kurdish forces have been fighting for decades.

At the time of the troop withdrawal, both Democrats and Republicans accused Trump of stabbing the U.S. military’s Kurdish allies in the back. In the face of such criticism, Trump agreed to a Pentagon request to keep a contingent of around 900 U.S. Special Forces around Deir al-Zour and pledged to “protect Syrian oil” from both ISIS remnants still operating in the region and Russian-backed Syrian forces. 

But Trump, in one of myriad misleading remarks, publicly presented the redeployment as a deliberate decision to keep Syria's oil for the United States.

 "We're keeping the oil," Trump declared at the time. "I've always said that -- keep the oil. We want to keep the oil, $45 million a month. Keep the oil. We've secured the oil." 

His comments drew outraged charges from Syria that the United States was pillaging its oil, a war crime under international law. Administration officials later clarified that the United States would only be guarding the oil. But the pillaging narrative gained traction, particularly among progressives in the United States. 

Amid the region’s political and military turmoil, Delta Crescent Energy was born. The company was founded by James Reese, a decorated veteran the Army’s elite Delta Force; James Cain, a wealthy Republican donor and former U.S. ambassador to Denmark ; and John P. Dorrier Jr., a former executive with Gulfsands Petroleum, a British-based energy company that was carrying out oil operations in the so-called “Block 26” enclave in Syria until it was forced to quit, “thanks to the conflict and resulting sanctions,” which cratered its stock value, according to Shares, a business news site. Delta Crescent was first identified by Al-Monitor, an online publication that focuses on Middle East developments.

Reese lent a frisson of battle-hardened grit to the company’s operations. Upon his retirement from the Army in 2007 as a lieutenant colonel after 25 years of service, Gen. David McKiernan, then-commander of coalition forces in Iraq and Afghanistan, called him "one of the finest special operators in the modern military.”

Reese went on to found TigerSwan, a North Carolina-based global risk consultancy. He met and befriended Cain in 2016, when the former diplomat hired TigerSwan to locate his son-in-law and the man’s sister after they went missing following an ISIS attack in Brussels. Reese was able to confirm that the two were among the 32 people killed in the attack. Later, Reese also became a military commentator on the Fox News Channel. Tiger Swan also provided security for the controversial Dakota Access oil pipeline.

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According to CNN, Reese and Cain, a George W. Bush appointee, discussed the threat that ISIS posed in Syria and agreed on the need for the United States to take active measures to keep Syria’s oil fields in the hands of its Kurdish allies. After the redeployment of U.S. troops to safeguard the Syrian oil fields, the administration hoped a major western oil company would help the Kurds modernize operations at Deir al-Zur, but the dangers kept them away. That’s when Reese and Cain came up with the idea for Delta Crescent Energy. After hiring Dorrier and registering the company in Delaware, the politically connected founders of the company broached their plan to the State Department, citing the Obama-era order that allowed U.S. private investment in the autonomous Syrian Kurdish region, one of the sources said.

The State Department and the Pentagon initially “sought to distance themselves from the project,” CNN reported last year, but “behind the scenes the State Department was active in making the deal happen,” according to its sources. 

The following year, Treasury’s Office of Foreign Assets Control (OFAC) approved a sanctions waiver and license for Delta Crescent to operate in Syria as part of a broader administration effort to force Assad to accept the autonomous Kurdish ministate, along with other reforms. The New Republic quoted government sources familiar with the deal as saying it was brokered “at the State Department’s highest levels.” At a July 30 Senate hearing last year, then-Secretary of State Mike Pompeo confirmed its existence in answer to a question from Republican Sen. Lindsey Graham. “The deal took a little longer, Senator, than we had hoped, and now we’re in implementation,” Pompeo said. 

‘It’s just business’

In addition to its influential friends in Washington, Delta Crescent also cultivated relations with Nechirvan Barzani, president of Iraq’s Kurdish autonomous region next door, in order to secure the export of oil through the region’s  pipeline into Turkey, The New Republic reported. Asked why Turkey, which views the Syrian Kurds as terrorists, would allow their oil to pass through Turkey, a source familiar with the arrangement replied, “It’s just business.”

James Jeffrey, a career diplomat who served as Trump’s Syria envoy, and Fred Hof, a former Syria adviser to the Obama administration, had urged Biden to maintain both the U.S. military and business presence in northeast Syria, citing Russia’s ambitions in the region. Advocates for that policy said that if Biden decided not to renew Delta Crescent’s license and withdraw U.S. troops from Syria, Russia would likely help Assad’s forces retake the oil fields, which would help the Syrian leader fund the war-ravaged country’s reconstruction. Russia hopes to profit from such construction contracts and serve as the broker to manage security threats in the region, these advocates say. Meanwhile, they added, America’s Kurdish allies would be betrayed once again, shredding whatever was left ofU.S. credibility as a reliable ally with them.

Other influential voices in Washington, however, argue that Syria, with its army and resources exhausted after a decade of war, poses no security threat to the United States or its allies in the region. 

“President Joe Biden would do well to change tack—withdrawing the hundreds of U.S. soldiers currently deployed to Syria and relying on Russia and Turkey to contain ISIS,” Robert Ford, the Obama administration’s ambassador to Syria, wrote in an article that appeared in Foreign Affairs earlier this year.

As late as Thursday, State Department and White House spokespeople continued to dodge questions about the administration’s posture toward Syria, including requests to outline the various considerations it’s weighing for the Delta Crescent decision.

With the clock ticking toward Monday, Reese gave a statement to SpyTalk that he says summed up the stakes involved.

“Our initiative in Northeast Syria, to build the capacity of our allies in Syria and generate billions of dollars of revenue for the autonomous administration of NE Syria, is in line with the foreign policy of consecutive U.S. administrations that has been in place since 2013,” he said. Oil revenue that Kurdish authorities require for security, economic stabilization and support for displaced Syrian refugees in the region “will be lost if the OFAC license is not renewed.” he said.

But now he’s out. Whether the Biden administration picks up another company to continue Reese’s Syria operations is an open question.  An administration official quoted anonymously by the Associated Press said it was no longer U.S. policy to “keep the oil”—as Trump once boasted—and use U.S. troops to protect it.