Context: The Strategic Logic of Russian PMSC Operations in Syria

At the start of the twenty-first century, Syria ranked as one of the leading oil and gas producers in the Mediterranean littoral region, and oil and gas revenues then, as now, represented a substantial portion of Syria’s overall GDP.¹ It would be hard to overstate the strategic importance of the country’s energy sector for the country’s stability. Although comparatively speaking, in the wider context of Middle Eastern producers, Syria is one of the smaller oil and gas exporters, revenues generated by sites managed by the Syrian Petroleum Company represented an estimated 25 percent of the Syrian government’s overall revenue stream prior to 2011.²

Syria’s government controls oil, gas, and mineral production and export, and Syria’s General Petroleum Company sets strategy for exploration and development and supervises national subsidiaries, including the Syrian Petroleum Company (SPC) and Syrian Gas Company (SGC).³ But, as in many other developing countries, Syria’s nationalized energy sector is highly reliant on external backing from foreign firms for capital-intensive upstream investment in exploration and development. SPC, as a result, operates through production-sharing agreements managed through several subsidiaries, including the Hayan Petroleum Company, the Al-Furat Petroleum Company, and the Deir Ezzor Petroleum Company.⁴

During the decade leading up to the start of the Arab Spring uprisings in Syria in 2011, the Assad regime worked assiduously to attract foreign investment in its energy production industry, and over time Russian state-backed firms came to dominate in Syria’s energy sector. Despite the death of the country’s long-time ruler Hafez Assad in 2000 and uncertainty about the political strength of his son and successor Bashar, Syria was able to maintain relatively stable levels of foreign investment.

Syria’s energy production prospects looked especially promising at that time because of the reopening of the Iraq-Syria pipeline through the terminal port at Baniyas. In 2000, Syrian oil production during the early post-Soviet phase of heavy Russian investment in Syria’s energy sector, Syrian companies affiliated with SPC exported about 581,000 barrels per day (bpd) in heavy sour crude oil.⁵ The bulk of exports from these facilities were to European markets.⁶ At the time the Baniyas pipeline carried an estimated 150,000 to 250,000 bpd, much of which reportedly came from oil fields in Kirkuk that were then still managed under the UN oil for food program.⁷ While U.S. and European oil majors such as ConocoPhillips, Shell, and Total sold oil pumped from the pipeline on the open market likely in violation of sanctions, Russian state-backed firms created an alternate gray market and also benefited considerably from sales of oils from the Baniyas pipeline.⁸

Yet, years of government mismanagement and political isolation stemming in large part from its enmity with Israel, backing of Hamas and Hezbollah, and development of chemical weapons, complicated long-term foreign investment prospects for Syria’s energy sector. The situation only grew worse, after the United States imposed sanctions on the Assad regime for its role in the assassination of Lebanon’s Prime Minister Rafik Hariri in 2005. Syria’s increasing economic isolation coincided with the start of a major global oil boom that lifted Russia’s highly leveraged economy out of its long post-Soviet recession that in turn transformed Moscow’s relationships with a number of Arab regimes.

After a prolonged period of fits and starts in the early 2000s, foreign investment in Syria’s energy sector began to pick up with a noticeable uptick in Russian investment in the gas sector that coincided with the maturation of earlier upstream investments in Syria’s oil and gas sector. Majority-owned Russian-state energy enterprises such as Gazprom, Soyuzneftgaz, and Stroytransgaz were among the leading foreign firms to benefit from this shift and each gained a greater market share as the Assad regime became more isolated.⁹ The Russian state is a majority stakeholder in all three energy conglomerates, which were headed by close associates of Vladimir Putin and had at various points served alongside him either during his stint in the KGB, the government of St. Petersburg, or later, as part of his presidential retinue.¹⁰

Syria’s growing dependency on foreign investment in the energy sector during these years entrenched structural flaws common to many petro-states. The country’s nationalized industry and dependency on foreign firms ultimately resulted in anemic earnings as net income from oil exports was offset by royalties paid to international producing companies.¹¹ As noted by scholar David Butter, petroleum product subsidies for the Syrian domestic market damped earnings potential even further and fed the growth of gray market export sales of subsidized fuel at much higher prices in neighboring Lebanon, Turkey, and Jordan.¹² Since security agencies, and the army and air force in particular, were among the largest bulk buyers of subsidized fuel, high-ranking officials in the security sector naturally emerged as key brokers in the country’s energy export sector. This also meant that Syrian officials with strong connections to the country’s security agencies would emerge as key nodes in brokering energy sector deals with Russian state-backed firms.

In the two decades leading up to the Arab spring, family members of the Assad regime and close allies of the government’s predominantly Allawite elites ran the government’s crude oil exports to Europe, which historically has been a primary market for Syria’s particular grade of heavy sour crude oil.¹³ During that same time, Russian state energy firms came to dominate a hefty portion of Europe’s energy sector. By far, Stroytransgaz, a one-time subsidiary of Russia’s Gazprom now owned by Volga Group,¹⁴ was among the most active in the development of Syria’s gas and oil production capacity during this period.

Much of the oil and gas production and development in that area falls within the range of the so-called Hayan block of hydrocarbon fields. According to energy industry journals, company records, and media reports, Hayan Petroleum Company and its operating partner, Croatia-based INA Naftpalin, have managed the Hayan Block’s Jazal, Jihar, and Mahr oil and gas fields under an arrangement for exploration that dates back to the late 1990s.¹⁵ An oil and gas industry survey and study led by Croatian geologists indicates INA first discovered hydrocarbon reserves in April 2002 in the Jihar field area and the Palmyra and al Mahr reserves later that same year.¹⁶ Three years after those discoveries, INA and Hayan Petroleum Company first began production at the Jihar site in late August 2005. Other fields in the same block, including Jazal, began production starting from 2007 forward.¹⁷

Linked to the Ebla gas refinery plant between the city of Homs and Palmyra, the al-Shaer gas field is also a prime source of liquefied natural gas in the Hayan Block. With reserves capable of producing an estimated 3 million cubic meters per day the al-Shaer field is also a critical node in regional energy supply and export chains, and along with the Ebla site is a key supply link in the long stalled Iran-Iraq-Syria gas pipeline project.¹⁸ Al-Shaer production first came on line with the launch of a joint venture in 2010 between Canada’s Suncor and Syria’s Ebla Gas Company in developing the Ebla gas field and then in 2011 with the joint development scheme for Jihar gas field between Croatia’s INA and Hayan Petroleum Company.¹⁹ Combined the two ventures increased by more than half Syria’s gas production capacity. But, the onset of the civil war saw a sharp downturn in energy sector output.

In January 2012, INA reportedly invoked force majeure clauses in its arrangement for exploitation of the Hayan Block indicating that an unforeseen “act of God” prohibited further work at the site and reportedly ceased operations at al-Shaer after the outbreak of war and imposition of EU sanctions on the Assad regime.²⁰ INA and Suncor ultimately pulled their expatriate staff from the company and from that point production at the site dropped precipitously.²¹ Interestingly, around the same time as INA found itself struggling to make up for lost revenue from the war in Syria, Russian-state energy giant Gazprom began pressing aggressively to buy out one of INA’s major shareholders, Hungary-based Magyar OLaj- és Gázipari Részvénytársaság (MOL).²² As of late 2019, the deal had yet to go through in part because of concerted efforts by the Croatian government to create more viable alternatives to Russia’s dominance of the gas production and transfer market in southeastern Europe.²³

Nonetheless, Gazprom through the minority shares it held in MOL at the start of the Syrian war had at least an indirect stake in the successful recovery of infrastructure operated by Hayan Petroleum and Ebla Petroleum. Presumably, Gazprom’s stake in MOL—whether a minority or majority—would ultimately help Russia’s largest state owned energy company gain leverage in INA’s affairs, providing Gazprom a strong incentive to invest in the restoration and protection of INA’s holdings in Syria, including the Hayan Block field. Likewise, Stroytransgaz—as one of the major Russian state-backed firms invested in construction, development, and maintenance of infrastructure of Syria’s hydrocarbon processing, treatment, and transportation—would benefit both from Hayan Block exploitation and more specifically from the al-Shaer site as one of the principal investors in one of the most key nodes in the processing of Hayan Block reserves.

Not surprisingly, as a result, an intricate web of social and business ties has sprung up between Stroytransgaz and the three state-run Syrian energy companies responsible for oversight and management of the lucrative Hayan Block gas fields, which encompass the gas processing plant at al-Shaer—the Syrian Petroleum Company, Ebla Oil Company, and Hayan Petroleum Company. As shown below, the intersection of interests between Stroytransgaz and Syria’s state-run oil and gas firms has also sprouted new networks between individuals and entities that service Stroytransgaz contracts for the Hayan Block, including EvroPolis, Velada and Merkury, three Russian firms linked to Yevgeny Prigozhin that facilitate financing and logistics for Wagner Group PMSC operators.

At the start of Syria’s civil war, just before the imposition of major U.S. and EU sanctions against the regime in 2012, the vast majority of Syrian oil exports were sold on the European market.²⁴ As a result, Russian investment in Syria’s energy sector, and its trade in Syrian oil and gas to Europe in particular, came to represent a vital lifeline for the Assad regime. Syria’s oil- and gas-rich Hayan Block, where the al-Shaer gas plant is located, sits at the center of this intricate web of Russian-Syrian trade relationships that for almost a decade now have constituted the crown jewels of the Assad regime’s survival strategy.

Located about 90 miles northwest of the ancient city of Palmyra, the al-Shaer gas plant and storage facilities sit astride part of the Jabal Shaer field in the Hayan Block. With the capacity to produce an estimated 106 million cubic feet a day, the al-Shaer facility is one of the most significant energy production sites in Syria.²⁵ The oil and gas fields in eastern Homs that constitute the Hayan Block on which the al-Shaer facility is located have, however, changed hands a number of times over the years.

U.S.-based energy company Marathon initially discovered the site and signed a deal with the Syrian government to exploit the site in the 1980s,²⁶ and in 2006, Marathon signed a production sharing agreement with Petro-Canada as relations between the United States and Syria soured.²⁷ Two years later, in 2008, Petro-Canada awarded the multinational conglomerate Petrofac a contract valued at $477 million to develop the al-Shaer and Cherrife gas fields.²⁸ Up until the start of the civil war in 2011, Canadian based Suncor operated the al-Shaer facilities in cooperation with the Syrian state owned Ebla Oil Company, but U.S. and EU sanctions forced Suncor to abandon the $1.2 billion project.²⁹ Although the abandoned al-Shaer facility would soon emerge as a center of numerous skirmishes between the Syrian government, rebel groups, and ISIS, ultimately Suncor’s exit from the scene would prove a boon for Russian firms that swooped in as the fighting intensified.

Reporting by Russian news outlets such as Fontanka and Novaya Gazeta following Bouta’s killing as well as a review of Hayan Petroleum Company’s Facebook pages indicates that Russian PMSC contractors with links to Wagner operatives provided security for the al-Shaer and other Hayan Block sites going as far back as 2014.³⁰ A publicly available copy of the SPC contract with EvroPolis indicates that the Prigozhin-linked firm has provided oversight and security at the al-Shaer Gas Plant facility in Homs where Bouta was killed since at least 2016.³¹

Contract and accounting records of EvroPolis’s revenues and expenditures in the 2017-2018 timeframe for operations in Syria that were reviewed by our team indicate that natural gas extraction from the Hayan block fields alone generated about 12,230,627,900 Russian roubles (RUB), or the equivalent of about $162 million in 2017.³² A substantial portion of those earnings appears to have come from natural gas extracted from sub-block well sites at al-Shaer. Total revenues indicated on that same spreadsheet for 2017 for other goods and services provided by EvroPolis as part of its contract for the Hayan block, such as oil and gas storage and gas condensates, added up to 19,219,411,196 RUB or roughly the equivalent of about $301 million.

While there are no direct ties indicated between EvroPolis LLC and the Ebla Petroleum Company, public records and social media accounts demonstrate existing ties between Ebla Petroleum and other Prigozhin-linked companies. In December 2019, Syria’s oil minister Ali Ghanem announced that the Syrian parliament had approved two contracts for oil exploration to two Russian firms with ties to Prigozhin—Merkury LLC and Velada LLC.³³

Cross-posts on Facebook pages for Hayan Petroleum Company and EvroPolis employees who traveled regularly in the Middle East such as Ildar Zaripov, who lists Hayan Petroleum Company and Elba Petroleum Company employees among his Facebook friends, appear to corroborate a high degree of capacity for close coordination between management at EvroPolis and Hayan Petroleum facility operations on issues such as security.³⁴ Zaripov is one of several Russian citizens whose names appeared in email exchanges between EvroPolis employees shared with our team by the Dossier Center.³⁵ As recently as May 2020, Zaripov’s Syria-based Facebook friend Adel Ahmad indicated, for instance, that he works for the Hayan Petroleum Company and at one time also worked for other Syrian state enterprises, such as the SPC. Another Facebook friend of Zaripov’s, Bassem Saad, listed the Syrian state-owned Ebla Petroleum Company as an employer, and posted updates on repairs to the al-Shaer facility as recently as April 2020.³⁶ Zaripov has also posted a number of photos on Facebook from his recent travels in the Middle East, and a review EvroPolis travel booking records and flight data analysis shared with our team indicate Zaripov took more than two dozen flights to and from key Middle East hubs including Beirut, Lebanon in 2018 and Istanbul, Turkey in 2019, all paid for by EvroPolis.³⁷

The fact that one of the Wagner Group’s most well-known operators, Dmitry Utkin, a veteran Vozdushno-desantnye voyska (VDV) airborne forces spetsnaz operator, was also known to have operated a PMSC detachment in the Palmyra area would appear to further suggest a central role for EvroPolis as a middle manager for Russian state firms such as Stroygtransgaz, and likely Gazprom or one of its many lesser known affiliates. Utkin, at one point after fighting in Donbas under the call sign “Wagner,” was one of the first to be exposed in press reports for a security detail in Syria for a subunit of the Moran Security Group known as Slavonic Corps.³⁸ The Moran Security Group was known to operate in the Palmyra area dating as far back as 2013, and it is well known that another former spetsnaz veteran business partner of Utkin’s, Andrey Troshev, fought there in the spring of 2016,³⁹

The Moran Security Group is a long-time service provider for Russian energy industry majors and energy insurers, such as the SOGAZ Insurance Group, and its operations in Syria would additionally seem to point to overlapping ties between both individuals and entities affiliated with Wagner, Hayan, and EvroPolis operators in Syria.⁴⁰ Indeed, if media reports documenting the treatment of combat wounded Russian private military contractors at St. Petersburg clinics owned by SOGAZ are to be believed, Wagner Group operators have received a significant amount of support from majority Russian state-owned enterprises.⁴¹

While tracing the intricacies of all of the overlapping interests between Russian and Syrian entities and the tightly latticed networks of individuals that support Syria’s energy sector is a daunting task, doing so is the key to understanding Prigozhin’s business model. Although Prigozhin’s connections to the Kremlin are clearly key to the success of EvroPolis and its ostensible parent company Concord, it is equally obvious on closer inspection that in many respects, Prigozhin is little more than a middleman for bigger players in Russia’s managed economy. According to investigative news reports, Prigozhin’s firm Concord has secured more than 5,300 contracts since 2011 valued at about 209 billion Russian rubles or roughly $2.76 billion from Russia’s military supply agency, Voentorg.⁴² Most of those contracts are held by shell company subsidiaries, such as Merkury and Velada, which curiously, according to our review of account documents shared by the Dossier Center, appear to have received payments from revenues generated by oil and gas field contracts held by EvroPolis in Syria.⁴³

Network analysis of these relationships is also critical for dissecting the organizational structures that constitute the principal elements of the so-called Wagner Group, which exists more in the realm of the virtual and the imaginations of the contract recruits who work for hire under arrangements with Prigozhin-linked firms than it does on paper. The Wagner Group is neither a legally constituted entity under Russian or international law nor is it a shadow army; it is a conveniently deceptive short-hand for the contingents of contract Russian warfighters who are paid through Voentorg procurement deals to execute on security risk management plans in conflict zones where Russian state enterprises have an abiding interest in the energy and arms sector.

In fact, close examination of the social ties that bind these contingents reveal much more about the distinctive recruitment patterns and organizational structures of EvroPolis-linked contingents that form the basis of effective Russian state control over the paramilitary group’s operations. Deeper analysis of the social media accounts of those who purport to have fought with these contracted Russian contingents also shows how organized armed violence creates its own distinct forms of social cohesion, and a fusion of interests between Russian ultranationalists and those interested in the mercenary lifestyle. In this regard, the battle for al-Shaer and the case of Hamdi Bouta’s brutal execution at the al-Shaer gas fields is quite instructive.

Almost from the outset of the civil war in Syria, control over the country’s major oil and gas facilities emerged as one of the most critical strategic objectives for forces on all sides. While Syria is not a major exporter of energy resources the oil, gas, and mineral reserves near the ancient city of Palmyra are an important source of revenue for Assad’s regime and a crucial source of energy for the military and electricity for the country writ large.⁴⁴ According to at least one report, about 80 percent of Syria’s gas production capacity is located in the Homs-Palmyra region.⁴⁵

Part of a larger energy production project area known as the South Middle Area Exploitation project, the al-Shaer facility is not only an important source of revenue for the regime in terms of attracting foreign investment but a crucial source of electricity and refined oil and gas for the military.⁴⁶ For these and other reasons, capture and control of al-Shaer has been a primary military objective of ISIL, rebel forces, and the Assad regime and its backers, including Russia.

The site has been a major point of contestation since at least 2013 when fighters affiliated with the aforementiond Wagner Group progenitor known as the Slavonic Corps were captured and forced to retreat from the area.⁴⁷ Staffed by armed operators who for a time held management positions in the Moran Security Group, a Russian PMSC, Slavonic Corps is one of several Moran related contingents whose employees have a long history of providing security for Russian energy projects in the Middle East.⁴⁸

For Russian state-backed firms with a vested interest in the production, refinement, and export of Syrian gas, such as Stroytransgaz, Sovfracht, a Crimea-based shipping conglomerate, and SOGAZ, one of Russia’s leading reinsurance providers, the strategic logic of deploying a dedicated contingent of military professionals is fairly straightforward. Seizing control of the Hayan Block and its critical infrastructure from ISIL had multiple benefits. Firstly, it ensured critical revenues for the Syrian state as well as stability for a cooperative regime. Secondly, control of the block insured the profitability of the investment for upstream investors looking to bring Syrian gas to market, such as Stroytransgaz.

Thirdly, flows of energy exports from Syria to world markets by ship through ports secured with the help of Russian military advisers would presumably boost revenues for major shipping firms such as Sovfrachtthat was sanctioned by the U.S. Treasury Department in 2019 for allegedly shipping jet fuel to Russian forces in Syria.⁴⁹ And, lastly and perhaps most importantly, control and protection of this most critical part of Syria’s energy infrastructure benefited the insurers of the site, creating a sort of crude virtuous cycle of dividends that likely would have accrued from the management of reinsurance policies for energy and shipping sector risk by firms such as SOGAZ, which, not coincidentally, counts as shareholders relatives and close friends of Putin.⁵⁰

In effect, U.S. and EU sanctions imposed on the Assad regime from 2012 forward serve to reinforce this interdependence between Syria’s nationalized energy production industry and Russian state-backed firms. When the U.S. and EU also imposed sanctions on Russia in response to the Ukraine crisis in 2014, Russia developed a new business model for operating in a sanctions gray zone in order to service existing contracts in Syria. Russian state firms effectively owned much of Syria’s energy production infrastructure and at the same time likely underwrote the risk insurance that protected that infrastructure. That would seem to explain why when rebel forces began attacking production infrastructure in Homs in 2013 reports of Russian PMSC operators in the area began to increase.

Early in the Syrian civil war ISIL fighters seized Palmyra, along with much of the Homs governate, locking down control over the al-Shaer gas basin.⁵¹ After 2014, Syrian Arab Army forces waged three major campaigns with the support of Russian PMSCs and Russian-trained Syrian militias for control of the swath of territory running from Palmyra to the al-Shaer gas plant. The most significant of these were the Palmyra offensives in the summer of 2015, spring of 2016, and spring of 2017. It was during these battles that the mythos surrounding the Wagner Group and their Syrian regime-backed counterparts in 5th Corps contingents, such as the ISIS Hunters, took on a viral quality.⁵²

Reports of secret burials of Wagner Group fighters killed while trying to recapture Palmyra and other energy production sites in Homs began to proliferate in the Russian and Ukrainian language press.⁵³ It was around this time also that the number of reported Wagner Group battlefield fatalities began to mount. According to data assembled by open source investigators and the international press and verified by our team, more than a dozen Wagner Group operators were reported killed in Syria in 2016.

In 2017, the number of battlefield deaths recorded specifically for the Wagner Group by open source researchers and verified by our team, increased to at least 52—although interviews conducted for this report indicate casualties for that year could be significantly higher.⁵⁴ Where places of death were indicated in the data, the majority of 2017 casualties appear to have occurred in Homs, Aleppo, and Deir Ezzor.⁵⁵ A cross-check of reported Wagner Group battlefield deaths and data our team gathered in the course of interviews with Syrian energy industry contractors in 2019 indicated a large number of reported fatalities appeared to have occurred at or near oil and gas sites for which Stroytransgaz is listed as a contracting party.⁵⁶

While each wave of battlefield casualties stemming from these battles precipitated press reports about the Wagner Group and its ostensible parent company EvroPolis, the trend also spurred a major reorganization of affiliated Syrian regime forces. In late 2016, the Syrian army announced the formation of the 5th Assault Corps.⁵⁷ Also known locally as the “Storming Corps,” the 5th Corps was composed of a mix of local volunteers and gang-pressed conscript detainees trained almost exclusively by Russian PMSC contingents at the al-Draij military base.

In January 2017, elements of the Syrian Arab Army (SAA) along with the Russian-backed 5th Assault Corps group of militias, initiated a major effort to recapture Palmyra and nearby energy production infrastructure from ISIS forces.⁵⁸ Fifth Corps militia units trained and supported by the Wagner Group, including the ISIS Hunters and Katibat Dir Watan, a Syrian-Lebanese fighting group, reportedly fought alongside Russians during the months-long assault.⁵⁹ The Syrian regime assault marked another in a long series of battles for control of Syria’s gas and mineral fields since ISIL first seized the territory in the fall of 2014.

By early March 2017, pro-Assad forces regained full control over Palmyra with the support of Russian PMSC contractors.⁶⁰ The SAA continued its push beyond the ancient city, recapturing key infrastructure north of Palmyra, including crossroads, granaries, electrical stations, and gas fields. According to news media reports, al-Shaer gas fields were successfully taken by April 28, 2017.⁶¹ This is likely where Hamdi Bouta’s journey from Lebanon back into Syria in the spring of 2017 ends and the mystery surrounding the video documenting his torture, killing, and dismemberment in the early summer of 2017 begins to unfold.