Syria: Is a Deal in the Works?
There are strong reasons to think so.
The recent deal between Turkey and the EU is related towards finding a solution for Syria. The fight for Aleppo could result in a large wave of migrants (500,000 plus) flowing to Turkey and then onwards to Europe. Moderate forces (supported by the US) are now squeezed between the Syrian government troops backed by Russian air power and ISIS forces.
By capturing Aleppo, the Syrian government and Russians hope to be dealing from a stronger position. Aleppo is the largest city in Syria.
I believe that once Assad has more control of this city along with other strategic areas such as Homs, there will be a deal in the works.
For the Russians the Syrian adventure could turn out to be very costly. Turkey could cancel the 20B nuclear power plant on the Mediterranean coast. In addition, trade between the two countries is over 30B a year, with Russia energy exports accounting for a large part of this.
Finally, I don’t believe Russia can sustain the Syrian adventure for too long. Recently, there was a meeting between Germany, France and the UK to find common ground in Syria. Add in the recent deal between the EU and Turkey and the picture is becoming clear that something needs to be done on Syria.
In short, once the Russian/Assad/Iranian alliance is satisfied with their position in Syria in terms of additional key areas under control, negotiations will get under way to settle things in Syria.
A deal will be difficult to do, but I looks that a real attempt will be made. A sticking point might be Kurdish control of Northern parts of Syria. The recent deal with Turkey and the EU would alleviate some of the fear in Turkey since it would dramatically reduce separatist movement in the eastern part of Turkey. Why would Turkish Kurds want to break away when and EU passport is close at hand?
Key Themes: if a deal is struck it would be positive for reducing political risk in the region. Expect this to affect several assets from oil to currencies to stock markets in the region. Specifically, I expect the Turkish Lira to get stronger and oil prices to weaken.