UPDATE 2-EU to allow purchases of Syrian oil from opposition
* EU plans sanctions relief for anti-Assad rebels
* Oil purchases to be allowed, if backed by rebel group (Adds context, background, analyst quote)
BRUSSELS, April 17 (Reuters) - European Union governments are expected to ease an embargo on Syrian oil next week to allow for purchases of crude from the opposition in an effort to tilt the balance of the conflict against President Bashar al-Assad.
At a meeting on Monday, EU foreign ministers will also agree to lift restrictions on selling equipment for the oil industry to the opposition and investing in the major Arab state's oil sector, EU diplomats said on Wednesday.
The move is part of a broader EU undertaking to support the Syrian rebels, waging a two-year-old uprising against Assad in which an estimated 70,000 people have died and the conflict is broadly stalemated.
It aims to give the insurgents much-needed cash for infrastructure repairs and to build up local governance, and, possibly, to fund purchases of arms. But conditions would apply to ensure that no business is done with supporters of Assad.
"The purchases will be allowed when an EU government authorises them after consultations with the (opposition) National Coalition," an EU diplomat told Reuters.
The lifting of oil sanctions may bolster the credibility of the Syrian National Coalition - an umbrella organisation of the opposition - among Syrians opposing Assad.
But it may not yield substantial economic results, experts say, largely because European companies may be reluctant to wade into the conflict and the rebels will struggle to prop up battered infrastructure to ship oil out.
They have gained control over some of Syria's oil-producing territory, including in the eastern provinces of Hasakah and Deir al-Zor, but these areas remain vulnerable to shelling and air strikes by government forces.
"It (removal of oil sanctions) is a largely illusory measure for the moment," Julien Barnes-Dacey of the European Council on Foreign Relations. "The regime will do what it can, including using air power, to ensure they aren't able to channel oil out of the country."
EU governments banned purchases of Syrian oil by European companies in 2011 in response to Assad's military crackdown on mass unrest, complementing a wide array of sanctions aimed to pressure Assad into relinquishing power.
But they have been wary of going too fast in backing those who took to arms after Assad tried to smash street protests, amid concerns of fragmentation and the presence of radical Islamists in the ranks of the rebels.
A campaign by France and Britain this year to ease an arms embargo to allow for weapons sales to the rebels has foundered, with many EU capitals refusing to support it.
Countries such as Germany, Austria and Sweden oppose the move, fearing it could lead to weapons falling into the hands of Islamist militants, fuel regional conflict and encourage Assad's backers, Iran and Russia, to step up arms supplies to him.
For now, diplomats say, EU governments and companies are allowed to provide technical assistance to the rebels and non-lethal equipment, provided it is used to protect civilians.
Debates on the arms embargo have subsided in Brussels in recent weeks, but they will likely pick up again in the run-up to June when sanctions against Syria come up for renewal.
Syria's oil output has plummeted during the war. The latest U.S. government data indicate that oil production in Syria was 153,000 barrels per day in October 2012, a nearly 60 percent decline from March 2011 when the conflict began. (Additional reporting by Luke Baker and Barbara Lewis; Editing by Adrian Croft and Mark Heinrich)
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