A gas pipeline and new rivalries

Print edition : March 13, 2020

The foundation platform of Leviathan natural gas field in the Mediterranean Sea, off the coast of Haifa, Israel, a January 31, 2019, picture. Photo: REUTERS

The book examines the little-known but escalating contentions following the discovery of gas in the East Mediterranean as also the prospect of new partnerships in a region where conflicts and uncertainties abound.

AMIDST the fierce, ongoing confrontations in West Asia, the burgeoning sources of tension in the East Mediterranean have not received front-page attention. But battle lines are being sharply drawn here and, given the high stakes and the deep divides between the contenders, a conflict could erupt.

Consider this: in November last year, Turkey extended its strategic outreach across the Mediterranean to Libya and signed two agreements with the beleaguered government in Tripoli: one, to define the exclusive economic zones of the two countries that would in effect encroach on the claims and interests of other nations—Greece, Cyprus and Israel—and, two, to provide military support to the Tripoli government as it faces attacks from self-styled Field Marshal Khalifa Haftar, whose forces are bombarding the Libyan capital with aircraft and artillery.

Haftar represents the Tobruk-based government in Libya. More importantly, he is backed by regional powers—Egypt, the United Arab Emirates (UAE) and Saudi Arabia. Their alliance is founded on a shared animosity for Muslim Brotherhood-affiliated countries, Turkey and Qatar, which are viewed as their ideological and political rivals in the region. Turkey has already shipped to Tripoli a few hundred of its own troops and about 3,000 militants from the Syrian National Army sponsored by it to buttress its interests in north Syria, thus escalating tensions with its regional rivals.

The Turkish intervention has prompted immediate consultations among the leaders of Greece, Cyprus, Israel and Egypt to coordinate responses to the Turkish threat. The cement that binds them is natural gas—the hydrocarbon fuel that has been recently discovered in their waters and promises both domestic prosperity and enhanced collaboration in joint development and marketing projects. On January 15, Israel also announced that it had begun exporting gas to Egypt, while there were demonstrations across Jordan to cancel contracts to import Israeli gas.

These little-known but escalating contentions are examined in Sujata Ashwarya’s book, Israel’s Mediterranean Gas. This work provides an excellent background to present-day competitions and anticipates several of the rivalries of recent weeks. It explores the discoveries of gas by Israel, Cyprus and other littoral states in the East Mediterranean over the last 20 years and the sharp geopolitical rivalries these discoveries have generated.

Israel’s gas-related history is complicated and contentious. Gas was first discovered in the Gaza Marine field in 1999, but Israel initially offered a low price for it and later refused to buy it as these purchases would fund hostile activity against itself. An Israeli-American consortium then discovered gas off the Israeli coast in 1999-2000. While this was being developed, Israel entered into contracts to buy Egyptian gas from 2008 through a 60-km-long undersea pipeline that went from Al Arish in north Sinai to Ashkelon on Israel’s Mediterranean coast.

This arrangement continued until 2012, when Egyptian production declined amidst the Arab Spring agitations and dramatic changes in government. But Israel’s own production came on stream from the offshore Tamar field from March 2013; this is being backed up by the even larger Leviathan field (discovered in 2010) that began production from December 2019.

These fields provide Israel with total estimated reserves of 960 billion cubic metres (bcm), which will meet Israel’s electricity needs for 30 years and also make it a net exporter. By 2030, Israel plans to produce 80 per cent of its power from natural gas and 17 per cent from renewable energy sources. In 2013, the government decided to export 43 per cent of the production and retain the rest for domestic use. Leviathan gas is contracted for supply to Jordan and Egypt.

According to Israel’s Energy Minister, the county’s gas production will provide increased state revenues of $100-150 million annually for the next 30 years, together with environmental benefits.

Egypt is Africa’s second largest gas producer. It has 77 trillion cubic feet (tcf) of proven reserves, mostly in the Nile Delta and the Mediterranean. Exports have been reduced by domestic unrest (that has hurt investments in upstream development) and increased local demand—by 2012, gas provided over 50 per cent of the country’s energy needs, as against 35 per cent in 2000. To meet increasing domestic needs, from 2015 Egypt began importing gas as LNG from Algeria and Russia.

However, the discovery of the Zohr gas field in the Mediterranean in August 2015 brought in fresh reserves of 30 tcf and additional production of 2.7 billion cubic feet per day, putting Egypt back in the export market.

In 2010, Egypt signed an agreement with Cyprus defining their economic zones after Cyprus discovered the Aphrodite field with proven reserves of 7 tcf. This was followed up by an Egypt-Cyprus agreement in September 2018 to build a pipeline linking the Aphrodite field with the Egyptian LNG terminals. Taking advantage of Egypt’s LNG terminals, Israel too is seeing Egypt not only as a market for its domestic consumption but also to re-export its gas to Europe as LNG.

Again, in 2010, an exclusive economic zone was set up within the territorial waters between Israel and Cyprus at the maritime halfway point. The two countries agreed to cooperate in the development of any cross-border resources discovered and to negotiate an agreement on dividing joint resources.

Regional alliances

The last chapter of the book, titled “Strategic Implications for the Mediterranean”, examines the competitions and contentions in the region and how they have affected, and on occasion aggravated, gas-related politics. This discussion is supported by maps that provide a clear picture of the ramifications of the claims and disputes in the East Mediterranean waters.

Israel’s gas discoveries have helped shape an “Energy Triangle” in the Mediterranean by bringing together Israel, Greece and Cyprus, an alliance that is supported by the United States, France and Italy. These partners see a “strategic connection” binding them that goes beyond energy interests and embraces security.

This “triangle” was expanded in July 2019 by Israel and Egypt cooperating to set up the East Mediterranean Gas Forum that also includes Jordan and Palestine. The forum plans to promote an integrated regional market for gas and further collective interests by managing demand and supply of its members.

The most exciting plan of the Energy Triangle is the East Mediterranean gas pipeline project, referred to as the EastMed pipeline. A preliminary agreement on this project was signed by the Energy Ministers of Cyprus, Greece, Israel and Italy in Tel Aviv in April 2017. This was followed by an agreement to build the pipeline, signed by Greece, Israel and Cyprus in Athens on January 2, 2020.

The EastMed pipeline is 1,900 km in length (1,300 km offshore, 600 km onshore) and 3 km under water, making it the world’s longest and deepest undersea pipeline. It goes from Israel’s offshore fields to Cyprus where local gas will be injected into the pipeline; from Cyprus, it will go 700 km undersea to the Greek island of Crete, from where it will join the Greek gas grid and go onshore to Italy.

The pipeline is estimated to cost about $7.3 billion and will have a capacity of 10 bcm; its capacity can be increased with new compression technology. The project is owned by IGI Poseidon, a joint venture between the Greek state gas company DEPA and the Italian energy group Edison. It will meet about 4 per cent of Europe’s gas needs by the mid 2020s and will help reduce Europe’s dependence on Russian gas imports. It is envisaged that later Egypt and Lebanon could also join the project.

Observers have noted that the agreement of January 2020 is only an expression of political will. There is no confirmation that the project will go through because there are concerns about the viability of the pipeline. For instance, taking into account the high cost of the project, there are doubts that the relatively limited potential of Israel and Cyprus for export is sufficient to justify the investment for supplies envisaged over a 30-year period.

Besides this, Europe itself is signalling a shift in favour of renewables, which could reduce Europe’s demand for gas over the long term. Given these uncertainties, observers believe that using Egypt’s LNG terminals could prove to be the better option for Israeli and Cyprus to export to Europe rather than an expensive undersea pipeline.

Rivalries and contentions

The one regional state excluded from these cooperation initiatives is Turkey; this is the basis for much of the emerging tension in the East Mediterranean.

Turkey’s exclusion from these gas cooperation efforts is linked to regional contentions that are not about energy. In fact, as Sujata Ashwarya points out, Turkey is the best partner for the marketing of Israeli gas: it is a major importer; its domestic demand is increasing, and it is looking for new sources for imports when its present supply contracts start expiring over the next few years. The author quotes an Israeli commentator as saying that Turkey is Israel’s “natural partner” for its gas export plans.

Although the differences that erupted between Israel and Turkey a decade ago have been slowly bridged over the last few years, the U.S.’ recognition of Jerusalem as Israel’s capital in December 2017 has brought deep divisions between them. These have ended for now the prospect of Israeli gas exports to Turkey and have encouraged Israel to look for fresh markets.

Turkey’s problems with Cyprus began with Turkey’s military intervention in Cyprus in 1974, which divided the island-nation into separate Greek and Turkish political entities. Turkey champions the interests of the latter and opposes any gas deals that exclude the Turkish Cypriots from a share of the revenues. This has, of course, brought Greece onto the side of the Greek Cypriots and given a fresh resonance to the traditional Greek-Turkish rivalry.

Turkey’s differences with Egypt’s military rulers go back to the Arab Spring in 2011: Turkey had then backed the Brotherhood government of President Mohamed Morsi on the basis of ideological affinity and later turned against the perpetrators of the military coup that brought down the government and incarcerated the Brotherhood leaders.

All of these divisions and rivalries are reflected in the Libyan scenario. Turkey has an ideological affinity with the Tripoli government that puts it at odds with Egypt and Haftar’s other allies. In terms of Turkey’s maritime agreement with Libya, the new maritime boundary runs very close to Crete and thus challenges the path of the EastMed pipeline, thus reducing investor confidence and creating further doubts about its viability. According to recent reports, by end January, Turkish drilling vessels, backed by a naval task force, have already begun explorations in the waters claimed in the agreement with Tripoli.

The author has also examined two other gas-related disputes in the Mediterranean—those that Israel has with Lebanon and Palestine.

Given the formal state of war between Israel and Lebanon, the maritime boundary between the two countries has not been finalised. This has led to a dispute relating to about 330 sq miles (855 sq km) that is believed to be rich in oil and gas and is claimed by both countries. This dispute has meant that Lebanon, import-dependent for its energy needs, is just not able to get international companies to show interest in exploring and developing its offshore potential. In fact, the dispute has also encouraged Israel to boost its naval presence in the disputed waters.

The problem with Palestine is more complex. As noted above, Israeli opposition has firmly blocked the development of the Gaza Marine. This has deprived the Palestinian Authority of much-needed revenues and also perpetuated the dependence of the Palestinians on Israel for their energy needs. As the author notes, Israel’s control over energy supplies enables it “to restrict, reduce or halt” supplies at will, creating a “chronic humanitarian crisis”.

Cooperation prospects

Clearly, political contentions have obstructed the development of the energy potential of the East Mediterranean and prevented regional cooperative projects, thus harming the interests of the populace at large. Israeli Prime Minister Benjamin Netanyahu is quoted in the book as saying that Israeli gas “will promote cooperation with countries in the region”; he added that gas exports would also make “Israel more immune to international pressure”. It is, in fact, the latter consideration that is determining the Israeli approach to the region.

Sujata Ashwarya has correctly noted that Israel’s gas resources will not have a positive impact on its ties with the Arab world “as long as the Palestinian issue festers without a resolution”—resolution is a remote prospect now after U.S. President Donald Trump’s grossly one-sided “peace plan” announced in mid January alongside a beaming and triumphant Netanyahu.

Besides the intractable issues relating to Palestine, there are more immediate security concerns in the East Mediterranean: with no ongoing political dialogue between the contending parties and the absence of crisis-management instruments in place, there are concerns that the presence of hostile naval forces defending rival interests could lead to unplanned skirmishes that could escalate into larger conflicts.

The U.S., clearly a partisan party in the regional disputes, is incapable of providing either leadership or credible platforms for dialogue to address these differences. Russia appears to be the one player capable of promoting processes that would encourage engagement and, over time, some mutually acceptable interim agreements before final settlements are reached through a comprehensive region-wide peace process.

Russia is a major gas producer in its own right, whose own interests are hardly affected by the relatively small quantum of East Mediterranean production. But it has the technology relating to exploration, development and pipelines that would be of interest to all regional parties.

Above all, it has the best possible ties with the principal regional players—Israel, Turkey and Egypt. In Libya, in the absence of a military victory for either side, both Turkey and Egypt will have little choice but to seek a power-sharing arrangement, put together under Russian auspices, that will bring peace to the country.

Again, in Cyprus, since a settlement of the Greek-Turkish Cypriot divide is unlikely in the foreseeable future, the best way forward would be an interim revenue-sharing arrangement between the two divided entities so that projects to develop and export Cyprus gas could be pursued.

Finally, development and marketing of East Mediterranean gas cannot be pursued without Turkey: it is in the best interests of Turkey and Israel to work on their differences, given that Turkey needs Israeli gas and Israel needs the Turkish market.

The author has noted that an East Mediterranean gas regime needs to address “issues of the location and configuration of export infrastructure as well as difficulties posed by regional political and territorial disputes” for the optimal utilisation of this valuable resource. Over the long term, the best arrangement for the region will be an “East Mediterranean Gas Grid” that will link the region’s producers and consumers so that rivalries are subsumed under the rubric of a shared interest in shared prosperity.

With this work, which combines outstanding scholarship with lucid presentation, Sujata Ashwarya has done a great service to students of West Asian energy and politics. She has provided the background and dimensions of the new rivalries in the waters of the Mediterranean which will be with us for several years to come and, unless addressed quickly and effectively, will become one more facet of the ongoing West Asian tragedy.

Talmiz Ahmad, a former diplomat, holds the Ram Sathe Chair for International Studies, Symbiosis International University, Pune.

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