Gas Gave Israel Geopolitical Leverage. That Changes Everything
The Mediterranean is about to become an even bigger fossil fuels minefield in the coming weeks as Israel has ratified the underwater pipeline project that will bring its game-changing natural gas to Europe. This means the controversial pipeline--the one that could shut Turkey out of the European gas game--will now go through, barring any major incidents along the way. Greece and Cyprus had already ratified the project. The implications are that Israel will certainly become a net exporter, and for the first time in history it is a major energy player, which completely changes the geopolitical dynamics of the region and beyond. (It will also change again when the low-carbon bug truly takes over the industry, and when renewable energy rather than oil is what turns into geopolitical leverage--but we’re not there, yet).
We saw the first signs of this changing dynamic when Israel struck a deal to supply gas to Jordan--a tough pill for Jordan to swallow and one that has led to major protests and culminated in a January draft law banning Israeli gas imports only days after they started.
But the deal went through anyway because it’s a lifeline for Jordan, even if it is a very difficult move to buy gas from your enemy. There may be a quid pro quo, however, that allows Jordan to save face: Israel is now considering a deal to buy solar energy from Jordan. And thus, two enemies in a…
Gas Gave Israel Geopolitical Leverage. That Changes Everything
The Mediterranean is about to become an even bigger fossil fuels minefield in the coming weeks as Israel has ratified the underwater pipeline project that will bring its game-changing natural gas to Europe. This means the controversial pipeline--the one that could shut Turkey out of the European gas game--will now go through, barring any major incidents along the way. Greece and Cyprus had already ratified the project. The implications are that Israel will certainly become a net exporter, and for the first time in history it is a major energy player, which completely changes the geopolitical dynamics of the region and beyond. (It will also change again when the low-carbon bug truly takes over the industry, and when renewable energy rather than oil is what turns into geopolitical leverage--but we’re not there, yet).
We saw the first signs of this changing dynamic when Israel struck a deal to supply gas to Jordan--a tough pill for Jordan to swallow and one that has led to major protests and culminated in a January draft law banning Israeli gas imports only days after they started.
But the deal went through anyway because it’s a lifeline for Jordan, even if it is a very difficult move to buy gas from your enemy. There may be a quid pro quo, however, that allows Jordan to save face: Israel is now considering a deal to buy solar energy from Jordan. And thus, two enemies in a neverending Arab-Israeli battle come together through business.
The second sign of the changing dynamic came when Israel started pumping gas to Egypt, following a $15-billion deal signed in 2018. It was a landmark deal that essentially meant doing what no Arab country could imagine doing: “Recognizing” Israel.
And most recently, last week’s historical UAE-Israel peace agreement. This agreement--which many would have thought utterly impossible prior to Israel’s gas discoveries--not only suggests a major shakeup of regional alliances in the Middle East, but Egypt’s authorities reportedly went as far as to direct its media outlets not to criticize the deal as would be the tendency. Egypt is motivated by business, and it just brought a new crude oil pipeline online at its al-Hamra port on the Mediterranean. Cairo is under no illusions. It’s aiming to be a major energy hub in this region, and if that means siding with Israel and warring with Turkey, so be it.
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The Israeli government can ratify the pipeline to Europe 10 times but it won’t make any difference. It is simply non-economical in the foreseeable future. This year Israel brought online 12 BCM/year production capacity and will bring on about another 6 BCM in early 2022 for a total of about 30 BCM/year, of which about half is consumed domestically. The other half will be soaked up by Jordan and possibly Egypt depending on the export potential of LNG. The big losers in all of this are Cyprus and Lebanon who are late to the game and thus have very little of chance having FIDs approved in the foreseeable future, with all their gas been locked up in the ground for years. The advantage goes will go to those who have existing production and pipeline infrastructure already in place (namely Egypt and Israel). The non-existent pipeline to Europe though will remain just that - nonexistent.
