Natural gas fields give Israel a regional political boost

A decade after discovering natural gas fields off its Mediterranean coast, Israel is starting to feel the geopolitical boost.

Its newfound riches have fostered economic bonds with its neighbors, tightening relations with Arab allies, and built new bridges in a historically hostile region – even without significant progress being made toward peace with the Palestinians.

Last week’s inclusion of Israel into the Eastern Mediterranean Gas Forum in Cairo – a consortium aiming to cut infrastructure costs and lower prices – marked the first time Arab countries accepted Israel into such a regional alliance, sparking excitement in the country that its long-held hope of finally also making “economic peace” with Egypt and Jordan was fast approaching.

“I think this is the most significant economic cooperation between Egypt and Israel since the signing of the peace treaty 40 years ago,” Israeli Energy Minister Yuval Steinitz told The Associated Press during his visit. “The discovery of significant gas fields in the eastern Mediterranean has also political value because it brings all of us … together to cooperate with each other.”

The forum, which also includes Cyprus, Greece, Italy and the Palestinian Authority, aims to emerge as a mini-OPEC of sorts and highlights how Israel has been leveraging its newfound gas reserves into a powerful tool to expand its immersion into a region that has increasingly come to see Iran and Turkey, rather than Israel, as their greatest rivals.

With the expected gas boon, Israel plans to wean itself off coal and emerge as an unlikely energy exporter – providing both an economic and political lift.

In the coming months, Israel will begin exporting gas to Egypt as part of a $15 billion deal signed last year to provide 64 billion cubic meters of gas over a 10-year period that will help turn Egypt into a regional energy hub.

The first batches will come from the operational Tamar field and later from the far larger Leviathan field, set to go online later this year. Israel already delivers gas to the Palestinians and to Jordan, with whom Israel’s Delek Drilling and its US partner, Noble Energy, signed their first export agreement in 2016 – a $10 billion, 15-year deal to provide 45 billion cubic meters of gas.

“This gives Israel an additional element to its relations with its neighboring countries. When you add an economic facet to the security cooperation it strengthens the bond and gives it stability,” said Oded Eran, a former Israeli ambassador to Jordan and to the European Union, and a senior researcher at Tel Aviv’s Institute of National Security Studies.

Still, he said economic interests alone aren’t enough to fully integrate Israel into the Middle East. Arab nations without formal peace accords with Israel would need to see at least some progress on the Palestinian front before normalizing relations, he said.

Israel has peace agreements with only two Arab countries – Egypt and Jordan. But warming ties with Israel remain unpopular on much of the Arab street, and the gas exports have sparked sporadic protests in Jordan. The Palestinians, pleased at being invited into the consortium, hope to develop their own gas fields off the coast of Gaza but for now are required by international agreements to acquire their fuel from Israel.

Sameer Abdallah, a former Palestinian economy minister, said they import from Israel “because we have no alternative but once we can change that, of course we will.”

The gas appears to have helped Israel grow closer to Arab governments and other Mediterranean countries that share its concern over what they perceive as the rising power of Iran and Turkey in the region.

Just as Noble Energy was discovering the massive gas fields in Israeli and Cypriot waters, Cyprus in 2010 suddenly banned Turkish flotillas seeking to break the Israeli naval blockade of Gaza from using its shores – a stunning about-face after months of turning a blind eye to ships that were creating a diplomatic nightmare for Israel.

Cypriot officials said at the time that Gaza-bound vessels were prohibited from leaving because of “vital national interests.”

Relations have since soared. Israel now holds annual trilateral summits with Greece and Cyprus, which have become its geographical conduits to the West. The two also conduct joint military operations with Israel, and just a short flight away, have replaced Turkey as the Israelis’ preferred holiday destinations.

The countries recently said they would sign an agreement for a $7 billion project to build a pipeline to carry natural gas from the eastern Mediterranean to Europe.

Cyprus Foreign Minister Nikos Christodoulides has said he believes “hydrocarbons in the Eastern Mediterranean can become what the coal and steel was for the European community” – a reference to how in the 1950s, coal and steel brought European countries together economically and politically.

Eran, the former Israeli diplomat, cautioned against investing so heavily in what he called “an economic adventure.” Even with the recent discoveries, he said the joint reserves were still not enough to create a strong enough economic lever to challenge global energy providers.

Still, the upside of finally having natural resources of its own has been so appealing that the Israeli government has pushed forward even against stiff domestic opposition from environmental and social welfare activists.

Critics, including prominent opposition lawmakers, say a controversial 2016 agreement over royalties is skewed in favor of the energy tycoons. More recently, local activists have been urging Noble Energy to move its proposed shoreline gas rig farther out to sea for fear of what they call catastrophic consequences of spreading toxic water and air pollution toward their homes.

Noble and the Israeli government say it’s an irresponsible scare campaign and have countered with an aggressive ad campaign extolling the virtues of Leviathan, which it has dubbed “the national project.” [AP]