This is based on presentations and discussions at a conference organised by the international think-tank Konrad Adenauer Stiftung at the Truman Institute in Jerusalem on February 10-11 2016.
Participation was by invitation only, with delegates from Israel, Jordan, Turkey and Cyprus, including the EU and Russia. I was a participant and made presentations at the conference and to Israel’s Ministry of Foreign Affairs.
The aim was to discuss and analyse recent developments in the East Med and the Middle East with a particular focus on geopolitics and energy, with an eye on the potential state of the region in the 2020s.
Israeli views
Israeli views about the East Med are not clear; one could even say they are a ‘work-in-progress’. The alignment with Cyprus and Greece is important to Israel, particularly with regards to security and support within the EU. But alignments are not necessarily alliances. And in that respect, Israel does not see this alignment as a substitute to Turkey, which is also an important priority.
Relations with Cyprus/Greece will not be developed at the expense of relations with Turkey, and vice-versa, but rather in parallel to it. Israeli cooperation with Turkey, in addition to commerce and gas, now has another dimension: containment of Iran.
Turkey is seen as economically important but politically tricky – too much dependence on ‘one man’ is considered to be unreliable.
Turkey needs Israel now, but what happens if geopolitics change, for example, through another Gaza flare-up? Turkey’s naval policy in the East Med might constitute a threat, especially since it is energy-driven.
In that respect, the alignment with Cyprus and Greece is providing a new security dimension, widening Israel’s sphere of security control, theatre of operations and influence in the East Med, which includes defence of offshore energy installations.
Last year, Israel and Greece signed a ‘status of forces accord’. It is the only other one Israel has signed outside the US.
But these alignments may not go as far as Israel running to Cyprus’ rescue if there is a Turkish threat. Egypt and Jordan are also important politically, but they are economically weak. Political benefits from Egypt can be enormous if stability can be assured.
Ultimately gas has changed Israel’s foreign policy perceptions. Israel is now looking to the future outwards. There is a new and important East Med policy, both in terms of political alignments and security, driven by energy considerations.
Turkish views
The region is unstable. Russia is confrontational. The East Med is a region of unresolved disputes, including Cyprus. The rift with Russia is deepening and spreading to all sectors. But Russia was considered a reliable partner and it is important to maintain dialogue for the future. So far, Russia has not used energy to punish Turkey.
Turkey’s gas demand is around 50bcm/yr and Russia provides about 55% of it. Even though future growth may be slowing down (it has been 4-5%)Turkey is investigating different energy scenarios, not just alternative gas supplies. But low oil-prices have taken some of the pressure away.
Turkey wants to limit dependence on any one country to less than 50%. In that respect it is investigating options for more LNG imports, eg Qatar, and new pipelines, such as Kurdistan, East Med, Iran, etc.
It realises that this requires cooperation with its neighbours and potential partners. This may be achieved by playing an active role in promoting stability in its neighbourhood. Talks with Israel and between Greek and Turkish Cypriots are part of this and are supported, but Turkey needs to add Egypt and Iraq into this process. Turkey’s decision-making model is being revised.
Cyprus and future prospects
Turkish policy towards Cyprus changed a number of times. But the view is that now Turkey wants to reach a solution: ‘no solution is not a solution’.
Turkish views
The region is unstable. Russia is confrontational. The East Med is a region of unresolved disputes, including Cyprus. The rift with Russia is deepening and spreading to all sectors. But Russia was considered a reliable partner and it is important to maintain dialogue for the future. So far, Russia has not used energy to punish Turkey.
Turkey’s gas demand is around 50bcm/yr and Russia provides about 55% of it. Even though future growth may be slowing down (it has been 4-5%)Turkey is investigating different energy scenarios, not just alternative gas supplies. But low oil-prices have taken some of the pressure away.
Turkey wants to limit dependence on any one country to less than 50%. In that respect it is investigating options for more LNG imports, eg Qatar, and new pipelines, such as Kurdistan, East Med, Iran, etc.
It realises that this requires cooperation with its neighbours and potential partners. This may be achieved by playing an active role in promoting stability in its neighbourhood. Talks with Israel and between Greek and Turkish Cypriots are part of this and are supported, but Turkey needs to add Egypt and Iraq into this process. Turkey’s decision-making model is being revised.
Cyprus and future prospects
Turkish policy towards Cyprus changed a number of times. But the view is that now Turkey wants to reach a solution: ‘no solution is not a solution’.
Future energy developments in Cyprus will depend on the progress of Cyprob.
No Cyprob solution: With the possibility of gas sales to Egypt gone, the only other options left may be FCNG or FLNG.
But neither of these has been considered seriously so far, despite their merits. So, 2016 may see development of Aphrodite going back to the planning table, with gas exports receding well into the 2020s.
With Cyprob solution: First, there will be the need to set up a federal system, and given that no preparation has been done for hydrocarbons, much may be needed to arrive at a workable system. In the meanwhile, Israel and Turkey will progress subsea pipeline gas export negotiations more seriously in the knowledge that a deal with Cyprus may be possible. Given Turkey’s needs for alternatives to Russian gas, it could accommodate all gas Israel and Cyprus may be able to export to it. And this could be as much as 25bcm per year for 20 years. What an incentive for Turkey to help solve the Cyprob!
Geopolitics of energy
In the East Med, the picture is changing all the time.
Not that long ago, and probably to some extent now, an energy link between Israel and Cyprus with Egypt was considered a high priority, partly driven by the US to strengthen cooperation in the region, but commercial realities are a challenge. Now with a glimmer of hope that Cyprob may be resolved, Israeli interest is turning to Turkey. Some say gas exports to both Egypt and Turkey are not mutually exclusive, but others doubt it.
Israel is mindful that gas to Turkey must not be driven just by its dispute with Russia and Turkey’s new-found need for alternative gas supplies. It is a long-term project requiring substantial investment and must be justifiable on its merits, longevity and manageable risks.
In Israel the question asked is: is energy a national security issue? But even security officials and analysts question this. Or is it a social justice issue? There was public uproar and a lot of introspection about this in 2015. Is the new gas regulatory framework deal going to put a stop to this? The deal is critical to industry as it provides regulatory stability for 10 years, encouraging investment. It is difficult to invest $6-7billion in Leviathan if the rules keep changing. One view is that the Israeli public had its say. It is now time to move on.
Who does Israel export to? Potential gas exports and security were the basis of invoking Article 52 to justify the proposed gas deal. There are discrepancies about how Israel sees its neighbours and how industry does. The region is fraught with risk, and solutions that might seem justifiable and appropriate today may not be tomorrow. The key problem is instability.
Gas pipelines to Turkey or Egypt might appear good options, but what happens if situations change in the future, as happened to the Egypt-Israel gas pipeline? Multiple export routes might be needed to minimise risk. In any case, any pipeline options need the active support of governments.
But ultimately the economics and geopolitics of gas and energy are transforming the wider region. There are opportunities, but these need to be implemented and managed through wider regional cooperation.
SOURCE
No Cyprob solution: With the possibility of gas sales to Egypt gone, the only other options left may be FCNG or FLNG.
But neither of these has been considered seriously so far, despite their merits. So, 2016 may see development of Aphrodite going back to the planning table, with gas exports receding well into the 2020s.
With Cyprob solution: First, there will be the need to set up a federal system, and given that no preparation has been done for hydrocarbons, much may be needed to arrive at a workable system. In the meanwhile, Israel and Turkey will progress subsea pipeline gas export negotiations more seriously in the knowledge that a deal with Cyprus may be possible. Given Turkey’s needs for alternatives to Russian gas, it could accommodate all gas Israel and Cyprus may be able to export to it. And this could be as much as 25bcm per year for 20 years. What an incentive for Turkey to help solve the Cyprob!
Geopolitics of energy
In the East Med, the picture is changing all the time.
Not that long ago, and probably to some extent now, an energy link between Israel and Cyprus with Egypt was considered a high priority, partly driven by the US to strengthen cooperation in the region, but commercial realities are a challenge. Now with a glimmer of hope that Cyprob may be resolved, Israeli interest is turning to Turkey. Some say gas exports to both Egypt and Turkey are not mutually exclusive, but others doubt it.
Israel is mindful that gas to Turkey must not be driven just by its dispute with Russia and Turkey’s new-found need for alternative gas supplies. It is a long-term project requiring substantial investment and must be justifiable on its merits, longevity and manageable risks.
In Israel the question asked is: is energy a national security issue? But even security officials and analysts question this. Or is it a social justice issue? There was public uproar and a lot of introspection about this in 2015. Is the new gas regulatory framework deal going to put a stop to this? The deal is critical to industry as it provides regulatory stability for 10 years, encouraging investment. It is difficult to invest $6-7billion in Leviathan if the rules keep changing. One view is that the Israeli public had its say. It is now time to move on.
Who does Israel export to? Potential gas exports and security were the basis of invoking Article 52 to justify the proposed gas deal. There are discrepancies about how Israel sees its neighbours and how industry does. The region is fraught with risk, and solutions that might seem justifiable and appropriate today may not be tomorrow. The key problem is instability.
Gas pipelines to Turkey or Egypt might appear good options, but what happens if situations change in the future, as happened to the Egypt-Israel gas pipeline? Multiple export routes might be needed to minimise risk. In any case, any pipeline options need the active support of governments.
But ultimately the economics and geopolitics of gas and energy are transforming the wider region. There are opportunities, but these need to be implemented and managed through wider regional cooperation.
SOURCE
