PUTINOLOGY
Putin’s Mediterranean Move
The race is on to exploit off-shore energy around Israel, Syria, Lebanon, and Cyprus -- and Moscow is crashing the party.
On Christmas Day, Russian state-owned gas company Soyuzneftegaz inked a $90 million, 25-year deal with Damascus to start exploring for the first time some of Syria's offshore energy resources. On the surface, it represents another show of support from Russia for the beleaguered regime of Bashar al Assad. But the deal also fits into a larger pattern of Russian energy adventurism in one of the world's newest frontiers for oil and gas development. If the investments there work out as planned, they could help cement Russia's eroding hold over Europe's energy supply -- and help boost Moscow's standing as a global power on the rise.
At a time when the whole post-war architecture of the Eastern Mediterranean is crumbling, from the breakdown of Egypt's relations with Israel to tensions in the U.S.-Turkish relationship, Moscow seems to spy an opportunity to reassert itself in a region where it once loomed large, get a grip on a potentially big alternative to Russian energy, and make it easier to flex its military muscles.
"They can kill two birds with one stone," Jeff Mankoff, Deputy Director of the Russia and Eurasia Program at the Center for Strategic and International Studies, said of the Russians. "They want to be in the Eastern Mediterranean, and if they can get the added bonus of bolstering this relationship with Syria, that's two for the price of one."
Israel, Lebanon, Cyprus, and now Syria are all agog over the seemingly vast reserves of natural gas discovered offshore; the U.S. geological survey estimates there could be as much as 120 trillion cubic feet of natural gas in the Levant basin, bigger than any single gas play in the U.S.
Israel, long plagued by energy poverty, dreams of turning its offshore finds into energy independence and export earnings. That's especially important now that Egypt cut off its gas exports to Israel.
Cyprus has visions of becoming a regional energy hub, exporting gas to Europe and Asia, but never-ending tensions between the Greek south and the Turkish north cast a pall of uncertainty over gas exploration. Cypriot gas plans also bring Turkey, the champion of north Cyprus, and Russia, Cyprus's main backer, into conflict.
Lebanon, for its part, eyes a potential economic boost by tapping hydrocarbons for the first time. Now Syria, undismayed by the ongoing civil war, is hoping to tap offshore gas resources to limit its own reliance on imported gas and boost revenues that have been hammered by the war and sanctions. Much of the country's on-shore production is in the east, and is either held by rebels or in contested areas.
Granted, turning those potential energy resources into actual production will be an uphill task. Economically recoverable reserves are likely only a fraction of the total gas trapped under the seabed. Offshore energy development is a lot more expensive and time-consuming that drilling for gas on land. Even once the gas is produced, the entire region will need massive infrastructure investments to ship it by pipeline to Europe, or liquefy it and ship to Asia. Gas development requires closer cooperation by neighboring countries, something in short supply.
Looming behind all those challenges is the region's sketchy security environment, which has only deteriorated since the beginning of the Arab Spring -- most notably in Syria, but also in Lebanon.
Turkey has threatened Cyprus with warships and aircraft in a bid to dissuade it from drilling in disputed waters. Cyprus, which doesn't have any money or sailors, is spending precious cash to beef up its navy. Israel is buying a pair of German frigates to protect its own gas fields. For the third year in a row, the U.S., Israel, and Greece carried out naval exercises, including practicing to repel attacks on offshore gas platforms.
Why does energy-rich Russia need to dive into these troubled waters? After all, Russia is the world's second-largest gas producer. It's own fields in Western Siberia hold five times the gas resources as the Levant Basin.
The answer appears to be two-fold. First, Russia's traditional domination of European energy supplies is slowly coming under threat. There's the advent of shale gas and rising volumes of liquefied gas; there are alternative sources of supply such as the Caspian; and there's the prospect of the Eastern Mediterranean turning into a spigot for southern and eastern Europe.Hungary, for one, has already talked up the prospect of using Israeli gas to substitute for reliance on Russia.
That explains why Russian firms such as Gazprom, Rosneft, and Novatek have been angling for a piece of the action in the Mediterranean. Russia's offered billions of dollars in bailouts to Cyprus in exchange for gas. Russian firms are lining up to bid on Lebanese gas concessions. And Gazprom scored a big victory earlier this year in securing the exclusive rights to export liquefied gas from Israel's Tamar field. Russia is keen to increase its share of the global LNG business, which is especially key to meeting Asia's rising demand for natural gas.
Grabbing access to Mediterranean gas would be a way for Moscow to try and maintain its energy hold over Europe, akin to Russian purchases of gas-distribution assets throughout southern and eastern Europe. At the same time, Russian involvement gives Moscow the ability to dictate the pace of some development in the region; some observers suspect Russian bids for Mediterranean resources are meant to slow down, not accelerate, the development of new sources of gas.
"The Russians aren't hurting for gas that they can send to Europe. They just need to make sure that other people aren't increasing supply in a way that competes with them," Mankoff said.
But more broadly, Russia's rush into the Mediterranean seems part of Vladmir Putin's plan to give Russia the kind of global, geopolitical heft that the Soviet Union had. During the Cold War, Soviet influence extended beyond the Middle East and well into the Mediterranean.
Indeed, the high point by some measures of Soviet naval prowess was the famous Fifth squadron that shadowed the U.S. Navy in the Mediterranean during the early 1970s. For centuries, Russian and Soviet leaders have seen the Eastern Mediterranean as a natural extension of the Black Sea, waters dominated by the Soviet and Russian navies.
Building closer energy and trade ties with key countries in the region, especially Cyprus, Israel, and Greece, gives Russia a way back in to an area it considers within its sphere of influence. That is already happening: During the Syrian civil war, Russian naval deployments to the region have reached levels last seen in Soviet times, with more than a dozen warships on station.
Some experts see closer Russian cooperation with Cyprus over gas as a way to bolster potential naval capabilities in the region; Russian requests for air basing in addition to naval basing on Cyprus have caused a minor furor on the island. Finding an alternative naval base would be crucial for Russia's Mediterranean plans; its last overseas naval base is in Syria, right near the offshore blocks earmarked for exploration.
And the benefits go two ways. By building closer energy ties with Russia, countries such as Israel, Cyprus, and Greece win a big backer in their disputes with Turkey and other neighbors. Indeed, after Turkish threats over Cypriot gas exploration, Russia dispatched an aircraft carrier to the region. Local reports suggest that Russia offered security assurances to Israel in a private meeting last month between Putin and Israeli Prime Minister Benyamin Netanyahu.
"Given the environment the Israelis are in, they are more willing to work with the Russians. Since the relationship with Turkey has gone so pear shaped, they need other partners to work with," Mankoff noted. "They think if they can get Russia involved, that gives Russia a stake in their security."
Link to source: http://www.foreignpolicy.com/articles/2013/12/27/putin_s_mediterranean_move
