Eastern Mediterranean energy patch is hot – in more ways than one

With a spate of new deals and discoveries in recent days, optimism is raging about the potential energy bounty lying underneath the eastern Mediterranean Sea. But energy development could as easily become a casualty as the cure for the region’s tortured geopolitics.

On Monday, Israel and Egypt finally inked a $15 billion agreement to export natural gas from a pair of Israeli offshore fields to energy-starved Egypt, a deal that had been in the works for years. That announcement came hard on the heels of a potentially huge discovery of natural gas in waters off Cyprus, which has been trying and failing to strike it big like its neighbors for almost a decade. And all the new developments come just weeks after Greece, Cyprus, Israel, and Italy signed a preliminary accord to build a pipeline to carry gas to Europe, which has spent years looking for fresh sources of energy.

But for all the region’s promise, energy hasn’t been able to break the shackles of long-standing geopolitical rivalries.

Lebanon and Israel are at daggers drawn over new plans for exploration in offshore gas fields in disputed waters, and Hezbollah is using the energy dispute to ratchet up rhetoric against Israel. And this month, a Turkish naval ship intercepted an exploration vessel working in waters off Cyrus, threatening to escalate tensions between the Greek and Turkish halves of the divided island.

“These resources are not an instrument for peace,” says Mona Sukkarieh of the Beirut-based Middle East Strategic Perspectives (MESP), a risk consultancy. But given the need for traditionally wary neighbors to work together to develop the new finds and build the infrastructure to bring them to market, the energy resources could still pay geopolitical dividends of a sort.

“By their very nature, so far at least, they impose cooperation,” she says.

If there are grounds for optimism about energy’s potential to knit the region closer together, it’s because there has been some good news lately, especially for Israel and Egypt. Israel’s first two gas fields are running at full speed, and two more could see investment decisions this year, notes Nikos Tsafos, an energy expert at the Center for Strategic and International Studies. Meanwhile, Egypt brought the Zohr field, its own mammoth gas discovery, online in record time, which promises to ease a cash crunch in Cairo aggravated by importing pricey gas.

“If you step back, it is remarkable how much gas has been developed,” Tsafos says.

The agreement reached Monday to tap Israeli gas – something that has been in the works for years – would be a shot in the arm for Egypt’s bid to return to exporting gas, as it did just a few years ago, including to Israel. But exports became a casualty to plummeting Egyptian production, rising domestic consumption, and toxic politics in the wake of the Arab Spring. The shift from exporter to importer spelled a double whammy for Cairo: a loss of gas export revenues and greater expenses to import the stuff.

Details are still lacking, including exactly how Israel will get the gas to Egypt, since there’s no firm pipeline route yet. And the export deal is hardly proof that energy development is a panacea for the region’s disputes. Israel’s two gas export deals – with Egypt and Jordan – were signed with the two Arab countries with which the Jewish state already had peace treaties, and even then relations are still fraught at times. Meanwhile, hopes that natural gas pipelines and projects could soothe years of tensions between Israel and Turkey have apparently evaporated.

“Politics drives energy relations, not vice versa,” Tsafos says.

And Israel has other energy-fueled disputes at the present. Lebanon’s decision this month to award an exploration concession to three international firms – France’s Total, Italy’s Eni, and Russia’s Novatek – to drill in a promising block off the Lebanese coast has ignited fresh tensions between Beirut and Jerusalem. That’s because both countries claim a slice of the waters where the firms won a concession and hope to start drilling next year.

Lebanon, which sees all the offshore blocks as belonging to it, has vowed to pursue development regardless of Israel’s claims. The southerly block in question is seemingly one of the most promising for natural gas, says Sukkarieh of MESP, and the firms have offered to drill far from the disputed slice of water to assuage Israeli concerns.

But Israel hasn’t backed down, with Defense Minister Avigdor Lieberman calling the development plans “provocative conduct.” All the while, the Lebanese militant group Hezbollah has waded into the energy dispute, reiterating late last week that it could attack offshore Israeli energy installations if Israel interferes with Lebanon’s development plans.

“The present clash is still at a rhetorical level, but things in this region can quickly escalate, which highlights the need to pursue mediation,” Sukkarieh says.

Mediation was at the top of the agenda during Secretary of State Rex Tillerson’s recent visit to Lebanon, as it has been for U.S. officials since 2012, but with little success. A senior U.S. diplomat tried again Wednesday but found little Lebanese appetite for U.S. proposals. While Israel wants continued U.S. mediation in the spat, Lebanon and especially Hezbollah see Washington as too pro-Israel to play that role, especially after the Donald Trump administration’s controversial decision to move the U.S. Embassy to Jerusalem. Hezbollah leader Hassan Nasrallah said the United States is “not an honest broker.”

State Department officials were tight-lipped about what progress, if any, was made before and during Tillerson’s trip, and the senior diplomat made no statements Wednesday.

A senior State Department official told reporters last week that the United States hopes that “choices are made which contribute not just to stability, which we always want, but also to the greater prosperity of Lebanon, full stop.”

The Lebanese-Israeli maritime border isn’t the only festering dispute that is being aggravated by a fight over potential energy riches. Cyprus, which has been feverishly drilling off its own coast in the hope of finding big gas fields as Israel and Egypt have done, finally struck gold this month with what could be a massive discovery south of the island, in a field known as Calypso. Cyprus’s only other decent-sized discovery, Aphrodite, came years ago, and the country had little success since then in replicating its neighbors’ good fortune.

The new discovery could give Cyprus the critical mass needed to develop its gas fields and fulfill its dreams of supplying Europe with energy; Aphrodite alone was too small to make large-scale infrastructure investments viable.

But just as the new discovery transforms Cyprus’s energy prospects from iffy to hopeful, it is also raising Turkey’s dander. This month – as it did in 2014 – a Turkish ship intercepted a drilling vessel in Cypriot waters; Ankara, which recognizes the Turkish north of the divided island, refuses to cede those waters to Greek Cyprus and angrily warned it could take further action if development continues.

The Turkish Foreign Ministry said it is “determined to take the necessary steps” to support the northern half of the island in its dispute with Greek Cypriots, who Ankara said are “irresponsibly jeopardizing the security and stability of the Eastern Mediterranean region.”

Turkey even blamed energy exploration for helping scupper last year’s talks at reunifying Cyprus.

“[A]s long as the Greek Cypriot administration continues its unilateral hydrocarbon-related activities, it will remain evident just how far removed the Greek Cypriot side is from perceiving the Turkish Cypriots as their equal partners,” the ministry said.

Turkey’s heated reaction underscores that even a shower of energy riches, and the need to cooperate to fully develop them, can’t necessarily bury old animosities that crisscross the region.

“Shared interest in [energy resources] might provide an incentive for cooperation among countries of the region that already enjoy more or less good relations,” Sukkarieh says. “But it is equally conceivable that they could fuel rivalries as well, like we are seeing lately with Turkey.”

Source: Chicago Tribune