Israel’s geopolitical windfall
In January 2020, Israel began exporting natural gas to Jordan and Egypt from its newly operational Leviathan offshore field. For Israelis, this was an important milestone. It has boosted their hopes that the exploitation of natural gas reserves off the Mediterranean coast will have a transformative effect on their country. They anticipate that it will help Israel’s economy and strengthen its regional standing.
Even by the most conservative estimates, the discovery of sizeable natural gas reservoirs will make Israel self-sufficient in energy for at least the next 40 years. In the process, the small country has gone from being an importer to an exporter of natural gas, allowing it to gradually free itself from its dependency on foreign energy, such as Russian coal and Egyptian gas. This comes at a particularly critical time, as Israel’s access to cheap Egyptian gas (which provided 40 percent of its needs) had become increasingly restricted. This was because of growing criticism in Egypt of the two countries’ 2018 gas export agreement deal, and Islamist groups’ frequent attacks on gas pipelines on the Sinai Peninsula.
Against this backdrop, access to its own natural gas has provided Israel with an important source of energy security. It has also turned the tables on Egypt, which has increasingly struggled to meet its own energy needs and, as a result, now has to import (considerably more expensive) gas from Israel. So too is Jordan, which lacks its own energy reserves. As Israel’s minister of energy, Yuval Steinitz, has noted, Israel’s transformation into a net exporter of gas will increase annual state revenue by $100m-$150m over the next 30 years.
But there are technical and financial obstacles to ramping up exports – especially exports to the lucrative European market. Israel has looked at a variety of options, ranging from pipelines to liquefied natural gas (LNG) plants. At present, its only option is to use Egypt’s LNG export facilities at Idku and Damietta. But their capacity remains limited. Israel had previously contemplated building a pipeline to Europe through Turkey. However, the severe deterioration in bilateral relations with the Turkish government has blocked that path for now – despite some small signs of detente.
Over the past few years, Israeli officials have, therefore, put forward an ambitious proposal to build what would be the world’s deepest and longest pipeline across the eastern Mediterranean, allowing Israel to export its gas to Europe via Cyprus, Greece, and Italy. In 2013 the European Commission designated it as a Project of Common Interest and subsequently financed feasibility studies with a view to reducing European dependency on Russian gas supplies.
Despite this, the proposed EastMed pipeline faces a number of obstacles. Investors are reportedly reluctant to put up the estimated $6 billion-$7 billion it would cost to build the pipeline. There are also questions as to whether Israeli gas can compete with cheaper alternatives, such as that from Russia. Meanwhile, the boundaries of Israel’s exclusive economic zone (EEZ) – which encompasses its gas fields and export infrastructure – are contested by both Lebanon and Palestine.
In addition, the proposed pipeline faces opposition from Turkey, which has been asserting its own maritime claims around Cyprus. Turkey objects to any project that would undermine its own position as a conduit for natural gas to Europe or prevent it from exploiting eastern Mediterranean gas reserves. The recent maritime deal that Turkey agreed with Libya’s United Nations-recognised government in Tripoli would see the two countries carve out a joint Turkish-Libyan EEZ across the Mediterranean. It seems the deal aims to frustrate Israeli and Cypriot ambitions, among other goals.
But it is not just about energy exports. Israel has sought to translate its newfound gas fields into regional influence. Israel no doubt sees the creation of the Cairo-based Eastern Mediterranean Gas Forum (EMGF) in January 2019 as an important step in this direction. The forum brings Israel together with Cyprus, Egypt, Greece, Italy, Jordan, and Palestine with the aim of enhancing regional cooperation in the development of eastern Mediterranean gas reserves. France has reportedly asked for membership of the EMGF, which has also benefited from US support. The exclusion of Turkey from the forum, and the deep animosity that the group’s members have shown towards the country and political Islam, are a welcome bonus for Israel. Israel could seek to harness these common interests as part of its own efforts to weaken Palestinian Islamist groups such as Hamas, which are supported by Ankara.
Alongside this, Israel has used its gas discoveries to bind its dependent neighbours closer to it. Israeli officials have described the 2018 gas export agreement with Egypt as the most important deal between the two countries since they signed a peace treaty in 1979. Seen from this perspective, Jordan’s reliance on Israeli gas imports could likewise provide Israel with a source of leverage in the future – potentially constraining any Jordanian pushback against its policy on the Palestinians. Such arrangements have, however, not made either Egyptians or Jordanians friendlier towards Israel. In fact, they have had the opposite effect, eliciting strong public condemnation of their respective governments and sparking anti-Israel protests. As such, both governments will come under considerable pressure to suspend their gas agreements should Israel proceed with its annexation of Palestinian territory in the West Bank.
Further afield, Israel has used the proposed EastMed pipeline to expand its political, military, and economic cooperation with EU members such as Cyprus and Greece. In January 2016, close energy cooperation on the energy front culminated in the first of several high-level summits between the three countries to discuss regional and security issues. These meetings have benefited from the active encouragement of the United States, with secretary of state Mike Pompeo attending the sixth trilateral summit in March 2019. There has also been an uptick in joint military exercises between the countries, often with US participation.
Just as importantly, Israel has sought to enlist the support of southern member states in internal EU discussions relating to its conflict with the Palestinians. This has already paid dividends for Israel. Against the backdrop of preparations for the first trilateral summit in January 2016, Greece spearheaded efforts to block a proposal that would have strengthened EU action against Israeli settlements. This came despite the leftist and ostensibly pro-Palestinian credentials of the then Syriza government. Nevertheless, cooperation with Cyprus and Greece remains transactional – and still falls far short of the kind of ideological affinity that Israel enjoys with central and eastern EU member states such as Hungary and Romania.
With clear obstacles to substantially ramping up exports in the near term, natural gas will not bring Israel the sort of wealth and energy clout of gas exporters such as Qatar. As such, its most noticeable outcome may be geopolitical convergence between eastern Mediterranean states that share energy and geopolitical interests. As it attempts to position itself at the centre of this new grouping, Israel will undoubtedly continue to draw important benefits from its gas industry – even if this may not be the regional game-changer that some in Israel hope for.