The Fuse

EastMed Gas Aggravates Regional Tensions

by Nick Cunningham | January 15, 2020

After years of delays, the massive Leviathan gas field in the Eastern Mediterranean recently came online. The startup of the field was quickly followed by the first shipment of gas from Israel to Egypt, a relationship that both sides believe can grow around their shared energy goals.

While the gas reserves in the Eastern Mediterranean have helped cooperation between Israel and Egypt, they have led to more conflict with Turkey and its neighbors.

But while the gas reserves in the Eastern Mediterranean have helped cooperation between Israel and Egypt, they have led to more conflict with Turkey and its neighbors. Despite assertions that gas development can be a peace project, the geopolitical consequences of the string of major gas discoveries in the Eastern Mediterranean over the past decade are decidedly mixed.

Israel-Egypt gas trade
The Leviathan gas field was discovered a decade ago, one of a handful of major gas fields discovered in the Eastern Mediterranean. There have been substantial delays, particularly for Leviathan, but Israel’s role as a gas producer is on the rise. One of the key problems has been finding markets for that gas – some of it goes to Jordan, but there is still a lot left over.

The logic of exporting to Egypt, then, is pretty straightforward. Egypt needs more gas to plug an energy deficit, although that need has decreased in recent years as Egypt has become a major gas producer in its own right. The Zohr gas field in Egyptian waters, developed by Eni, was the largest discovery in the region ever recorded when it was announced in 2015. Still, Egypt is a large and growing market.

More importantly, Egypt possesses LNG export infrastructure, something that Israel lacks. As such, the gas flows from Israel to Egypt, where it can then be exported around the world. That’s the goal at least. For now, the gas will be used domestically in Egypt.

This campaign has been billed as a peace project, not only a business relationship but also something that can build ties between the two neighbors and tamp down regional tensions.

For Egypt and Israel, both sides see the benefits and development continues. Two years ago, Egypt and Israel signed a deal for the gas from Leviathan to flow to Egypt under a long-term contract. Last October, they expanded the agreement, making it worth roughly $19.5 billion out over 15 years. Delek Drilling and Noble Energy, which brought Leviathan online only a few weeks ago, began exporting gas to Egypt on January 14. The first phase of the Leviathan field has a production capacity of 1.2 billion cubic feet per day (Bcf/d).

The deal is “the first of its kind and scope since the peace agreement was signed between Israel and Egypt 40 years ago,” said Israeli Energy Minister Yuval Stienitz. Israeli press described the onset of the gas exports as a major milestone, and other Israeli officials say that its new ability to use “energy diplomacy” bolsters the country’s regional standing.

EastMed pipeline
The geopolitical actors involved in the Eastern Mediterranean – including the U.S. government – tend to overstate the potential for building peace on gas development. In some cases, the race to develop gas on shared maritime borders has actually inflamed tensions. That is the case for the fields in Cypriot and Turkish waters, which have exacerbated the decades-long battle for control over both Cyprus and the adjoining territory in the Mediterranean.

The prospect of an EastMed pipeline that connects the gas fields in the Eastern Mediterranean to Southern Europe – from Cyprus to Crete, then to the Greek mainland, and then on to Italy – has long captured the imagination of some policymakers in Europe, but the project has always been a somewhat far-fetched idea.

Ankara has angrily opposed the project, and there have been several incidents in disputed waters over the past two years.

At $6 to $7 billion, the cost has loomed large. Building a 1,200-mile pipeline is also technically challenging. But the politics are equally daunting. Some of the gas fields lie in disputed waters between Cyprus and Turkey. Ankara has angrily opposed the project and there have been several incidents in disputed waters over the past two years, with Turkey sending in naval ships to scare away drilling off the coast of Cyprus. The Turkish government views the drilling in Cyprus as illegal.

But despite the challenges, the pipeline continues to inch forward. Israel, Cyprus and Greece signed an agreement on January 2 to move the project along. The project is at least two years away from a final investment decision, which means no pipe will be laid down anytime soon.

Turkey denounced the deal. Meanwhile, Turkey and Libya recently signed an agreement that establishes a joint exclusive economic zone (EEZ), through which the EastMed pipeline would need to cross. The move is seen as a way for Turkey to enhance its leverage and block the pipeline. “Other international actors cannot conduct exploration activities in the areas marked in the memorandum,” Turkish President Recep Tayyip Erdogan said in a statement after the agreement with Libya. “Greek Cypriots, Egypt, Greece and Israel cannot establish a natural gas transmission line without Turkey’s consent.”

The European Council denounced Turkey’s establishment of a new EEZ as outside of international law. Greece’s foreign minister called Turkey’s new EEZ “absurd,” noting “the large geographical land mass of Crete” that sits between Turkey and Libya. In any event, Turkey’s opposition is a substantial roadblock for the EastMed pipeline project. Ankara has hinted that it would continue to use its navy to block drilling in Cypriot waters.

Israel said the project will go forward. “We are ready to discuss some kind of cooperation, energy cooperation, also with the Turks. We are not against the Turks but we are very much in favor of the EastMed gas pipeline project,” Israel’s Energy Minister Yuval Steinitz told Reuters.

Conflict over energy
Both the Greek and Israeli Prime Ministers billed the EastMed pipeline as a peace project, just like the other energy projects in the Eastern Mediterranean. But the conflict with Turkey belies that notion.

In fact, in the case of reserves in disputed waters, Eastern Mediterranean gas appears to be a source of aggravation, which could inflame tensions further. What has been a multi-decade simmering feud between Turkey and Greece, and Turkish Cypriots and Greek Cypriots, has morphed into a larger regional conflict.

On one side, there is Greece, Israel, Cyprus, the United States and much of Europe. On the other side there is Turkey and its growing friend in Russia (on a related note, the Russia-to-Turkey Turkstream gas pipeline just came online). And while there is a long list of reasons for this fissure, including longstanding tensions, the Eastern Mediterranean’s gas reserves have become a major flashpoint.

 

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