A New Med-East Forum Is About More Than Just Gas
(Bloomberg Opinion) -- There is a new regional organization in the Middle East and, for once, that’s good news.
Last week, in Cairo, the Eastern Mediterranean Gas Forum was introduced to the world. The EMGF will include Italy, Greece, Cyprus, Israel, Jordan, Egypt and the Palestinian Authority. Its goal is to foster cooperation among parties with an interest in the creation and maintenance of a multi-billion-dollar energy ecosystem.
This project has its origin in the discovery, more than a decade ago, of vast deposits of natural gas in Israel’s coastal waters. There was far more gas than Israel needs for domestic use, and so it began seeking customers.
The first deals have been made in the neighborhood. After long negotiations, Jordan made a 10-year, $15 billion purchase that (pending approval of the Jordanian parliament) will begin flowing this year. The Jordanian interest is obvious: Israeli gas is both cleaner and cheaper than what it has been using. The Kingdom will save around $600 million a year and get the environmental bonus of cleaner air.
Egypt has negotiated a similar deal. The Egyptians have their own natural gas, but they prefer to use it domestically. Cairo intends to buy, process and re-export Israeli gas, hopefully becoming a regional hub of liquid natural gas or LNG.
Local sales are a good start, but Israel has bigger plans. “We want to lay a gas pipeline from Israel to Cyprus, Crete, [mainline] Greece, Italy and the rest of Europe,” Prime Minister Netanyahu said on Dec. 20 at a meeting with Greek and Cypriot leaders, in Jerusalem. Israeli authorities estimate a capacity of up to 20 billion cubic meters of gas, with Energy Minister Yuval Steinitz last year putting it at between 9 and 12 billion cubic meters. The cooperation will also include fiber optic cables and undersea electricity links among the three countries. If things go as planned, the pipeline will cost upwards of $7 billion dollars, and take five to seven years to complete.
This is where the Forum comes in. Its first role is to reassure foreign investors that their money won’t be threatened by internal dissension or mismanagement. “In a deal like this, energy security is the key issue,” says Bar-Ilan University Professor Yossi Mann, one of Israel’s leading experts on the subject. “A pipeline isn’t a tanker. It is very expensive infrastructure. It has to be managed and maintained and protected in a reliable way.” Mann cites the failure of the oft-proposed pipeline from Iran to Lebanon via Iraq and Syria as Exhibit A: “Banks won’t invest in it because they rightly fear political instability and terror.”
Still, there will be external challenges. Turkey opposes the pipeline on the grounds that it will strengthen its rivals, especially Greece and (the Greek part of) Cyprus as well as Egypt and Israel. Lately, Turkish officials have discussed creating an alternative Northeast Forum that would include Syria, Lebanon and Turkish-occupied western Cyprus. A more serious threat is posed by Russia, a major exporter of energy to Europe, which may discourage competition, or seek a piece of the action. Israel will treat Moscow’s concerns gingerly, especially given Russia’s military presence and interests in Syria.
The U.S., on the other hand, is all in. Recently U.S. Ambassador to Israel David Friedman welcomed the pipeline as a project “of great importance for the prosperity and stability of the Middle East and Europe.”
The Med-East pipeline is in its early stages. So is further gas exploration by Israel, Cyprus and others. Issues will inevitably arise as members consider pricing, logistics, security and financing. Professor Mann sees the Forum as a clearinghouse of sorts for all of this. Working cooperatively to foresee or solve problems will be in everyone’s interest. And not just on the subject of energy.
“Countries that engage in discussions of the topic at hand often wind up discussing other matters of broader interest,” says Mann. “It is a relationship-builder.”
This is of particular importance to Israel. The EMGF marks the first time in its history that the Jewish state has been included in a regional organization with members of the Arab League. The League officially maintains a boycott of Israel, although Israeli-Arab trade in everything from tourism to high-tech military equipment is an open secret.
For Israel, inclusion is not just an economic opportunity but a part of its geopolitical strategy to boost its standing in the world.
Lately Jerusalem has been on a diplomatic roll. It may have received little notice in the outside world, but the decision of Chad, a majority-Muslim African nation, to renew relations with Israel after almost 50 years is significant. Negotiations are quietly taking place with several other former enemy states.
No project as ambitious and potentially profitable as the East Med pipeline comes without challenges. But its benefits clearly outweigh the difficulties. A Med East pipeline will bring energy to Europe, enrich its own members and foster better relations between Israel and its neighbors. It’s still a long way off, but in the Middle East, that’s what good news looks like.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Zev Chafets is a journalist and author of 14 books. He was a senior aide to Israeli Prime Minister Menachem Begin and the founding managing editor of the Jerusalem Report Magazine.
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