Israel’s Unnatural Dreams For Its Natural Gas
October 23, 2013 § 6 Comments
On Monday, Israel’s High Court cleared the way for Israel to export 40% of its new natural gas bonanza after rejecting petitions that challenged the government’s export plan. The Israeli government harbors high hopes of reaching $60 billion in profits over the next two decades from natural gas exports, and so the High Court’s decision is being celebrated as paving the way for an economic windfall. The problem is that there are some very big and intractable regional issues that have to be settled before Israel sees even a shekel from gas exports, and the prospect for all of this coming together is quite slim. If anything, Israel’s natural gas fields are going to end up sparking competition and regional destabilization rather than the opposite.
There are two ways for Israel to export its natural gas. The first is via pipeline to Turkey and hooking up with the planned TANAP or TAP pipelines in order to send Israeli gas to the rest of Europe. The prospects of Israel and Turkey cooperating on a pipeline deal at this point are laughable when the two sides cannot even agree on something as basic and simple as compensation for the Mavi Marmara deaths, not to mention the most recent unpleasantness between the two countries. Let’s assume for a moment though that cooler heads are able to prevail and mutual economic interests override the basic domestic politics of both countries, there is still a thornier problem of geography. A pipeline from Israel to Turkey has two possible routes. The first runs through Lebanon and Syria, which is a non-starter for all sorts of obvious reasons. The second route is undersea and has to travel through Cyprus’s exclusive economic zone. Given the animosity between Turkey and Cyprus and Turkey’s adamant insistence that is does not and never has occupied any part of Cyprus, reconciliation between these two parties over an issue that has been dubbed a diplomats’ graveyard is not on the horizon. It is true that there are many good reasons for a deal to happen, from the fact that there is a lot of money at stake to the fact that Turkey is completely isolated on the Cyprus issue and is the only country in the world that even recognizes the Turkish Republic of Northern Cyprus as an independent state, but that doesn’t mean that movement is imminent. Greek Cypriots overwhelmingly rejected a painstakingly negotiated federal model in 2004, and there is no reason to think that opinion on this has changed. What this means is that a pipeline, which would be the most cost-effective and easiest solution, is out for now.
The other way for Israel to export its gas is to liquify it and ship LNG to Turkey and other destinations. This comes with its own set of challenges as well. The first is that liquifying natural gas is an expensive process that reduces profit margins as compared to shipping it via pipeline. On top of the process itself, it requires building an LNG terminal that takes approximately 3-5 years to build and costs somewhere between $5 billion and $10 billion, which cuts into profits even further. An LNG terminal is unlikely to be built in Israel itself due to legal and environmental challenges, which again leaves Cyprus as the natural partner, but absent reconciliation between Turkey and Cyprus, shipping LNG to Turkey from a Cypriot LNG terminal is likely off the table. Without a Turkish market for gas, Israel is not going to expend the time and resources to build a LNG terminal in Cyprus to then have it essentially be bricked. Even assuming that Turkey and Cyprus are able to patch things up and Israel goes the LNG route, the security challenges posed by protecting an Israeli LNG terminal that is in Cyprus rather than in Israel and then protecting Israeli tankers plying the waters of the Eastern Mediterranean are enormous. Israeli ships carrying Israeli natural gas are immediately going to become an attractive target for all manner of jihadi and terrorist groups, and the Israeli Navy does not now have the capacity to protect such a potentially large venture.
So the bottom line is that a boom in natural gas exports is not assured by any means. No matter which way Israel turns, the path to huge profits from natural gas is complicated by geopolitics that have so far proved immune to easy resolution. In the short term, the answer is likely to send natural gas to Jordan, which will be profitable to a limited extent since Jordan is not a very big market. Another cheap alternative with much larger potential is to export to Egypt, but despite Energy Minister Silvan Shalom’s insistence that this avenue is open, the Egyptians claim that they have no interest in buying Israel’s natural gas.
Looking at the bigger picture, Israel’s long term problem may be more serious than simply not having a viable market for its exports. Turkey and Egypt both project very high growth in energy demand with no real energy resources of their own at the moment, and they are sitting next to countries – Israel and Cyprus – that are resource rich and with whom they do not have great relations. In addition, there are claims on Eastern Mediterranean gas fields being made by Lebanon and by the Palestinians in Gaza, not to mention Northern Cyprus’s claims to the fields claimed by the Cypriot government. How these tensions will be resolved is unclear and anyone’s guess, but a very combustible situation is developing, and the idea of major resource conflict at some point is not all that far-fetched. Should the Israel-Turkey-Cyrpus triangle not get resolved to each party’s relative satisfaction, the Eastern Mediterranean may very well become a lot less placid.
Pointing Out The Obvious On Turkish-Israeli Reconciliation
November 26, 2012 § 9 Comments
Like clockwork every 6-12 months, this weekend brought the now familiar news story informing us that Turkey and Israel are holding secret talks aimed at reconciling. As usual, this one has all of the elements that we’ve come to expect: backchannel negotiations between relatively powerless envoys, breathless claims that the two sides are not that far apart despite all evidence to the contrary, leaks from one side or the other that have everything to do with domestic politics and absolutely nothing to do with the two countries’ relationship, and a political situation at the top that leaves the talks destined to fail. My reaction is the same this time as it has been every other time, which is that the talks have as much chance of succeeding as Dick Morris does of getting a political prediction right. One of these times I am going to be wrong, but let me explain why I don’t think today is going to be that day.
First, the fundamentals of the situation have not changed. Turkey is still making three demands: an apology over the deaths of nine Turkish citizens aboard the Mavi Marmara, compensation for their families, and an end to the Gaza blockade. It is this last one that is the sticking point, since Israel has no intention of ending its enforcement of the Gaza blockade, particularly since the UN Palmer Commission ruled that the Israeli naval blockade of Gaza is legal under international law. Israel also feels that the blockade is none of Turkey’s business, anymore than it would be Israel’s business to insist that Turkey undertake a more lenient policy toward the PKK as a condition of resuming ties. Ahmet Davutoğlu reiterated on Sunday, however, that Turkey’s three demands are not subject to negotiation and thus unless a creative solution can be found to break this impasse (more on this below), these talks will meet the same fate as their forebears.
Second, when Feridun Sinirlioğlu and Yosef Chiechanover worked out language over an apology in the summer of 2011, it was ultimately scuttled when Bibi Netanyahu decided that Avigdor Lieberman’s hardline position against an apology presented too much of a political threat to him. Netanyahu was afraid that Lieberman would hammer him from the right if he apologized for the IDF’s actions, so the whole thing went nowhere. Fast forward to November 2012, and Lieberman is now even more powerful than he was two summers ago since Likud and his own Yisrael Beiteinu party are running in the January elections on a joint list. If Lieberman had the power to sabotage even a partial agreement over the language of an apology back when he was a much derided and often ignored foreign minister, his opposition this time will make the entire thing a non-starter.
Third, the January 22 election makes the timing of this almost impossible to pull off. The objections to issuing an apology and compensation for the Mavi Marmara come from Netanyahu’s right, and in the aftermath of Operation Pillar of Cloud, rightwing nationalist parties are polling much stronger than they were before. One of the latest polls has Jewish Home and National Union at 13 seats and Strong Israel at 4 seats, and while those parties can be expected to join a Likud-led coalition after the election, Netanyahu cannot afford to have them attacking him from the right before the election, even if their support wanes (which is likely). Making concessions to Turkey plays right into their hands, and it is something that the ever-cautious Netanyahu will be loathe to do.
Finally, and this last one cannot be stressed enough, Prime Minister Erdoğan’s rhetoric during the Gaza operation was so over the top and outside the lines of acceptable discourse and basic civility that no government would be able to just set that aside and continue along as if nothing happened, irrespective of what the status of the negotiations was before Israel launched Pillar of Cloud. Calling Israel a terrorist state of baby killers and denying that thousands of rockets being launched at civilians creates any right to self defense is the kind of thing that is tough to move past. If Erdoğan thinks that Israel is going to come and plead with Turkey to reconcile after his tirade, then his grasp of how governments operate is, to put it delicately, less than sound.
It’s pretty clear that the sudden leaking of these talks is coming from the Turkish side as part of Ankara’s effort to demonstrate its relevance in the Israeli-Palestinian conflict. One cannot help but note the amateurish display of Erdoğan originally stating that there are zero contacts between Israel and Turkey to then have Davutoğlu claim a few days later that Turkey was “actively involved” in trying to broker a ceasefire between Israel and Hamas and that Ankara and Jerusalem were talking as part of that involvement. The fact that Turkey has essentially made itself irrelevant when it comes to anything involving Israel has been widely noted and the absurdity of Erdoğan’s positions is being criticized by Turks as well. Erdoğan and Davutoğlu are now furiously trying to spin the ceasefire as partly a Turkish achievement, but that is only believable insofar as it can be demonstrated that Turkey has any sway left at all with the Israelis. Hence the timing of this leak and Erdoğan letting it slip that Mossad head Tamir Pardo and MIT chief Hakan Fidan met in Cairo. All of a sudden, claiming that Turkey has absolutely no contacts with Israel has become a political loser and a source of criticism, and so the Turkish government is now trying to make it seem as if reconciliation is a possibility when the reality is that rapprochement between the two sides remains a distant dream given how things currently stand.
All this aside, there seems to me to be an obvious out here. As I mentioned above, the real long term sticking point here is the demand that Israel end the Gaza blockade, but the imprecise language makes this a point that can easily be massaged. Israel is not going to end its naval blockade, particularly given the renewed focus on Iranian missiles that are being shipped to Sudan rather than directly to Gaza in an effort to avoid the Israeli navy. There is also, however, the land blockade that is enforced by both Israel and Egypt, and if Israel and Egypt jointly loosen restrictions on the land crossings to allow more goods in and out of Gaza, then Israel and Turkey can both reasonably claim victory, and it might pave the way for the countries to make up. Unless something changes though, feel free to ignore any and all news reports about secret talks and back channel negotiations between Ankara and Jerusalem.