ICG (International Crisis Group)
REPORT 240 / MIDDLE EAST & NORTH AFRICA 26 APRIL 2023
Rethinking Gas Diplomacy in the Eastern Mediterranean
Major gas finds in the eastern Mediterranean seabed over the last ten years have fuelled ambitions to link the region’s energy markets and, in turn, bring its countries in conflict to the negotiating table. These great expectations have proven outsized, but smaller-scale objectives are achievable.
What’s new? Over a decade of gas discoveries in the eastern Mediterranean raised hopes that “gas diplomacy” could dramatically reshape relations among countries in the basin – and even farther afield. The creation of a regional gas forum contributed to this line of thinking. But the prospects for gas diplomacy face significant limits.
Why does it matter? The region is beset with armed conflicts and political disputes, including those involving Israel and Palestine; Israel and Lebanon; Cyprus, Türkiye and Greece; and more. The false promise of significant gas exports to Europe has intensified competition, while gas diplomacy has failed to address the conflicts’ underlying causes.
What should be done? With the collapse of European Union plans for a pipeline to carry the region’s gas, it is time to reboot expectations for gas diplomacy. Eastern Mediterranean governments should focus on regional markets and cooperation. Actors pursuing conflict resolution should focus on political dynamics, with gas diplomacy playing a subsidiary role.
Executive Summary
Recent gas discoveries in the eastern Mediterranean have transformed the region’s energy market and economic relationships, raising hopes for geopolitical change as well. The U.S. pioneered what it called “gas diplomacy”, aspiring to use the region’s new energy wealth to bring its countries in conflict to the negotiating table. Israel and Egypt, the new finds’ main beneficiaries, co-founded a regional gas forum. The European Union (EU) launched a study for a pipeline that would carry Israeli and possibly Cypriot gas to Europe – a project that appeared timely indeed after Moscow’s all-out invasion of Ukraine in February 2022 choked off access to Russian gas. But the pipeline project now seems to be dead, due to commercial and environmental concerns. In this and other respects, the great expectations for gas discoveries in the eastern Mediterranean have proven outsized. All actors should now focus on a more modest objective – cultivating an inclusive approach to exploitation to promote regional integration and stability – and continue the move toward renewable energy sources.
Following major finds just over a decade ago – the Tamar and Leviathan fields near Israel, the Aphrodite field off Cyprus and Zohr close to Egypt – U.S. and European diplomats were optimistic that the new gas reserves would catalyse greater regional economic cooperation and stability by altering political realities in a strategic part of the world. The U.S. spearheaded “gas diplomacy” to advance separate gas deals between Israel and Jordan, Israel and Egypt, and Israel and Lebanon. It also hoped that economically driven actions on gas exports could motivate regional players to make breakthroughs toward conflict resolution in non-energy-related matters.
But even the gas deals that marked the high ebb of gas diplomacy tend to be less meaningful on inspection than they might appear at first glance. Deals between Israel, on one hand, and Egypt and Jordan, on the other, added a positive dimension to bilateral cooperation, but Israel had signed peace treaties with these two countries long since. Israel’s deal with Lebanon – with which it remains formally at war – was arguably more significant, leading as it did to a boundary delimitation agreement between the two countries. Yet Israel’s gas deals with Egypt and Jordan did little to warm what is best characterised as a “cold peace”, and the boundary accord between Israel and Lebanon shows no real sign of overcoming decades of enmity between the two.
Elsewhere in the eastern Mediterranean basin, the advent of gas diplomacy has delivered even less promising results, and indeed energy discoveries have done more to exacerbate than mitigate tensions. Against the backdrop of failing diplomatic efforts, discoveries off the coast of Cyprus have done nothing to bring Greek and Turkish Cypriots together. If anything, they are a source of added friction on the divided island. Meanwhile, the Gaza Marine gas field, which British Gas discovered off the coast of Gaza in 1999-2000, a full decade before Israel hit the gas jackpot with Tamar and Leviathan, remains inaccessible due to Israeli restrictions, and thus offers no relief to the people in Gaza suffering under a stifling Israeli siege.
[There was an] assumption that greater cooperation on gas exploitation and exports can pave the way to closer ties.
The assumption that greater cooperation on gas exploitation and exports can pave the way to closer ties between states, and subsequently greater regional stability, helped create some excitement around the establishment, in January 2020, of the East Mediterranean Gas Forum. Co-founded by Egypt and Israel with EU and U.S. backing, the forum has over time also brought together the Republic of Cyprus, Jordan, the Palestinian Authority, Greece, Italy and France. Forum members envision that it will be a platform for economic cooperation and greater regional integration. Yet, even with the Forum up and running, prospects that it will serve as a mechanism for expanding regional cooperation on energy matters remain low. A key obstacle is the absence from the forum (for a range of reasons) of major regional actors on gas-related issues – including Türkiye, Lebanon, the de facto Turkish Cypriot authorities controlling territory in northern Cyprus and Hamas, the Palestinian faction that rules the Gaza Strip but, under Israeli occupation, has no control over its offshore gas field.
The exclusion of Türkiye in particular has in some cases aggravated tensions between the forum’s members and those who make opposing claims on the Mediterranean’s gas reserves. Rather than a neutral entity that manages a regional resource in a manner that could help states overcome their political differences, the forum is more a strategic partnership for states with shared energy interests.
Hopes that the gas discoveries might help forge deeper bonds between the region and European governments eager to diversify their energy supply – especially as relations with Russia have been strained to the breaking point by the war in Ukraine – have also been disappointed. The problem is one of both supply and demand. On the supply side, the eastern Mediterranean has only limited export potential: existing gas reserves are barely sufficient to cover domestic needs in regional countries, while existing infrastructure is inadequate to export what little is left over. Higher gas prices might make a pipeline from Israel and Cyprus to Greece, or a much shorter Israeli pipeline to Türkiye, commercially viable, but it would take years to complete such projects, a disincentive for would-be investors.
On the demand side, the growing consensus around the need to cut emissions by eliminating the use of fossil fuel altogether is dampening Europe’s long-term appetite for gas, militating against over-the-horizon investments in gas infrastructure, especially pipelines. The EU’s proposal for a pipeline from Israel and Cyprus to Greece and the rest of Europe faltered primarily for this reason.
It is time for a rethink of gas diplomacy, to reflect three key elements. First, commercial realities dictate that EU states will look elsewhere to meet the bulk of their near-term energy needs. Conversely, from their side, gas-rich countries in the eastern Mediterranean, rather than seeking to export to Europe or Asia, would do better to turn toward easily accessible markets in the region itself. A concerted effort to meet the region’s own energy needs with the eastern Mediterranean’s undersea bounty could be good for local economies and provide benefits in terms of broader economic integration, provided that it is pursued in an inclusive manner.
Secondly, pivoting to this goal will require certain key states that either sit or are active in the region to work more closely with states that they have tried to keep at arm’s length in energy dealings. Perhaps most prominently, the East Mediterranean Gas Forum should aim to broaden its membership – working, incrementally if need be, toward the inclusion of Türkiye. Only in this way can the Forum truly become a force for integration and stability, rather than recreating and exacerbating the fault lines that are already too prevalent in the region.
Finally, even if there is substantial progress toward regional economic integration, outside actors with an interest in the region’s stability should not assume that resource wealth can be the engine of efforts to end political and territorial disputes. Those will continue to require focusing on political dynamics. In short, part of any successful gas diplomacy strategy will be to understand its limits, and to ensure that it is paired with a political agenda for resolving the region’s conflicts.
Brussels, 26 April 2023
I.
Introduction
Gas discoveries in the eastern Mediterranean over the past decade have transformed the area’s energy market. With the discovery of Tamar, a 10 trillion cubic foot (tcf) natural gas field, in 2009, and Leviathan, at 17.6tcf then the largest in the region, a year later, Israel secured prospects for fully supplying its domestic market and becoming a net gas exporter.1 The find allowed Israel to end its dependence on unreliable, politically fraught gas supplies from Egypt, which it had long brought through pipelines across the Sinai Peninsula. It had so much gas of its own, in fact, that it promptly began looking for outside buyers.2
Then, in 2011, Noble Energy discovered the Aphrodite gas field in Block 12, off the coast of Cyprus. Aphrodite is a medium-size field with reserves initially estimated at between 3.6 and 6.0tcf (or 101.94 to 169.9 billion cubic metres or bcm).3 Aphrodite has yet to produce gas, mainly because the Cypriot market is not large enough to guarantee steady purchases that would make drilling commercially viable.4 In the absence of a pipeline to Europe, the government is considering exporting gas by pipeline to Egypt and/or through liquefied natural gas (LNG) terminals it would construct.
Production at Leviathan faced challenges similar to those at Aphrodite: both fields lacked export infrastructure and buyers prepared to commit to long-term supply. In its search for such buyers, Israel was mainly eyeing the European continent. It hoped to reach Europe through the projected EastMed pipeline, which was to carry Israeli and Cypriot gas 1,900km under the sea to Europe via Greece. Israel saw the opportunity to be geostrategic as well as commercial: the pipeline would not only deliver profits but also bring it more closely into the European orbit.5 In 2015, the European Union (EU) launched a feasibility study for the project, which was expected to wrap up by the end of 2022 (but instead, as discussed below, seemed to die a quiet death).
Finally, in 2015, Italy’s ENI corporation discovered Zohr, an Egyptian “super” gas field estimated to hold around 30tcf (roughly 849.50bcm), the basin’s biggest reserve, which dwarfed Leviathan and thus undermined overnight Israel’s hopes of emerging as the region’s gas hub. Having already constructed export infrastructure – the Damietta and Idku LNG terminals on the Egyptian coast, both of which can be used to export either Cypriot or Israeli gas – Egypt quickly became the de facto centre for gas export in the eastern Mediterranean. Given its large domestic market, Egypt also promised to soak up much of the gas it was producing, mainly at Zohr.
The discovery of these [gas] resources has inevitably played a role in shaping foreign relations in the eastern Mediterranean basin.
The discovery of these resources has inevitably played a role in shaping foreign relations in the eastern Mediterranean basin, but it has been less of a game changer than some outside actors (like the U.S.) might have hoped. Looking forward, calibrated expectations seem appropriate. On one hand, the region’s recent history suggests that prospects for shared interests in the region’s hydrocarbon wealth to bring about transformational change are fairly low.6 On the other hand, gas finds certainly have the potential to alter the status quo in the eastern Mediterranean, either by encouraging greater regional integration or by acting as a catalyst for destabilising competition.
Against this backdrop, this report offers an initial mapping of the complex interaction between regional politics and the eastern Mediterranean’s natural gas landscape. It describes the aspirations that both local and outside actors have had for “gas diplomacy”, discusses how and why reality has tended to fall short of those ambitions, and offers suggestions for how the region’s resource wealth can most effectively be harnessed to efforts that will promote peace and security. The report is based on more than 70 interviews carried out in 2020-2022 with officials, policymakers, experts, journalists, activists and professionals who are or have been involved in the gas sector during the past decade in Lebanon, Jordan, Palestine, Israel, Cyprus, Türkiye, Egypt, the United Arab Emirates (UAE), Italy, France, Greece, the UK and the U.S., as well as at the EU. It also draws on Crisis Group’s earlier work on dynamics relating to gas exploration in the eastern Mediterranean.7
Map of Eastern Mediterranean Gasfields.
II.
Actors, Relations and Fault Lines
Actors in the eastern Mediterranean roughly fall into three overlapping categories. First, there are states that enjoy pre-existing peace agreements, allowing them to expand economic relations to encompass trade in gas, albeit within limits. Secondly, there are those with ongoing conflicts or political disputes – which tend to severely limit or constrain, or even prevent, engagement on economic issues. Thirdly, there are states – Türkiye chief among them – that harbour regional ambitions and treat competition over eastern Mediterranean gas reserves as a means of pressing that agenda. The question of how successfully regional actors have worked and are working together to exploit new gas discoveries tends to hinge on where their relationships sit on this spectrum.
A.
Actors at Peace
The most successful gas agreements that have been concluded in the eastern Mediterranean over the course of the past decade are those signed between Israel and each of Jordan and Egypt. In both instances, Israel had pre-existing peace agreements with the countries, and also enjoys economic and security ties with them, particularly with Egypt. Yet even with the new agreements, relations between Israel and its counterparties have not warmed appreciably, largely because the Egyptian and Jordanian populations remain opposed to Israel’s treatment of the Palestinians. Any expansion of formal relations with Israel beyond the bounds of what might be described as a “cold peace” remains likely to spark public outcry.
1.
Israel and Jordan
Until 2009, Israel appeared destined to remain a net gas importer. It relied heavily on Egyptian imports transported through a pipeline owned by the Egyptian East Mediterranean Gas Company. The pipeline, which begins in Port Said, traverses the Sinai Peninsula. At an above-ground terminal in al-Arish it forks into a branch running undersea to Israel’s Ashkelon port and another passing overland to Jordan. For Israel, dependence on Egypt for energy security was a point of concern, and its 2009 discovery of the Tamar field offered the welcome prospect of reducing it.8 The government used Tamar primarily for domestic consumption. Then, the discovery of Leviathan a year later turned Israel into a gas exporter, with significant implications for its role in the region – including for its relations with neighbouring Jordan.
Jordan had struggled to enhance its energy security for years. Its heavy dependence on Egyptian gas exposed it to frequent supply shortages, particularly after 2010, due to attacks on Egypt’s al-Arish terminal.9 To make up the shortfalls, the country had to burn heavy liquid fuels, rather than gas, to produce electricity, though these are pricier and more polluting. Already in 2007, the Jordanian government energy commission began exploring ways to diversify sources of electricity production in an effort to reduce the country’s reliance on the pipeline gas and its energy bill. The ensuing strategy had three pillars: supply diversification, development of local resources and environmental considerations.10
An outcome of this strategy was that Jordan began constructing a terminal in its Red Sea port city of Aqaba to allow it to buy LNG on the open market. Completed in 2015, the terminal provided Jordan with flexibility in terms of supply (the buyer, the National Electricity Producing Company, could purchase gas through both long-term agreements and the spot market). The LNG was a costlier source of electricity than pipeline gas from Egypt but a cheaper one than heavy liquid fuels.11
In 2014, Jordan also signed a memorandum of understanding with Israel to import $10 billion worth of gas for a period of fifteen years. An official deal followed in 2016, and gas began flowing in January 2020.12 The agreement was a lifeline for Israel’s gas export potential. Leviathan’s size made it ideal for export, as domestic demand alone would not have made it a viable investment for producers. The signing of a long-term agreement underpinned investor confidence in Leviathan, allowing production’s first phase to begin.13 A former Jordanian energy minister said “Jordan … gave Israel the ability to commercialise its own gas”.14
In Jordan, the [memorandum of understanding with Israel to import $10 billion worth of gas for a period of fifteen years] has had at best a mixed reception.
In Jordan, the deal has had at best a mixed reception. Parliament had voted against the memorandum of understanding in 2014. To pre-empt another possible rejection, the king dissolved the legislature before making the pact official in 2016, so there was no way for it to block the deal.15 The moment the deal became public, popular protests broke out that were the biggest since the 2011 uprisings roiled the country.16 Many baulked at the idea of deeper ties to Israel on principle. Others argued that the deal had made Jordan dependent on Israel for its energy security, for questionable benefit. A former energy minister said:
The gas agreement makes no sense. If we have an LNG terminal and are importing gas, why would we need Israeli pipeline gas? People are against any agreement with Israel on human rights grounds. But also, why place yourself at their mercy? They can close the tap [at any time].17
The government’s main justification for the deal is its claim that using Israeli pipeline gas is cheaper than burning liquid fuels or buying LNG abroad, saving the country close to $500 million annually.18 Some industry experts, drawing upon price projections and their own analysis, concur, noting the deal allowed Jordan to reduce both the cost of its energy mix and damage from pollution.19 The claims are impossible to verify at present, however, as the government has not made the deal’s terms public.20
The opacity exposed the deal’s authors in Amman to more criticism. A parliament member said, “I challenge any minister to honestly declare the agreement’s terms”, saying he doubted that Israeli gas was cheaper than LNG.21 Others also pushed back against the government’s economic rationale.22 They also argued that the agreement would distract the government from pursuing a better energy security agenda focused on renewables and job creation.23 Many saw it as a capitulation to Israel. A leading activist said, “This government and its decision-makers are invested in Israeli interests, not Jordanian ones. Any energy agreement should be related to a ‘Jordan first’, not an ‘Israel first’, motto”.24 Whatever the economic rationale’s merits, critics were convinced that the U.S. government, fixated on advancing Israel’s interests, had pushed the deal through at Jordan’s expense. A former minister said:
There was American pressure to sign the gas deal. We get $1.3 billion in aid from the Americans annually, almost equal to government salaries and retirement benefits for two months. So, we can’t afford to piss them off and lose that money, which was clearly at stake had we refused the deal.25
U.S. sources tell a different story. A former U.S. diplomat said Jordan was a “test case” for Washington, which was keen to find out if it could use gas diplomacy in the Middle East. He claimed that energy deals of this type create inter-dependency that can prevent conflict. He also contended that U.S. mediators had not pressured Jordan in the talks leading to the agreement but provided it with a lifeline at the request of senior Jordanian officials who feared the destabilising impact of energy insecurity at a time of unrest in the Arab world.26
Thus, even after it had been concluded, the deal continued to face domestic opposition. In 2019, months before the gas was to start flowing, parliament voted unanimously to approve a proposal for the government to draft a law that bans Israeli gas imports. The government apparently did not submit such a law to parliament, however.27 A former minister, who was a cabinet member at the time, said:
No one [in the government] could do anything about it. And no one could defend it publicly because no one can adopt the narrative of the need to buy gas from Israel. The deal was very unpopular, and it would have been political suicide for any government official to publicly defend it on economic grounds or any other justification.28
In the end, the government pushed the deal through by means of a contract with Noble Energy, the U.S. partner firm in Leviathan, rather than Delek, its Israeli counterpart.29 The ploy did not pacify the critics, however. Parliamentarians and civil society leaders hurled accusations of wrongdoing at officials, submitting papers purporting to document misdeeds to the government’s anti-corruption office, but with no result.30 When gas began flowing in early 2020, the government imposed a gag order on media outlets seeking to report the story, which activists claimed was an effort to disguise the prices Jordan was paying.31 While the start of imports did not trigger popular mobilisation like the first news of the deal had, it remains a source of grievance.32 A Jordanian energy sector executive noted that, “The gas agreement with Israel could be a driver of future unrest, particularly since the agreement has caused acute popular resentment among people who are opposed to any kind of agreement with the Zionist entity”.33
2.
Israel and Egypt
For Israel, the agreement with Jordan was a major coup, not least because it made Leviathan a viable producer and thus paved the way to exporting gas to Egypt.34 With production from Leviathan now enjoying a guaranteed market, Israel signed a deal with Egypt in 2019 for $15 billion, covering supplies for ten years. Egypt is to re-export most of the gas to external markets following liquefication at its coastal export terminals.35 Israeli Energy Minister Yuval Steinitz described the pact as a “historic landmark”, calling it the most important example of economic cooperation between the countries since the 1979 Camp David peace agreement, and saying it would revolutionise the Israeli economy.36 Shortly after Israeli gas began flowing to Jordan, it also started going to Egypt.
Egypt’s situation with respect to Israeli gas differs from Jordan’s in two ways. First, the internal response was different, in that there were no organised protests. Secondly, Egypt itself has become a major energy player in the region with the 2015 discovery of the Zohr field.37 Thanks to Zohr’s massive size, coupled with the gas distribution and export infrastructure already in place, including the Idku and Damietta LNG terminals on the Mediterranean, Egypt is positioned to be a gas hub and export gateway. Prior to this field’s discovery, Israel had eyed Egypt as the key destination for Leviathan gas, but the availability of Zohr gas suggested that, notwithstanding the 2019 deal, Egypt might be able to meet its domestic demand itself. In 2018, Egypt’s domestic production exceeded its consumption for the first time, establishing a pattern that has more or less held, indicating that Egypt may be self-sufficient in gas for some time to come.38
Israel is increasingly looking to Egypt to export Israeli gas under arrangements that could boost both countries’ ambitions in the region and beyond.
At first, Egypt’s newfound resources heightened Israel’s drive to secure European interest in and backing for an EastMed pipeline to run from Israel to Europe via Greece (discussed below), but that vision has changed. With the pipeline project’s prospects having faded, Israel is increasingly looking to Egypt to export Israeli gas under arrangements that could boost both countries’ ambitions in the region and beyond. 39 The reason is clear: in the absence of export infrastructure in Israel, Egypt’s LNG terminals are best placed to deliver Israeli (and Cypriot) gas to European and Asian markets.40 Egypt is also well positioned to continue exporting gas by pipeline to Jordan, and possibly also to Syria and Lebanon (see below), given its facilities.
The sort of arrangement that both countries are likely to find interesting is exemplified by the provisional deal among the EU, Israel and Egypt – sketched out in a memorandum of understanding signed in June 2022, amid the Ukraine crisis – to pipe Israeli gas to Egypt, where it will be liquefied before shipment to European markets.41 In 2022, Egypt’s imports of Israeli gas rose by 49 per cent to an average of 607 cubic feet per day.42
Backed by Zohr’s production power, Egyptian officials view the 2019 deal with Israel as part and parcel of Egypt’s vision to cement its position as an energy hub and pioneer of regional integration.43 It recognises that its relations with Israel are central to that vision, and it sees the gas agreement as strengthening pre-existing ties between the two countries.44 Egypt’s regional aspirations are also manifest in its leadership role in the Cairo-based East Mediterranean Gas Forum, which it co-founded with Israel (see below), and where it is positioning itself – with U.S. support – as a new source of supply to undergird Europe’s energy security.45
Yet Egypt’s aspirations at this point may outstrip the reality of its energy and economic needs. A senior international oil company representative noted that Egypt’s ambition to become a major gas exporter is “not materially founded”; the country is still focused on securing supplies, as it puts both domestically produced and imported Israeli gas into the same pool, using most of it for domestic consumption.46 A local gas investor said ensuring the availability of cheap gas for domestic consumption over the next twenty years will remain a key driver of Egypt’s economic growth.47
B.
Actors in Conflict and Dispute
1.
Israel and Palestine
Palestinians in the Israeli-occupied territories rely almost exclusively on Israel for their electricity needs, alongside minor supplies from Jordan and Egypt. Residents of both the West Bank and Gaza purchase power from the Israeli Electricity Company.48 The energy dependence persists despite the presence of an oil field in the West Bank – the Rantis field, which Israel calls Meged – and the Gaza Marine gas field offshore.49 In both instances, Israel has prevented Palestinian authorities from asserting sovereignty over the fossil fuels or even gaining access to them.
In the West Bank, the Palestinian Authority (PA) has tried to break out of dependency by starting a power generation company in Jenin. The plan is for the company to have a 150MW capacity to cover the territory’s entire needs, with possible expansion to 450MW. For the company to distribute that kind of power, it would need to manage its own electricity grid, which in turn would require getting off the Israeli grid that supplies Israeli settlements.50
The Palestine Investment Fund, the plant’s main funder, has played a primary role in drawn-out negotiations with Israel and international backers to secure Israeli gas supplies and Israeli approval to build the necessary infrastructure for power generation and distribution, much of which would have to traverse Israeli-controlled Area C, which makes up some 60 per cent of the West Bank’s territory. Negotiations began in 2014, and two years later, Israel issued a provisional permit for the plant’s construction, prompting Palestinian Prime Minister Rami Hamdallah to lay the cornerstone.51
But progress stopped there. Though Israel has issued approvals for Palestinian control of four electricity substations, it has yet to give the final green light to build the plant and electricity grid.52 A lead negotiator for the investment fund, speaking of his Israeli counterparts, complained, “They talk the talk but don’t walk the walk”, in reference to their practice of stating support for the project but dragging their feet in getting it going.53
Israel began citing security concerns to explain its refusal to allow Palestinians to develop the field.
After British Gas discovered the Gaza Marine gas field in 1999, Yasser Arafat, the Palestine Liberation Organisation chairman, famously rode out to the find in a boat, expressing his hope that it would power the journey to Palestinian statehood.54 Yet Israeli restrictions prevented British Gas from securing enough supply contracts to make production commercially viable.55 Following Hamas’s takeover of the Gaza Strip in 2007, and fearing that gas profits might help fill the Islamist movement’s coffers, Israel began citing security concerns to explain its refusal to allow Palestinians to develop the field.56 After Israel bombed Gaza’s power generation company – the only such plant in the Palestinian territories – during the 2014 war, the enclave began suffering from chronic electricity shortages. It came to rely on Qatari fuel deliveries to keep the plant going, supplementing the power it produced with electricity from Israel and Egypt.
After discovering Leviathan, Israel began looking to Gaza as a destination for its gas, claiming that the resulting energy would ease the besieged enclave’s humanitarian crisis, while continuing to prevent production from Gaza Marine.57 It is considering a project, Gas for Gaza (G4G), which entails constructing a pipeline to Gaza from Ashkelon, on Israel’s southern coast.58 The idea is that Qatar would stop providing its free liquid fuel, or diesel, to the Gaza power plant, which would revert to running on gas.59 The Palestinians would be buying this gas from Israeli sources, with the bill footed by foreign donors through the PA and private investors.
The G4G project has support from many quarters. It has Qatari financing, with Doha viewing the project as a way of weaning Gaza’s power plant off the diesel that it has been supplying.60 It also has the backing of the EU, which views it as a humanitarian measure while the Israeli-Palestinian peace process is on hold.61 The PA supports G4G, seeing it as a way to reduce dependence on Israel and cut the fees it pays to the Israeli Electricity Company, thus lowering the cost of electricity for consumers. Ramallah also backs it because it would allow the Authority to get a foot back into Gaza, having been displaced by Hamas.
But while the Israeli government is also ostensibly supportive of G4G, it has, in effect, blocked its progress by imposing the condition that the PA, not Hamas, control the Gazan gas supply.62 Because of Hamas’ de facto control of Gaza, that condition is not presently realistic. Hamas officials who spoke to Crisis Group professed no knowledge of the details of G4G, having been excluded from the negotiations. They made clear, however, that no project of this type could go forward without the movement’s approval.63
As for Gaza Marine, from their side, Palestinian non-governmental organisations accuse Israel of robbing the Palestinians of access to their national resources while securing its own production, calling it a form of plunder.64 Palestinian political factions in the Gaza Strip, including Hamas, staged a demonstration on 13 September 2022 demanding the enclave’s right to Gaza Marine’s gas, under the slogan “Our Gas Is Our Right”.65
But the PA seems to have a more accommodating attitude. In early 2021, news broke that Palestinian officials were negotiating with Israeli and Egyptian counterparts to allow for the production of gas from Gaza Marine and its transport to Egypt. In return, Palestinians would receive Leviathan gas.66 (The PA has agreed that Leviathan gas will fuel the West Bank’s Jenin power plant, in the hope that it will eventually also have access to Gaza Marine.) Hamas officials, cut out of the loop, criticised the talks’ lack of transparency, which they said underscored the PA’s corruption.67
Some Palestinian and other analysts criticise both these talks and G4G as manifestations of “economic peace” logic – ie, treating improvements to Palestinian livelihoods, rather than ending Israel’s occupation or negotiations, as the focus of diplomatic engagement in the Israeli-Palestinian conflict.68 Underlying this criticism is the worry that pursuit of “economic peace” will allow Israel to put off political compromise with the Palestinians indefinitely, while advancing its de facto annexation of the occupied West Bank. While economic interventions to calm the conflict may have development and humanitarian benefits, there is little evidence to suggest that previous such interventions have moved the needle on the peace front, or that gas diplomacy will bring better results. A former senior U.S. diplomat privy to the Leviathan negotiations says a focus on near-term improvements of this sort does indeed underlie these discussions.69
2.
Israel and Lebanon
A new maritime boundary agreement between Lebanon and Israel has averted a potentially dangerous clash over offshore gas fields, but the deal does not resolve the underlying conflict between the two countries. On 27 October 2022, Israel and Lebanon separately signed a final demarcation agreement for their shared maritime border, resolving a decade-long impasse that has hindered the exploitation of natural gas reserves off both countries’ coastlines.70 The dispute revolved around two expanses of eastern Mediterranean seabed, which contain at least two untapped gas fields: Karish (which is ready for commercial exploitation) and Qana (an unconfirmed “prospect” north east of Karish). The agreement, which came after extensive U.S. mediation, leaves all of Karish in Israeli waters and most of the unexplored Qana prospect inside Lebanese territory.71
Under the agreement, Israel and Lebanon have accepted a maritime border that represents a compromise between each country’s maximalist claims. Back in 2011-2012, negotiations focused on a disputed area of 860 sq km, the difference between Israel’s northernmost claim (known as “line 1”) and Lebanon’s southernmost claim at the time (known as “line 23”). The divergence between lines 1 and 23 stemmed from disagreement over both the angle and starting point of the maritime border.72 After the negotiations collapsed, Lebanon extended its claim to what has become known as line 29, which would have given Lebanon an additional 1,430 sq km south of line 23, including nearly half of the Karish field. The final demarcation agreement places the border at line 23, which cuts through the Qana prospect. Under the deal that was reached, while Lebanon alone can exploit Qana, Israel is entitled to receive compensation from the consortium exploiting the field out of gas revenues for the segment of Qana falling south of line 23.73
The [maritime border] agreement has defused a flashpoint between Israel and Lebanon, which at times threatened to erupt into conflict.
For now, the agreement has defused a flashpoint between Israel and Lebanon, which at times threatened to erupt into conflict. In mid-2022, before the demarcation deal was reached, a dispute over the Karish field escalated between Israel and Hizbollah, the powerful Lebanese political party-cum-militia. With demarcation negotiations stalled, Israel had assumed it could proceed with exploiting the Karish field, because Lebanon had never made an official claim to line 29 – which runs through Karish – or any area nearby.74 On 5 June 2022, a floating production, storage and offloading facility operated by the London-based company, Energean, arrived at a position near the disputed maritime border to prepare to extract gas from Karish for Israel, in an area clearly south of line 29. On 9 June, Hizbollah Secretary-General Hassan Nasrallah said his party would consider Karish a disputed resource, absent an agreement, and would defend it from Israeli exploitation if the Lebanese state failed to do so.75
Over several months, observers expressed concern that these tensions would spill over into violent confrontation – and with reason.76 On 2 July, Hizbollah’s military wing, the Islamic Resistance, claimed responsibility for sending three unarmed drones toward Karish. Israel shot down the drones, describing the incident as “an attempt to undermine negotiations”, adding: “Hizbollah wants to destroy Lebanon”.77 Nasrallah doubled down, vowing on 13 July that Hizbollah would block gas exploitation by Israel even “beyond Karish” until Lebanon could mine its own maritime resources.
But the parties’ growing economic and political incentives to reach a deal helped them step back from the brink. As Russia’s war in Ukraine led European countries dependent on Russian gas exports to scramble for alternatives, Israel believed that prospects might improve dramatically for marketing eastern Mediterranean gas.78 Israel thus had an immediate incentive to boost its output by exploiting Karish as quickly as possible and to remove the security threat that a conflict with Hizbollah could have created for its entire Mediterranean gas operation.
Some Israeli officials have also expressed hope that the deal could be a springboard for more lasting conflict resolution with Lebanon and its various political factions. Israeli security officials suggested that Lebanon might covet stability on the shared maritime border if it could get access to natural gas reserves.79 Some also justified accepting a compromise on the Qana prospect primarily for political rather than economic reasons, claiming that it would set a precedent for resolving other disputes between Israel and Lebanon through negotiation. In the words of one senior Israeli official, a deal would “erode a [Lebanese] taboo” regarding Israel.80 When the agreement was signed, then-Prime Minister Yair Lapid claimed that Lebanon’s entry into the deal in effect recognised the state of Israel “in front of the entire international community”.81
[Lebanon’s] fractious political leadership perceived collective political benefits in concluding the maritime deal.
As for Lebanon, the country’s fractious political leadership perceived collective political benefits in concluding the maritime deal. After the demarcation agreement was finalised, both President Michel Aoun and Hizbollah leader Nasrallah heralded it as a new dawn for Lebanon’s devastated economy, claiming that Lebanon had become an “oil-producing country”.82 This narrative provided a distraction from Lebanon’s escalating economic crisis, for which many Lebanese hold their political leaders responsible. Aoun also repeatedly claimed the border demarcation deal as a major diplomatic achievement of his presidency, which ended only days later.83 He lauded the negotiating efforts of Gebran Bassil, his son-in-law and anointed political successor as party leader.84 For its part, Hizbollah took credit for Israel’s sudden willingness to compromise, suggesting that the episode demonstrated Lebanon’s continued need for Hizbollah’s weapons, which it maintains controversially beyond the state’s purview.85
But much as the maritime agreement was a welcome achievement in its own right, and a positive development in terms of regional dynamics, it will need to be joined by much broader efforts if there is to be a breakthrough in overall relations between the two neighbours. Lebanon’s political leaders, including Nasrallah, have stressed that the maritime border deal is not an agreement between Lebanon and Israel, let alone a move toward normalisation.86 The deal’s terms and structure deliberately avoid putting Lebanon in the position of formally recognising Israel’s existence, notwithstanding Lapid’s claims to the contrary. The countries will seal the deal by depositing matching decrees about the border compromise with the UN, allowing Lebanon to avoid signing a direct agreement with Israel.87 The French oil giant Total, not Lebanon, will pay any compensation owed to Israel.88 While Hizbollah approved the Lebanese negotiating team’s decision on the maritime border, it insisted that the deal explicitly acknowledge that land border negotiations remain unresolved.89
The maritime agreement still could be a first step toward a more concerted push at cross-border peacemaking. But with Lebanon beset by economic challenges and deadlocked over the selection of political leadership, and Israel facing domestic upheaval over the new right-wing government’s plans for a drastic judicial overhaul, there is no sign – nor much promise – of near-term movement on that front.
C.
An Actor with Regional Ambitions
Türkiye is rising as a regional power with an assertive foreign policy that shapes its approach to hydrocarbon extraction. Ankara’s defence of Turkish Cypriot claims to sovereignty drives its position with respect to the exploration and exploitation of seabed hydrocarbons around the island of Cyprus. Its 2019 deal with the UN-recognised government of Libya – in which it committed to help Tripoli militarily in exchange for favourable terms on maritime delimitation – is best seen as an effort to counter-balance regional economic and political blocs that it sees as impinging on its interests.
1.
Türkiye, Greece and the Cyprus question
Efforts to exploit gas discoveries around the island of Cyprus both fuel and are complicated by a decades-old sovereignty dispute between the island’s Greek Cypriot population (which controls the internationally recognised Republic of Cyprus or RoC) and Turkish Cypriots (who are concentrated in the breakaway and de facto “Turkish Republic of Northern Cyprus” or “TRNC”). Türkiye is the only nation to recognise the “TRNC” as sovereign and is deeply implicated in Cyprus-related geo-politics, as are a number of other outside powers, including the U.S., the UK and Greece.
In some respects, it is hardly surprising that gas discoveries would exacerbate the sovereignty dispute between Greek and Turkish Cypriots.90 With the UN recognising the RoC as representing the entire island, the latter claims the exclusive right to explore and exploit resources in the surrounding maritime zones. Rejecting the north’s assertion of sovereignty, and labelling Türkiye’s military presence there an “occupation”, the Greek Cypriot administration objects to Turkish Cypriot representatives having any say in resource management.
But Türkiye and the Turkish Cypriot administration see things differently. Ankara does not recognise the RoC and contests its right to enter into “exclusive economic zone” agreements or draft hydrocarbon development plans unilaterally. It aligns with the Turkish Cypriot claim to co-ownership of the country’s natural resources based on bicommunal decision-making structures that broke down in 1963, and argues that in addition to receiving a fair share of revenues, it should have a say in managing them. Turkish authorities invoke their status as a guarantor state under the 1960 Treaty of Guarantee among Greece, Türkiye and the UK in asserting that they will prevent the “usurpation” of Turkish Cypriots’ rights, and say they will not allow Greek Cypriots to benefit from the exploitation of natural gas reserves unless they come to an agreement with the Turkish Cypriots.91
Turkish officials have voiced their concerns about alleged violations of Turkish Cypriots’ rights ever since the RoC signed its first delimitation deal with Egypt in 2003.92 They redoubled their protests in 2004, after the Greek Cypriots rejected a UN plan proposed by then Secretary-General Kofi Annan for reaching a political settlement with the north, shortly before the RoC joined the EU. They did so again after the RoC proceeded to sign new delimitation deals with Lebanon in 2007 and Israel in 2010.93
The [Republic of Cyprus’] discovery of gas reserves in 2011 meant that the economic stakes were suddenly much higher.
But the RoC’s discovery of gas reserves in 2011 meant that the economic stakes were suddenly much higher. “We said this is going to lead to problems. The island is still divided, and the EU was silent”, a Turkish official said. “We had to do something”.94 He also said (on a later occasion) that the “TRNC” has been “mirroring” the moves of the Greek Cypriot state since 2011. For example, after the RoC signed delimitation agreements, the “TRNC” followed suit by signing a deal with Ankara purporting to establish a maritime boundary between the island’s northern part and the Turkish coast. The official noted that:
Between 19 and 25 September 2011, in just one week, a lot happened: the Greek Cypriot state delineated parcels and licenced them to international companies to conduct exploration and drilling. Immediately, the TRNC identified licence areas [ruhsat sahaları] and gave exploration licences to Turkey’s TPAO [Türkiye Petrolleri Anonim Ortaklığı, the Turkish national oil company].95
Although Cyprus’ status as a divided island has led to quarrels over how to apportion its energy resources, those resources have also been a source of hope. Because duelling claims meant that the two sides were impeded from exploiting the potential wealth off the island’s shores, and because the best option for exporting the gas to Europe would be through Türkiye, the expectation was that the two sides would have more incentive than ever to resolve their disputes and reunify the island. By setting their differences aside, and collaborating on exploitation, they would be better positioned to reap economic rewards. Thus, as the island’s sixth round of major negotiations over a political settlement reached a crescendo between 2015 and 2017, some were optimistic that natural gas projects would provide economic incentives to resolve the conflict.96
But these hopes were disappointed. The talks collapsed in 2017, and in their aftermath, the parties’ zero-sum approaches only hardened. In separate talks about energy issues, the “TRNC” and Ankara have continued to insist on joint decision-making, pressing the RoC for what they consider an equitable revenue-sharing scheme with respect to the island’s energy wealth.97 Moreover, in 2018, Türkiye for the first time supplemented its verbal objection with a military show of force. Turkish naval vessels prevented an ENI ship from drilling in RoC-licenced areas. That same year, the “TRNC” began conducting its own hydrocarbon exploration in disputed waters by licencing TPAO. Türkiye has also sought to limit Greek Cypriot exploration, using its navy to deter drilling by international companies operating under RoC licences in disputed waters off the island’s coast.
In response, the Greek Cypriot side has pursued partnerships with a view to countering Turkish intimidation. For example, when Turkish warships stopped Italy’s energy firm ENI from drilling in RoC waters in 2018, the government responded by suggesting that ENI pair with France’s Total in allocated blocks because it believed Paris would be more assertive than Rome in confronting the Turkish navy. That proved correct: when Total and ENI jointly engaged in offshore exploration in the following years, France deployed its own naval assets, including its flagship Charles de Gaulle aircraft carrier. Since then, a Greek Cypriot expert said, Türkiye “has not hindered ENI-Total drilling in Republic of Cyprus waters, even though it had threatened to do so”.98
Greece has worked with the RoC to rally other states against Türkiye’s conduct. In November 2019, based on a proposal by Greece and the RoC, the European Council adopted a new sanctions mechanism to counter what it saw as Türkiye’s “unilateral” actions in the eastern Mediterranean.99 Under these “restrictive measures”, the EU imposed limited sanctions on two Turkish TPAO officials the following February.100
Greece and the [Republic of Cyprus] have also sought to galvanise support from, and fortify their partnerships with, heavyweights both in and outside the region.
Greece and the RoC have also sought to galvanise support from, and fortify their partnerships with, heavyweights both in and outside the region.101 The RoC stepped up its efforts to bolster defence and diplomatic alliances, focusing on countries that have also had difficult relations with Türkiye, such as Egypt, Israel and the United Arab Emirates. Greece, too, has forged new defence ties, especially with France, the U.S. and the UAE.102 Turkish officials are disgruntled in particular over Washington’s growing military partnership with Athens and its full lifting of an arms embargo on the RoC in September 2022.103
Over the past several years, these developments have only prompted Ankara to push back harder. In mid-2020, Turkey dispatched naval vessels to the eastern Mediterranean to intimidate energy majors and highlight what it claimed was the RoC’s illegitimate drilling. It also sent seismic research ships flagged by its navy to gas fields claimed by the RoC on several occasions between January 2020 and mid-2022.
This practice has at times created a dangerous risk of escalation.104 Tit-for-tat rhetoric and actions from the last eighteen months include the following:
In November 2021, the RoC issued a navigational telex (Navtex) announcing drilling by Exxon Mobil-Qatar Petroleum in seas over which it claims jurisdiction.105
Ankara condemned the agreement, stating that Türkiye “will never allow any foreign country, company or vessel to engage in unauthorised hydrocarbon exploration activities in its maritime jurisdiction areas, and will continue to resolutely defend her rights and those of the TRNC”.106
In May 2022, RoC-licenced ENI and Total resumed drilling activities in the RoC-claimed exclusive economic zone for the first time since the COVID-19 pandemic had put it on hold. The “TRNC” and Türkiye again repeatedly protested the RoC’s unilateral drilling activities, arguing that these violate Turkish Cypriots’ rights.107
In August 2022, tensions between the RoC and Ankara reignited when Türkiye announced it would dispatch a new drillship to the Mediterranean near Cyprus. Both Greece and the RoC objected, saying Türkiye would thus violate their rights within their respective exclusive economic zones. Ankara later clarified that the ship would operate within Türkiye’s own sovereign territory outside of the disputed waters of Cyprus.108
In December 2022, ENI and Total announced that they had found more gas off Cyprus, to which the “TRNC” and Türkiye responded with harsh statements dismissing the legitimacy of the RoC-claimed exclusive economic zone and accusing the RoC of ratcheting up tensions in the eastern Mediterranean.109
This back-and-forth has not yet led to confrontation between the two sides. But the continued RoC-“TRNC” sovereignty dispute and the role Ankara plays in backing the Turkish Cypriots has laid to rest hopes that Greek and Turkish Cypriots will seize the opportunity to use hydrocarbon wealth for mutual benefit. While Türkiye and Greece softened their rhetoric after the February earthquakes, when Greece dispatched aid and rescue teams, it is possible that frictions will rise again in the run-up to elections in both countries in the summer of 2023. In the meantime, though Turkish vessels have not proceeded with exploration in disputed zones around the island, they do criss-cross the area with naval escorts and their activities can create friction.110
2.
The Libya angle
In 2019, Ankara, seeing war-torn Libya as a potential ally in countering the group of countries that had formed the East Mediterranean Gas Forum (discussed below), threw its weight behind the UN-backed government of Prime Minister Faiez Serraj in Tripoli and struck a deal.111 That deal had the following contours. Türkiye agreed, in effect, to offer military assistance to the Tripoli-based government, which at the time was struggling to fend off an offensive by Egypt- and UAE-backed forces loyal to Field Marshal Khalifa Haftar. For its part, Tripoli acquiesced in a memorandum of understanding that established the two countries’ respective maritime economic exclusive zones in the eastern Mediterranean on terms that benefited Ankara.112 The deal gave Türkiye claim to maritime areas west of the 28th meridian that overlap with waters Athens considers part of its continental shelf, including around islands such as Rhodes and Crete.113
Through this arrangement, Ankara hoped to achieve several objectives. These included both disrupting plans for an EastMed pipeline that were being developed without it (see below) and encouraging Egypt and Israel to backtrack on delimitation agreements they had reached with, respectively, Greece and the RoC. More broadly, Türkiye hoped this approach would give it a say in regional energy projects.114 “As a major player with rights in the eastern Mediterranean”, a Turkish official said, “we want to have a seat at the table when it comes to exploiting its resources”.115
While Ankara attempted to mend ties with some of its Arab foes, notably Saudi Arabia and the UAE, its relations with Egypt remain troubled.
Türkiye has yet to gain such a seat, however, and tensions perpetuated in large part by its assertive tactics persist. While Ankara attempted to mend ties with some of its Arab foes, notably Saudi Arabia and the UAE, its relations with Egypt remain troubled. They soured even further after Turkish officials signed a new memorandum of understanding with Tripoli in October 2022 that paves the way for joint Libyan-Turkish offshore projects in their respective declared maritime zones.116 If acted upon, the agreement could lead to joint Libyan-Turkish explorations close to the Greek island of Crete in waters Libya considers its economic exclusive zone but infringe on Greece’s claim. Officials from Egypt, Greece and other EU member states denounced it as illegitimate.117 The move particularly alarmed Greek officials, who announced that any such explorations would prompt a response “both at a bilateral level and at the level of the European Union and NATO”.118 While Ankara is keeping its options open, it does not appear eager to test that proposition. It has thus far refrained from such activity.
III.
The East Mediterranean Gas Forum
The parties involved in establishing the EU-backed East Mediterranean Gas Forum, which aims to enhance economic cooperation and regional integration through the region’s gas reserves, consider it a success story.119 The 2020 partnership among Egypt, Israel, Cyprus, Greece, Jordan, the PA, Italy and France made headlines, especially in the region.120 Actors with no direct stake in the forum – including the U.S. – are knocking on its doors, seeking to join the plenary. The forum is discussing major new plans, including whether it should remain focused on gas reserves or expand into other areas, including energy more broadly, as well as economic and security issues.121 A senior European energy executive said, “My simple common-sense answer to the question of whether it is working is yes. Other countries are looking to join, not just countries from the region but also from outside the region and even big powers, and not just to talk about energy”.122 But the forum’s exclusionary approach has also helped entrench regional divisions and drive up tensions.
A.
Türkiye’s Exclusion
The most prominent absentee is Türkiye. Many actors in the eastern Mediterranean view Türkiye as a destabilising power seeking to increase its influence in several places, from the eastern Mediterranean to Libya and Palestine.123 Forum members seeking to enhance regional cooperation view excluding Türkiye as a means of facilitating discussion. A European diplomat, speaking of Türkiye’s diplomatic manoeuvres outside the forum as they relate to eastern Mediterranean gas, said:
Turkey puts all kinds of things on the table to ensure discussions go nowhere, and can go on for years, but by then the market will no longer need gas. This is why they have not invited Turkey yet. Once there is a common understanding and an amicable and international law-based discussion, there is no problem with Turkey joining.124
Against this backdrop, claims by forum advocates that it is open to any party interested in cooperating on gas reserves, including Türkiye, ring hollow.125 When France joined the forum in March 2021, Paris barely concealed its desire to use the body as a vehicle for pushing back against Türkiye.126 Describing Egypt’s perspective, an energy professional said Cairo saw the forum as “a political forum to keep Türkiye out, keep Arab countries close, build relations with the EU and close the door on the EU’s criticism of Egypt’s human rights record”.127
To be sure, the forum is about much more than just keeping Türkiye out. Prominent members have multifaceted economic and political agendas. Egypt and Israel had their own motives for establishing the forum. The latter seeks to integrate itself more into the region, while the former sees the forum as a platform for its broader ambitions.128 Beyond seeing the forum as a vehicle for pursuing its objectives in the region, France’s entry application to the forum was also likely motivated by competition with Italy, as Total (French) and ENI (Italian) are both key corporate players in the basin.129
Ankara’s detractors see Türkiye as driving increased tensions around eastern Mediter-ranean gas reserves.
But the forum’s exclusionary approach has become part of its identity, which creates problems. Much as Ankara’s detractors see Türkiye as driving increased tensions around eastern Mediterranean gas reserves, the forum’s critics note that it has arguably deepened divisions in the eastern Mediterranean basin, aggravating Türkiye’s sense of isolation, and further politicising the very assets that diplomats are touting as means of ameliorating political disputes.130
In this sense, the forum has become part of a vicious circle: Türkiye is angry at being left out, and in response doubles down on projecting its power. Its reaction, in turn, irritates Greece, Egypt and the RoC, which see even less reason to consider Türkiye for entry into the East Mediterranean Gas Forum. Whether these tensions will ebb following the 14 May Turkish elections remains to be seen: Türkiye’s slow normalisation with Egypt as well as its improved relations with Israel offer some hope that a calmer phase and more constructive dialogue may be within reach.
B.
Other Notable Absences
Beyond Türkiye, there are other notable absences from the forum’s membership – Lebanon and Palestine – although the dynamics around these actors are someone different.
In the case of Lebanon, Beirut refuses to join because of its objections to Israel’s membership. While Lebanon currently lacks a president, its political leaders show no sign of having moved away from this position in the aftermath of the October maritime boundary deal.131
As for the Palestinians, while the PA belongs to the forum, it does not control the territory – the Gaza Strip – off whose shore the gas reserves are located. That territory is run by Hamas. The PA’s decision to enter the forum was political, akin to its strategy of joining international treaties as a way of demonstrating its legal sovereignty, particularly since the forum’s charter recognises state sovereignty over natural resources.132 While the Palestinians view their ability to assert themselves as equals in the forum to be “a very significant statement”, it remains to be seen how they can leverage this platform, if at all, to assert control of Palestinian gas reserves.133
C.
Incremental Moves
While the forum may not be able to integrate all the region’s major energy players, the absence of so many has a cost. As long as it remains what is in effect a strategic partnership, rather than a neutral entity that manages a regional resource in a manner that promotes stability, the forum will be prone to sowing division rather than fostering unity. If the forum is to succeed in its self-declared mission to increase regional gas cooperation – much less become a regional hub for renewable energy and electricity links in line with some visions for its future – then it needs to change. It will need to expand its membership and commit itself to mediating between conflicting views both inside and outside the group, perhaps even including on issues like sovereignty over the seabed around Cyprus (although this idea is highly aspirational at present). Perhaps the most important step in this direction would be to find a way to accommodate Türkiye, including by signalling an intent to allow that country to move toward membership.
Forum members might ask the EU to sponsor an eastern Mediterranean gas conference in which Ankara could participate alongside them.
All these things are of course easier said than done, and if moving incrementally would be helpful, the forum might consider an interim step. Forum members might ask the EU to sponsor an eastern Mediterranean gas conference in which Ankara could participate alongside them, as a preliminary measure to clarify, and perhaps overcome, the principal differences. The EU mentioned the idea of an inclusive eastern Mediterranean conference as part of a “positive agenda” it proposed at an October 2020 summit.134 Symbolic as it may be, such an initiative would give Ankara a seat at the table and counter those in Türkiye who contend that the country will be heard only if it projects military power.135 But since the EU dangled the idea, there has been little discussion of staging such a confidence-building exercise, and elections, both recent and forthcoming, in several countries in the region may cause the idea not to be picked up until the newly elected governments have settled in – ie, likely not in 2023.136
IV.
The Limits of Gas Diplomacy
The countries in and around the eastern Mediterranean will be best positioned to benefit from the energy wealth in the basin if they and their partners from outside the region take a clear-eyed view of what gas diplomacy can achieve, and where the primary markets for the region’s resources are likely to sit.
A.
Managing Expectations about Gas Diplomacy
Diplomatic interventions by the U.S., the EU and EU member states around the eastern Mediterranean gas reserves came to be dubbed “gas diplomacy”. The term was shorthand for efforts to use the prospect of gas exports to encourage regional players to make breakthroughs toward conflict resolution in non-energy-related matters. An affinity for gas diplomacy was prevalent during the administration of U.S. President Barack Obama (2009-2017). After a hiatus, it returned when President Joe Biden entered the White House in 2021, even if his administration tends not to use the term.137 A former U.S. diplomat encapsulated the idea as follows: “We saw energy as a proxy for other forms of collaboration, because people need it, they want it and it creates a bridge toward a degree of cooperation. The hypothesis was that it would have a halo effect on the region’s political relations as well”.138 At the least, said another former U.S. diplomat, energy creates relationships that can help prevent conflict.139
But while that is the U.S. theory, practice has been more of a mixed bag. On the one hand, bilateral deals between Israel and Jordan, and between Israel and Egypt, have encouraged stronger economic cooperation facilitated by energy discoveries. The above-referenced gas forum is a space for collaboration and partnership, at least among its members. Some prospective arrangements are also worthy of notice. For example, a complex gas deal that has been under discussion for some time would link Lebanon, which is in desperate need of electricity, with Syria, Jordan, Egypt and, indirectly, even Israel. That deal must still overcome major stumbling blocks including possible exposure to U.S. sanctions, obtaining World Bank funding amid Lebanon’s governance crisis, and possible Lebanese concerns about Israel’s indirect role.140 Whether it will move forward is anyone’s guess at this point.141
Gas diplomacy has yet to show major geopolitical results, and many doubt that it will.
But modest successes and works-in-progress aside, gas diplomacy has yet to show major geopolitical results, and many doubt that it will. Some gas diplomacy advocates have come to recognise its limitations, noting that gas agreements cannot dispel the fundamental distrust between countries or heal “deep wounds”, even as others continue to insist that economic agreements can “break the status quo” by creating an entry point for political discussions among warring parties.142
What the record in fact shows is that the openings created by gas diplomacy will only take adversaries so far, absent an effective strategy for achieving political reconciliation. In Cyprus, for example, the Aphrodite discovery prompted hopes that Turkish and Greek Cypriots would come together to exploit the area’s energy bounty; instead, the find added to tensions over who was entitled to licence extraction and export the offshore resources around the island.143
The limits on how far economic interests can go to accelerate political deals that could contribute to conflict resolution are perhaps most starkly evident, however, in Lebanon. Here, the maritime delimitation deal with Israel, informed by the presence (Israel) or suspected presence (Lebanon) of quantities of gas that could find their way to ravenous European markets, combined with other motives to momentarily defuse a dangerous situation.144 But they did little to create sustained momentum toward addressing the larger Lebanese political crisis or easing the overall hostility between Israel and Hizbollah.145
B.
Managing Expectations about European Demand
Much of the excitement about the eastern Mediterranean gas discoveries in recent years has owed to their proximity to Europe. Politicians and commercial entities alike saw the newfound assets as fitting into Europe’s strategic ambition to diversify its supply sources and reduce its dependence on Russia.146 They hoped that eastern Mediterranean gas would have numerous, dependable consumers in Europe, making the fields commercially viable and integrating the region’s countries more closely into the European neighbourhood – and with each other.147
The reality is more complex, however. The main adjustment will be for stakeholders to revisit the assumption that European demand can underpin eastern Mediterranean production. It is true, of course, that Russia’s actions toward Europe in the wake of its invasion of Ukraine are creating acute European demand for gas from alternative sources. Yet Europe is not looking primarily toward the eastern Mediterranean to offset a dramatic loss in Russian supplies. Indeed, energy experts understand that the region will likely become only one of many new suppliers of gas.148 The priority for Europe is to find alternative sources that are sufficient in volume (which the eastern Mediterranean cannot supply), while accelerating the trend toward decarbonisation. As Josep Borrell, the EU high representative for foreign affairs and security policy, declared just before Russia’s all-out invasion, “With high prices and gas supplies challenges caused by the crisis with Russia, [energy] is at the top of our agenda. We need to address short-term pressures while sticking to our long-term goal of the net-zero transition”.149
Following Russia’s February 2022 assault, the EU articulated a policy that would allow it to cut its dependence on Russian gas.
Following Russia’s February 2022 assault, the EU articulated a policy that would allow it to cut its dependence on Russian gas within a much shorter time span than it had envisioned originally, namely by two thirds before the end of 2022 and fully by 2027. It wants to do so by importing gas from alternative sources in the short term and sharply curtailing European gas consumption in the medium to long term, specifically by boosting energy efficiency and promoting renewable sources of energy, especially hydrogen gas.150
To address its immediate needs, the EU intends to import an additional 50bcm per year (or about 1.75tcf) of LNG, mainly from the U.S. and Qatar, and another 10bcm (about .035tcf) of pipeline gas, mainly from Azerbaijan, Algeria and Norway.151 In June 2022, it signed a tripartite memorandum of understanding with Israel and Egypt, promising to help the two countries develop gas production and exploration in their territorial waters and increase LNG exports. Details have yet to be negotiated, but the export volume will be small because the Egyptian LNG facilities’ capacity is limited.152 In the absence of available infrastructure, and given the lag times that would be involved in building it (as discussed below), there has been little discussion of exporting major quantities of Egyptian or Israeli gas to Europe in the short term.
C.
Pipeline or Pipedream?
Rhetorically, the EU and its member states, as well as the region’s gas-rich countries, remain invested in exploring prospects for European import of eastern Mediterranean gas, including through the project known as the EastMed pipeline. If built, the 1,900km pipeline would carry gas from Israeli and Cypriot fields via Greece to the rest of Europe, initially at a rate of 10bcm (or about 0.35tcf) a year.153
In May 2015, the EU designated the EastMed pipeline as a Project of Common Interest (suggesting benefits accruing to multiple member states) and launched a feasibility study, subject to lengthy review, with results due at the end of 2022.154 But in January 2022, the U.S. signalled it would not support the project by intimating that the planned pipeline should be used for electricity rather than gas.155 By early 2023, with Brussels having gone silent on the project and in keen pursuit of its green agenda, the EastMed pipeline seemed to have fallen by the wayside.156
As a gas professional familiar with the project said, “The pipeline that we’ve been talking about for a decade is more of a political flag than a real industrial project”.
While there were many reasons for the project’s demise, at least one is that, from the start, its proponents appeared to be driven by a primarily political agenda, one that ignored the pipeline’s commercial viability. As a gas professional familiar with the project said, “The pipeline that we’ve been talking about for a decade is more of a political flag than a real industrial project”.157 For one thing, the project’s cost would have to be underpinned by a 20-25-year supply agreement to justify investment. That timeframe sat uneasily with the EU’s green agenda and its shift toward decarbonisation even before it decided to accelerate its pivot away from hydrocarbons in the wake of the Ukraine conflict.158 A global gas expert explained to Crisis Group:
Even the best deal in the world takes four years to negotiate, followed by six years to build the pipeline. This means that it will be the late 2020s before any gas can flow even in the most optimistic scenario. Even if you say 2025, the contract will be until 2050. Europe is looking to have zero natural gas in the system by the end of 2050. So, why would anyone sign a 25-year contract on that basis?159
Furthermore, a regional gas expert commented that the pipeline was too complicated politically, not least because the waters between Cyprus and Crete are contested.160 Already in 2021, an EU official dismissed plans for the EastMed pipeline altogether, calling it a “pipedream”.161 Yet, as an international energy expert put it, “None of these realities stop regional East Med politicians from continuing to talk about it. Their mantra is that the EU needs more gas to replace Russian gas and the EastMed is an option. It no longer is”.162
V.
Rethinking Gas Diplomacy
The eastern Mediterranean gas reserves were heralded as discoveries that could change the region, creating stability in a place rife with conflict, and integrating the southern periphery closer to European shores in a way that meets the EU’s strategic interests. Despite the hype of the past decade, the reality is that the eastern Mediterranean discoveries have brought no political breakthroughs. In some cases, the reserves have heightened rather than reduced tensions with actors that have chronic disputes. They may even further entrench those disagreements by adding to the list of mutual grievances. At the same time, commercially, a big part of the gas assets that were discovered risk being stranded. The European demand that many dreamed of is unlikely to reach the hoped-for levels, meaning that Europe is unlikely to be the source of major infrastructure investment.
While gas holds real promise, these commercial and political realities cannot be wished away. They must be confronted directly for these reserves to hold any benefit for the region, and to bring countries closer together. For these and other reasons, gas diplomacy as envisaged by the U.S., the EU and others requires a rethink.
The countries of the eastern Mediterranean and outside investors should revisit their assumptions for where the gas is likely to be sold.
First, both the countries of the eastern Mediterranean and outside investors should revisit their assumptions for where the gas is likely to be sold – a process that has already begun. It is highly improbable that a significant volume of eastern Mediterranean gas will find its way to Europe, given the huge short-term demand that eastern Mediterranean supplies cannot satisfy and the accelerating transition to renewable energy sources. Eastern Mediterranean producers will most likely have to find other markets for their gas.
The best bet would be in the region itself. Commercial viability will then depend mainly on the size of these markets accessible for each field. Israel has already positioned itself as the principal outside supplier of two consumers – Egypt and Jordan – that have a clear demand for gas, even if Egypt now supplies the bulk of its own needs. Cyprus might be able to enter the arena with a pipeline to Egypt, though Türkiye would probably play the spoiler in this scheme unless the Turkish Cypriots would also benefit from the revenues. Domestic markets could reconfigure themselves away from dependency on liquid fuels like oil and diesel, which underpin much of the region’s electricity generation, and toward gas, while also expanding production of renewable energy, which would sustain regional demand for some time. The industry is already shifting away from polluting liquid fuels toward less polluting gas, while focusing on expanding the capacity for renewable energy production. The Middle East is particularly well suited for the latter, given its solar energy potential.
For its part, the EU should ask itself what its core objectives in the region are and how its involvement can be better aligned to meet those. If it is unlikely to be a major buyer of eastern Mediterranean gas, as appears to be the case, it should use its diplomatic and financial power to mediate and encourage the region’s more inclusive integration and greater stability, developing a vision consistent with the global move toward decarbonisation.
In the short to medium term, commercial realities position Egypt’s LNG terminals, not the defunct EastMed pipeline, as the most viable way to export the region’s gas. Sending a clear message to this effect, along with showing momentum behind Europe’s green ambitions, will offer a more coherent perspective to players in the region. The parties could also explore alternatives, including EU-backed regional integration efforts that look beyond gas resources toward renewable energy, likewise with export potential.
Secondly, if gas diplomacy is to make a positive contribution to more traditional forms of conflict resolution, it must be grounded on a solid foundation that accounts for the economic interests of all the players that seek a share of the gas reserves. Regional cooperation is essential to attracting investments in gas, as it allows for leveraging infrastructure and thus bringing down costs.163 The ultimate goal therefore should be to make the East Mediterranean Gas Forum more inclusive, turning it into a platform that helps reduce regional tensions rather than exacerbate divisions.
The EU and its member states should use the opportunity of Ankara expressing an interest in “turning a new page” with the EU to engage Türkiye more actively.
The EU and its member states should use the opportunity of Ankara expressing an interest in “turning a new page” with the EU to engage Türkiye more actively and offer it carrots to anchor it in a regional framework. While the EU needs to acknowledge that its leverage is limited, it should pursue aspects of the “positive agenda” it put on the table in October 2020, including the idea of a regional gas conference aimed at breaking the ice. As noted, progress on this initiative may have to wait for a period after the Turkish elections in May, and it may not be on the cards for 2023 no matter who comes out on top.
Thirdly, even if and when the eastern Mediterranean basin becomes more integrated economically, actors invested in its political stability must acknowledge the primacy of political factors driving the region’s conflicts. They should address these factors head on instead of waiting for energy and other economic deals to somehow enable peaceful settlements. The promise of a hydrocarbon bonanza may be enough to temporarily ease tensions in the right situation and at the right moment, as Israel and Lebanon showed in 2022, but it will rarely by itself be enough to defuse a conflict. Moreover, unless addressed as part of an effective dispute resolution strategy, questions about the control of seabed resources can become another front in a broader struggle – as they have in the case of Cyprus
VI.
Conclusion
Gas discoveries in the eastern Mediterranean raised expectations not only that the region could become less energy-dependent, possibly even starting to export to markets in Europe and farther afield, but also – in some quarters – that the new finds could help defuse drivers of local political conflicts. But the track record is at best mixed. Israel and Egypt have become next exporters of gas, but are producing too little, and have insufficient infrastructure in place, to satisfy the acute European demand for gas amid the Ukraine crisis. Gas discoveries have failed to ease tensions in and around Cyprus, and they may be making things worse. While some gas deals have gone forward even between enemies, as in the case of Israel and Lebanon, these have done little, if anything, to address political disputes. Moreover, the accelerating energy transition toward renewables is further shrinking markets for gas in the medium to long term.
To maximise opportunities, therefore, countries in the region should make their regional mechanisms for furthering gas interests more inclusive, if only to improve economic efficiency through joint infrastructure. They should accelerate their own transition toward a zero-carbon future and the export of renewables. Finally, regarding the region’s deep and longstanding political conflicts, both regional and outside actors should foster realistic expectations regarding the potential of gas diplomacy to contribute to peaceful settlements. The reserves may encourage a level of economic integration but by themselves are unlikely to transcend political differences. If a decade-plus of gas diplomacy has demonstrated anything, it is that the region’s conflicts require political solutions, not commercial ones.
Brussels, 26 April 2023
No comments:
Post a Comment