Neither Lebanon nor Israel Want to Go to War Over Gas-drilling Rig. Or Do They?

As expected, the arrival of the Energean Power gas-drilling platform in the Karish gas field, escorted by Israel Navy ships, triggered a burst of angry reactions from Lebanon. Beirut claims that the Karish gas reservoir partially overlaps its maritime waters, and that Israel took a unilateral step before an agreement on the maritime borders has been signed. (It is unclear when negotiations for this will resume.)

Lebanese President Michel Aoun and caretaker Prime Minister Najib Mikati demanded that the United States immediately return American envoy Amos Hochstein to renew the negotiations and warned that Lebanon will be forced to respond if Israel persists in its “provocative” actions. “The Israeli enemy’s… encroaching on Lebanon’s maritime wealth… is extremely dangerous and could create tensions the repercussions of which no one can foresee.”

Hezbollah leader Hassan Nasrallah was more explicit. “Lebanon will not permit Israel to produce gas from the field,” he declared, sternly warning the foreign companies that operate Karish not to drill at the site. Analysts in Lebanon are already wondering whether a new war between Israel and Lebanon could be in the offing should Hezbollah decide to launch a missile attack on the platform and the accompanying ships, or whether there is a diplomatic alternative that could dispel the tension and yield an agreement between the two countries.

Diplomatic minefield

The working assumption is that neither country wants to see this dispute devolve into a military confrontation. However, neither Israel nor the Lebanese government can be certain that Hezbollah won’t independently initiate a military move, particularly when Lebanon does not yet have a new government and it is unclear when it will, even though the election took place on May 15.

The gas issue is not merely a technical and commercial dispute between Israel and Lebanon over the size of each country’s maritime waters, from which the potential for gas production and profits will be derived. In Lebanon, it is also an intense political dispute between the president, who is accused of being willing to give in to Israel in exchange for other personal and economic benefits, and Hezbollah. The latter has not expressed opposition to the negotiations with Israel, but is maintaining an unyielding stance against any concession, and not only for patriotic reasons; mainly, it is a way to exert pressure and dictate the eventual composition of the new government.

The nub of the dispute in Lebanon has to do with Decree 6433 from 2011, which defines the boundaries of the Lebanese exclusive economic zone. According to the decree, the southern maritime border (Line 23) passes north of the current line (Line 29). Discussions between Israel and Lebanon on the basis of this line began in 2020, with American mediation, with the aim of reaching agreement on the maritime border between the two countries. Two years later, Lebanon changed its stance and announced that its maritime border begins at Point 29, and it began using this as its starting point for negotiations. This new borderline adds 1,430 maritime square kilometers to its southern border. The Lebanese government prepared new maps and formulated a new decree for President Aoun to sign. But the new decree has been sitting in the president’s desk drawer and he has declined to sign it thus far. Without his signature, it has no validity and the old borderline remains in force.

The delay in signing has prompted a theory that Aoun is presenting Line 29 as a starting point alone, in order to get to Line 23 in the negotiations, so he can portray it as a Lebanese concession to Israel. Another theory says Aoun will agree to Line 23 but that in return he wants the U.S. to lift the sanctions on his son-in-law Gebran Bassil, thus unblocking his path to becoming the next Lebanese president. Another theory says the U.S. is exerting pressure on Lebanon to agree to Line 23, and that in return it will give the final approval for obtaining gas from Egypt and electricity from Jordan, in accordance with the agreement that was signed a year ago. The supply of Egyptian gas and Jordanian electricity depends on transit through Syria, which is under a heavy American sanctions regime. The U.S. has told Egypt and Jordan that it is not opposed to the deal, and that it even supports it, but to date Washington has not given written approval to Egypt and Jordan that exempts them from the sanctions on Syria and stipulates they would not be penalized because of this deal.

Aoun is caught in a vise of internal pressures, with Hezbollah and its partners warning him that any concession on Line 29 would be a “great betrayal.” This dramatic pronouncement may merely be a pressure tactic, with Hezbollah seeking to use control of the gas faucet as a means to dictate the composition of the next government. On the other hand, Aoun and the Lebanese government, and Lebanese citizens, know that without an agreement on the maritime borders, no foreign company will invest in natural gas explorations. A delay in this doesn't only mean a loss of foreign currency income for gas; without an agreement, Lebanon will not be able to see or grant franchises to international companies, nor receive immediate payment or loans in return for the gas to be produced in its territory in the future.

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Washington is not displaying any urgency on this. As of Tuesday, it had not replied to Lebanon’s request to dispatch Hochstein to Beirut to resume the negotiations, and it also has not commented on the Israeli installation of the drilling platform in the Karish gas field. It may additionally feel that Lebanon will have no choice but to agree to Hochstein’s previous proposal in the form of a map with a twisting borderline that could, he believes, satisfy both sides. Or with this policy the Americans could literally be playing with fire.

Reaching into citizens’ pockets

At the same time, pressure on the Lebanese people is growing. Lebanese banks recently announced they would no longer accept checks for deposit from private money-changers and depositors, aside from those constituting salary payments and other circumstances that receive special approval. For example, citizens will not be able to pay by check for loans they received, for insurance or for transferring funds abroad. This order also applies to money-changers who often cash checks for a hefty, sometimes draconian, fee. The declared reason for this move was preventing the flight of capital or money laundering, but it’s hard to see how not honoring checks will prevent the flight of capital at a time when the banks are not transferring foreign currency abroad, except to authorized importers and exporters, and in keeping with a limited quota.

But it appears the real reason for it is that the banks want to do all the check-cashing themselves, in order to earn the profit on the difference between the sum on the check and the amount the depositor receives for this service. The difference can be so dramatic that someone who wants to cash a check for $1,000 may find himself with just $150 to $200 in cash, with the bank pocketing the rest. While it doesn’t appear to be a move that is liable to save the Lebanese economy, this could easily destroy the monthly budget of ordinary Lebanese workers who have no choice but to receive postdated checks as payment for their work and then to lose most of their income in the banking casino.