Foreign Ministry: Iranian Threat a Key Reason to Clinch Israeli Gas Deal

Energy expert disagrees: National security a ‘misguided and misleading’ excuse for failure to solve antitrust problem.

Albatross

When the security cabinet met late last month over offshore gas policy, the Foreign Ministry presented a position paper providing reasons why the major gas fields off the Mediterranean coast should be deemed a strategic asset, which in turn would provide grounds for bypassing antitrust considerations. Economy Minister Arye Dery surprised his colleagues at the meeting by refusing to go along with the process, shifting the decision to the Knesset, but the Foreign Ministry’s paper sheds light on the ministry’s view of the importance of Israel’s gas reserves.

The Iranian nuclear threat, disappointment by members of the U.S. Congress over the problems that the regulatory uncertainty has caused an American company, and fulfillment of the vision of Israel as a regional natural gas powerhouse were cited by the Foreign Ministry as the main reasons to expedite a compromise with the two main companies controlling the offshore Tamar gas field, which is already producing gas, and the much larger Leviathan field, which is not yet online. A finding by the security cabinet that national security requires expedited resolution of antitrust concerns would provide the basis to bypass concerns voiced by outgoing Antitrust Commissioner David Gilo that the two major gas production stakeholders, Noble Energy of Houston, Texas and Israel’s Delek Group, have monopoly control of the gas fields in restraint of trade. The ministry was summoned to present its position because foreign policy or defense grounds were necessary for such a bypass.

“Misguided and misleading” was how energy policy expert Brenda Shaffer of the University of Haifa described the argument that a compromise proposal with Noble and the Delek Group should be sealed for geopolitical reasons. She added: “There was an antitrust problem here that they didn’t manage to solve, so they invented national security considerations to bypass it. They are excuses that are quietly getting through because the Israeli citizen is used to crediting the government on defense issues and the courts refrain from intervening in security matters.”

In its position paper, the Foreign Ministry, which, in the absence of a full-time foreign minister, is the direct responsibility of Prime Minister Benjamin Netanyahu, detailed the countries in the region that would be expected to import Israeli gas and “could be affected by the possibility of a failure to perform the transactions.” (See map on this page regarding at least tentative memorandums of understanding). Gas exports could “establish Israel as a central player in the global gas market,” while failure to export would “directly harm Israel’s foreign policy,” the ministry stated.

With regard to the regional presence of Iran as grounds for expedited approval of a compromise with the energy firms, one that would give them a measure of immunity from antitrust concerns for a period in return for concessions, the position paper noted that the Iranians seek to double their natural gas production as well as gas exports to Europe and Turkey by 2019. (That is on the assumption that Western sanctions against Iran over its nuclear program are lifted).

Referring to the collapse of Egypt’s capacity to export gas, the paper noted that Iran “has expressed a readiness to fill the energy void left by Egypt and to become a gas supplier to Jordan and even Egypt over the long term.” The claim comes despite the arguably slim prospects that Iran can actually export to the region, at least over the next decade, and forecasts that Egypt will again become a natural gas exporter over the next several years. On the other hand, the policy paper never mentioned the prospect of Egyptian gas coming online.

Instead, the document emphasized the situation in Jordan, which has suffered an energy shortage for years, one that has been exacerbated by a flood of refugees from Syria and Iraq. The memorandum of understanding that was signed between the firms involved in the Leviathan field and Jordan, at 3 billion cubic meters a year, is not particularly large.