The announcement this week that many of the countries of the East Mediterranean, including Israel, agreed to set up a forum to create a regional gas market is a landmark development for Israel. It not only creates a framework for developing the region’s energy, but it marks the first time Israel has been admitted to a regional grouping that will give it official status in the Arab world.
The Eastern Mediterranean Gas Forum, announced on Monday after a meeting in Cairo, aims to “create a regional gas market that serves the interests of its members by ensuring supply and demand, optimizing resource development, rationalizing the cost of infrastructure, offering competitive prices and improving trade relations, among other goals,” Egypt’s Petroleum Ministry announced.
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Besides Israel, the group includes Egypt, Cyprus, Greece, Italy, Jordan and the Palestinian Authority. The statement said that other Eastern Mediterranean countries may join the forum later, a hint that Lebanon may become a member.
The forum is part of efforts to transform the region into a major energy hub. But from Israel’s point of view it also marks a major geopolitical win in its efforts to become an accepted member of the Middle East, where it has been all but isolated for the past 70 years.
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Yuval Steinitz, the first Israeli energy minister to visit Egypt since the 2011 uprising that ousted President Hosni Mubarak, said as much in an interview with Reuters on the meeting’s sidelines. “Israel exporting natural gas to the Arab world and also to Europe — this is something that sounded like a dream or a fantasy just 10 or 15 years ago,” he boasted.
In fact, Israel has already begun integrating itself into the regional gas market. In September, Israel and Egypt bought a 39 percent stake in the EMG pipeline, paving the way for a landmark $15 billion natural gas export deal to begin this year. It is also exporting gas to Jordan and to the PA.
As well, the forum’s terms will offer Israel some protection from unilateral moves by member states that hurt its energy interests, such as Egypt’s 2012 decision to end a contract to supply Israel with natural gas. That protection is important to Israel as its gas exports to Jordan and the PA are not politically popular in the Jordanian and Palestinian streets.
However, membership in the forum also entails a number of disadvantages for Israel.
For one, it could be used as a way of pressuring Israel politically, although it would be done indirectly and quietly since the forum’s mandate is limited to energy issues. In particular, the PA could exploit its membership in the organization to undermine Israel’s growing political and security cooperation with Egypt.
The forum and its members’ committee on ensuring supply could pressure Israel into allowing development of the Gaza Marine offshore gas field, which lies outside Hamas-ruled Gaza.
In a controversial move at the time, Ehud Barak, when he was Israeli prime minister, ceded rights to the gas. However, after British Gas discovered 30 billion cubic meters of reserves there in 2000, Israel blocked development out of concern that profits from the gas could flow to terrorist organizations.
Another problem is the forum’s potential to tie Israel’s hand vis-a-vis future gas development. Egypt is angling to be the hub of the emerging regional market, which would make it the most powerful member of the group.
But many people in the Israeli energy industry say Israel shouldn’t countenance that position and should ensure its independence by, among other things, developing its own capacity for exports. For instance, Israel could build terminals to liquefy natural gas rather than send the gas to Egyptian LNG plants.
The idea of an Israeli LNG facility hasn’t been the subject of serious discussion by Israel, but if it did it might well run up against Egyptian claims that such a facility violates the terms of the forum, leading to a call for Israel’s expulsion.
The forum could also give Cairo a say in the proposed 2,000-kilometer (1,243-mile) East Med pipeline, which will stretch from Israel and Cyprus into Greece and Italy to export Israeli and Cypriot gas to Europe. Steinitz told Reuters this week that he expected to sign a construction deal for the pipeline “in a few weeks’ time.”
The pipeline is not a sure thing due to the cost and engineering challenges it proposes, but Egypt may leverage the forum to demand that all Israeli gas bound for Europe go through its LNG plants rather than via the pipeline.
Egypt’s interest in the forum is clear – to ensure its status as the most influential player. But Israel must ensure that the geopolitical gains it is getting don’t cause it to ignore its economic interests.