international analysis and commentary

Eastern Mediterranean energy deals: can they change the regional picture?


The new Mediterranean gas hub currently being planned by Israel, Cyprus and Greece is far from business as usual. The more this historic project advances, the more it risks becoming Israel’s trump card as it vies to protect its security interests in the Middle East while also seeking Europe’s approval.

Israel has planned to develop two main gas fields off Cyprus’ coasts called Leviathan and Aphrodite. Its investments on the shores of the half Greek and half Turkish island date back to 2011, and on site operations started in 2013, conducted by a joint venture between Texan Noble Energy and the Israeli Delek Drilling and Avner Oil.

Initially, Turkey was very unhappy to lose influence over the island and more importantly over a gas deal. Relations with Israel were then at their worst, due to the May 2010 Freedom Flotilla incident  off Gaza’s shore, in which eight Turkish citizens died. For its part, Israel was feeling increasingly isolated in the region precisely due to the loss of a strategic ally – and NATO member – such as Turkey. Come 2011, and Egypt, too – one of only two Arab countries with which Israel has ever signed a peace treaty, beside Jordan – had suddenly become a more difficult neighbour in the aftermath of the so called Arab spring: those revolts decapitated the old leadership – at least temporarily in the case of Egypt and to this day in the case of another relevant energy player such as Libya.

This unstable regional situation, and  the prospect of this lucrative gas deal in the Eastern Mediterranean, brought the newly re-elected Israeli prime minister Benjamin Netanyahu to make a private phone call on 22 march 2013 to Turkish prime minister Erdogan to finally apologize for the Freedom Flotilla incident. This détente made the project of a pipeline to bring Leviathan and Aphrodite gas in Europe via Turkey a realistic option. It also provided Israel with an alternative for its traditional energy dependence on Egypt.

But more recently Israel has argued that it is also possible, and more desirable, to bring liquefied gas to Europe via Greece. This option gained traction over the course of 2015 and produced the final announcement at the presence of Israeli Prime Minister Binjamin Netanyahu, Greek Prime Minister Alexis Tsipras, and Cypriot President Nicos Anastasiades on 28 January 2016.

Securing a Mediterranean hub for natural gas extraction with the potential of shipping the gas straight to the heart of Europe via Greece represents a key goal for Israel in its search to improve its overall security and possibly its role in the Middle East, with Europe’s stamp of approval.

The Eastern Mediterranean has always been a key place for business despite being known for political turmoil and instability. To many countries in the region, it remains a crucial trade route to the southern Mediterranean shore and its Arab neighbours, which still sit on most of the Earth natural oil and gas resources. But the last decade has shown once more that Western involvement in these countries needs to take into account a host of geopolitical factors and translates into delicate political choices.

The diplomatic situation is in flux. Egyptian president General Al-Sisi met with Greek prime Minister Alexis Tsipras in December 2015 to discuss the gas deal, but hasn’t released any official statement committing the government yet and is still actively pursuing his economic partnership with Italian company Eni in the recently discovered Zohr field.

Israeli investments have proven to be solid and from a more political point of view they may give Israel some leverage with Europe on issues on which Prime Minister Bibi Netanyahu has been disappointed by Brussels. If Europe has recently been using economic pressures to send signals to Israel, Jerusalem may have found the way to turn things around.

Israel certainly didn’t take kindly to the recognition of Palestine as an independent state by Sweden on 30 October 2014 and then to a string of votes across member-states and in the European Parliament along the same line. Cyprus itself had recognized Palestine, but long before it joined the EU. France has warned it is prepared to do so should its efforts to promote an international conference on the Israeli-Palestinian conflict fail. Greece has also been traditionally keen on the Palestine cause.

But there is more. According to the new “interpretative notice” issued in November, EU retailers must label goods produced in the West Bank settlements. This stirred a vehement reaction from Jerusalem, which suspended for months its dialogue with the EU on the peace process. Israel has been reluctant to accept its 1967 borders and freeze or dismantle any new settlement activity in the occupied territories. Both US secretary of State John Kerry and European partners have been vocal on that. All in all, Israel feels like it is hitting a wall with its traditional allies. Even the US is no longer as interested in the Middle East as it once was, less attracted to the region’s enormous energy resources. Under the Obama administration, the US has increased domestic oil and gas production thanks to the advent of fracking, has pivoted to Asia and opened its relationship to Iran.

As a way to recover from this impasse, Israel is therefore working on the creation of this Mediterranean gas hub to bring natural gas to Europe. What is clear to Israel is that its natural gas is more and more appealing to Europe as relations with Moscow remain frigid on everything from the Ukrainian crisis to the Syrian conflict. Additionally, this Mediterranean gas hub, shaped by Israel investments in Cyprus, seems to be shaping up more quickly than other alternative projects, like the one to develop new deposits discovered in Egypt. As they were only recently identified, they still require huge investment from oil company Eni, Egypt’s Italian partner in the venture, and more to the point they have not confirmed all their potential yet. 

Overall, the Israel-Cyprus-Greece gas deal potentially benefits all parties involved, while competing projects such as the Egyptian-Italian one lag behind. Both Cyprus and Greece are keen on seizing the opportunities presented by Israeli investments and technological know how, particularly as they feel the security pressure created by the Syrian conflict and the refugee crisis. This deal also offers the neo-liberal premier Netanyahu a very pragmatic way forward. It is a brand new area where he can push his own political agenda.

If over the past few months Netanyahu has felt that Europe was leaving him out in the cold, the new gas highway connecting Israel to Europe may now fuel Israeli ambitions to aggressively protect its security interests in the Middle East, acting with even less restraint than in the past but now possibly with Europe’s blessing – or at least with Brussels turning a blind eye.