Moses' Gift: Israel Could Use Gas to Its Advantage

by Peter Martino

Europe is to a large extent, dependent on Russian gas, supplied by Gazprom. A quarter of Europe's entire gas consumption is provided by Gazprom. As a new player in the market of gas exporters, Cyprus could reduce the European dependency on Russian gas.

Golda Meir once quipped that Moses could have done the Jewish people a better service. "He took us 40 years through the desert," she said, "to bring us to the one spot in the Middle East that has no oil."

Today, Golda Meir's quip has lost its punch. Last week, natural gas began flowing out of the Tamar gas field, discovered off the coast of Israel in January 2009. Tamar and Leviathan, its neighboring gas field, discovered in June 2010, are among the world's largest recent offshore natural gas discoveries. The Israeli companies controlling the fields are even considering exporting gas to neighboring countries.

Geologists assume that commercial oil reserves may lie beneath the gas find. Some analysts say that the Tamar and Leviathan fields might change Israel's position in the geopolitical and energy world. But not just Israel's.

The Israeli fields are adjacent to the Aphrodite gas field, discovered in December 2011, which lies in Cypriot territorial waters, less than 25 miles west of Leviathan. The government in Nicosia expects that the result of offshore drillings will confirm later this year that the island is sitting on vast amounts of natural gas worth billions of dollars. The recent banking crisis in Cyprus –the latest episode in the saga of the collapsing euro – came too early for the country to benefit from its future natural gas wealth. It is, however, indicative that Cyprus turned down the European Union's demands that the gas reserves be used as collateral for the loans which the EU has just extended to Cyprus.

Brussels had demanded that a fund be created in which it was given a direct say over the revenues from Cypriot gas reserves, but Nicosia refused to do so. The Cypriots feel betrayed by the EU. Hence, they are not inclined to let Europe share in the future wealth which they hope to derive from gas. Nicos Anastasiades, the president of Cyprus, said that Cyprus had no other choice than give in to the harsh demand of Brussels that it dismantle its banking sector. He, however, promised that savers who lost money in the Cypriotic banks would be compensated by being given shares in banks guaranteed by the future natural gas revenues.

Today, Cyprus is paying a very heavy price for its membership of the EU's common currency, the euro. When by 2019 the gas proceeds are expected to start flowing, the tables will be turned. Then Cyprus will be in a position to leave the euro without facing the prospect of national bankruptcy.

To begin extracting the gas from the Aphrodite field by 2019, however, the virtually bankrupt Cypriot government will in the coming years need to make enormous investments. The Russian state-owned gas company Gazprom, the largest extractor of natural gas in the world, seems keen to get involved. So far, however, the Cypriots have kept the Russians at bay.

Europe is already to a large extent dependent on Russian gas, supplied by Gazprom, a company controlled by the Russian oligarchy around President Putin. A quarter of Europe's of Europe's entire gas consumption comes from Gazprom. As a new player in the market of gas exporters, Cyprus could reduce the European dependency on Russian gas.

What applies to Cyprus, obviously, applies to Israel as well. It, too, could use its gas exports to a political end. Bat Ye'or has argued that the pro-Palestinian positions of the European governments since the 1970s were to a large extent the result of Europe's dependency on Arab oil. Israel has a unique chance of also using the Cypriot gas to its own geostrategic benefit. The Cypriot gas fields are located halfway between the Cypriot and Israeli coast. Israel, Cyprus and Greece are already collaborating in the EuroAsia Interconnector project, which is an undersea power cable linking Israel with Cyprus and Cyprus with Greece. A gas pipeline following the same route would balance the current pipeline on the Baltic seabed linking Russia with Germany.

Another opportunity for Israel might be the fact that some international gas companies are reluctant to get involved in the exploitation of Cypriot gas fields because they also operate in Turkey and do not want to upset the Turkish authorities who oppose the Cypriot gas extraction. Though the Aphrodite gas field lies in waters across Southern Cyprus, Turkey is demanding that all gas revenues be shared with Turkish occupied Northern Cyprus.

Last January, Turkey warned Israel that a potential gas pipeline between Israel and Turkey could be scuttled if Israel were to make a deal with Cyprus on natural gas. The recent rapprochement between Israel and Turkey, culminating in Israel apologizing to Turkey over the deaths of nine Turkish activists aboard a Turkish flotilla bound for Gaza in 2010, upset the Cypriots. Nicosia read it as an indication that Israel might prefer to work with Turkey rather than with Cyprus.

Last week, the Turks told Cyprus that its best chance to get its natural gas to the global market is to do so through Turkey. Ankara warned Cyprus that to exploit its natural gas riches without considering Turkish claims would be difficult. But Ioannis Kasoulides, the Cypriot Foreign Minister, adamantly challenged the suggestion that Cyprus should ferry its gas to Turkey for further distribution. Israel's apology over the flotilla incident, he said, "doesn't mean Israel is obliged to follow what Turkey is dictating in this region." He added that Cyprus would be able to exploit its resources, regardless of whether Israel decides to be its partner in the project.

Nevertheless, the Cypriots realize that without Israel they would face an almost impossible task. Minister Kasoulides is visiting Israel this week with the Cypriot Energy Minister to discuss the gas exploitation. Later this month, President Anastasiades, too, will travel to Israel. If Israel plays this right, it will be able to use its own as well as Cyprus's gas reserves to its geopolitical ends. Perhaps natural gas – and, who knows, the oil deposits beneath the gas finds of 2009-2011 -- might soon be of great use (not just financially) to the Jewish state -- thanks to Moses.


Peter Martino

Source: http://www.gatestoneinstitute.org/3660/israel-natural-gas

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