The Deterioration in the Israeli-Egyptian Relations

As you can read at the following Bloomberg article, Egypt has frozen negotiations with Israel for the import of Israeli natural gas. The reason was the verdict of the international court which ruled that Egypt has pay Israel a few billion dollars for failing, in previous years, to export to Israel the agreed amounts of Egyptian natural gas.

Egypt was a natural gas exporter but gradually became a natural gas importer. The main reason being her growing domestic demand. But the supplies to Israel were also disturbed by sabotage of the Egyptian networks, like the Arish-Ashkelon pipeline, which connects Egypt and Israel. I guess these networks were sabotaged by Islamist militants supported by Turkey, Qatar and Iran.

Map 1 Arish-Ashkelon Pipeline

 http://interfaxenergy.com/gasdaily/uploads/articles/1411135463.jpg

After the court decision Egypt has to pay quite a few billions to Israel, and Israel says it plans to take these money from Egypt, which infuriates the Egyptians. I guess the Egyptians believe that since the sabotages were carried out by common enemies, the Israelis should not insist on the compensations. However I have to say that some of the compensations refer to the period 2012-2013, when Mohamed Morsi of the Muslim Brotherhood was in power in Egypt. Mohamed Morsi was a protege of Turkey and Qatar, and wanted to terminate all diplomatic and economic relations with Israel. I mean that some of the problems did not arise from Islamist fighters supported by foreign countries, but by the official Egyptian government of the time.

What is very interesting in the Egyptian-Israeli relations is to see how they will be affected by the discovery by ENI of the Zohr natural gas field in 2015. Zohr is the largest natural gas field of the Eastern Mediterranean Sea and was discovered by ENI in Egyptian waters last August. At the following map from the Foreign Affairs you can see the natural gas of Eastern Mediterranean Sea. Zohr is the largest field of Egypt, Aprodite Cyprus’s largest one, and Leviathan and Tamar Israel’s largest and second largest ones. This is a 2014 map and I had to add Zohr myself.

Map Natural Gas of the East Mediterranean Sea

https://www.foreignaffairs.com/articles/cyprus/2013-03-20/trouble-eastern-mediterranean-sea

Until August 2015, when Zohr was discovered, the plan was that Israel and Cyprus would export their natural gas to Egypt, because Egypt cannot meet her export contracts and her domestic demand, and she needed a source of cheap natural gas. Exporting natural gas to Egypt would not disturb the Russians, who export to Europe, and it would not disturb Turkey too much either, since Turkey wants to send natural gas to Europe and not Africa i.e. from the Middle East and Caspian Sea. However after Zohr was discovered the Israelis and the Cypriots cannot count on Egypt to export their gas, at least not in the long run.

The only other player who can absorb large quantities of natural gas in the region is Turkey i.e.  through Israel-Cyprus-Turkey Pipeline. The third solution would be to send this gas to Europe, through the East Med Pipeline (Israel-Cyprus-Greece). However the East Med Pipeline does not seem to be a viable project because it hurts both Turkey and Russia. The Americans, who would see favorably this pipeline, could not go against Turkey, because Turkey is promoting the Southern Energy Corridor, which is a more ambitious project than the East Med. Moreover Turkey is an American ally, and the US greatly needs Turkey. Therefore it is not very easy for the Americans to go against Turkey for a project like the East Med, which would send to Europe approximately 20 billion cubic meters of natural gas per year.

If the American-Turkish relations collapse at some point, and if they Saudis and the Qataris are willing to supply the East Med, the Americans might be willing to provide military support. But until then this project will only be economically and diplomatically supported by the European Union. The problem is that the European Union does not have an army to protect this project from Turkey and Russia.

Map 3

 The Israelis of course had given a share of Tamar to Gazprom, and they are discussing the possibility of giving a share of Leviathan too to Gazprom, in order to “cure” this problem. However I do not think that this would make the Russians very happy with the East Med. This plan would make the Russians happy as long as the Israeli gas was headed towards Egypt, but not towards Europe or Turkey.

If the East Med pipeline is taken out of the equation, the only solution seems to be Turkey. An Israel-Cyprus-Turkey pipeline would keep the Turks happy, and the Russians unhappy of course, but the Americans could provide some military support because they would not have to go against their ally Turkey. If the Israel-Cyprus-Turkey pipeline was to go through, the Israelis could ask from the Turks to stop attacking them from Gaza in return, and the Cypriots could ask the Turks to give them concessions on the long Greek-Turkish dispute over Cyprus. Note that Turkey invaded Cyprus in 1974, and the Turkish army is controlling the northern part of the island till this very day. Also note that Egypt and Turkey are almost at war.

Therefore, with the discovery of the Zohr, the Egyptian-Israeli honeymoon might end, because Egypt will not see Israel as the solution to her energy problem, but might see Israel as a potential competitor. Even though there is still the possibility for Israel and Cyprus to use the LNG facilities of Egypt in Damietta and Idku to liquefy their gas and ship it to Europe. In addition, it will take ENI a few years to start production from the Zohr, and the Israelis and the Cypriots could export to Egypt until then.

Map 4 Egyptian LNG Facilities

http://www.naturalgaseurope.com/egypt-catalyst-for-east-mediterranean-gas-hub-26842?utm_source=Natural+Gas+Europe+Newsletter&utm_campaign=afa169c0b0-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_c95c702d4c-afa169c0b0-307785513

But even if the Israelis and the Turks work things out, the Israelis and the Egyptians will still face the Islamists of Gaza as a common enemy, because the Islamists of Gaza are not only supported by Turkey, but also from Iran and Qatar. Therefore the Israelis and the Egyptians are natural allies when it comes to Gaza, because Gaza is the center of the attacks to the Israeli South, and to the Sinai Peninsula in Egypt.

Map 5 Gaza

Turkey, in order to import Israeli gas and normalize the Turkish-Israeli relations, requires that Israel lifts the naval blockade of Gaza, so that it will not seem that Turkey “sells” Qatar, one of her main allies, but also Iran, whose natural gas Turkey plans to send to Europe through Turkey. But I do not think that Israel could lift the naval blockade of Gaza, because the Qataris and the Iranians could send Hamas as many rockets as they pleased by the sea, instead of using the tunnels which connect the Sinai Peninsula to Gaza. If the naval blockade of Gaza was lifted by the Israelis, the fire power of Hamas would soon reach the levels of the fire power of Hezbollah in Southern Lebanon.

That means that it is not very easy for the Israeli gas to travel to Turkey if Turkey insists that the Israelis lift the naval blockade of Gaza. It is not easy for Turkey to accept the Israeli gas even though she dies for it, because Turkey needs an alternative to the cheap Russian gas, especially now that the Russo-Turkish relations have further deteriorated. Turkey imports from Russia 30 out of the 50 billion cubic meters of gas that she consumes annually, and another 10 from Iran. And Turkey is also at war with Iran in Syria and Iraq. Therefore the Israeli gas would be for Turkey a gift from heaven. But becoming friends with Israel would cost a great deal to Turkey, because Erdogan wants Turkey to become the leader of the Muslim Islamic world, and fighting Israel is greatly helping this cause.

Of course if Turkey was to work things out with Egypt, and if Turkey could satisfy Cyprus in the Cyprus dispute, Turkey could receive the Egyptian gas through Cyprus. But the Turkish-Egyptian relations are probably worse than the Turkish-Israeli ones. Things can change of course but that’s how things are today.

Therefore we have to keep an eye on the Israeli-Egyptian relations, and see how they are affected by the compensations the Egyptians have to pay to the Israelis, but also from the discovery of the biggest gas field of the East Mediterranean Sea i.e. the Zohr. I guess it will not be always easy to separate what is due to the former and what to the latter, because the language of diplomacy is not very easy to interpret and very honest either.

For the article see:

“Egypt to Freeze Israeli Gas Import Talks After Court Ruling”, December 2015

http://www.bloomberg.com/news/articles/2015-12-06/egypt-to-freeze-israeli-gas-import-talks-after-court-ruling