Natural-Gas Find Could Fuel Prosperity and New Conflict

Natural-gas reserves recently discovered in the eastern Mediterranean are attracting big international energy companies and changing the region's geopolitics, writes Paul Salem. But whether they will help sow stability and prosperity or regional and international conflict remains to be seen.

al-monitor A natural gas extraction rig. Photo by REUTERS/Kyodo.

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turkish pipeline, turkish foreign policy, turkish economic policy, turkey, russian foreign policy, regional politics, oil & gas, oil, maritime border delineation, lebanon, lebanese gas, lebanese-israeli relations, israeli gas, israeli-cypriot agreement, israel, hezbollah, geopolitics, economic, eastern mediterranean hydrocarbons, cyprus, conflict & security

Mar 23, 2012

The eastern Mediterranean natural-gas fields have started to affect Middle Eastern geopolitics. The huge gas discoveries in Israel, and also perhaps the expected important discoveries off the coasts of Cyprus and Lebanon, have attracted the attention of influential regional states and major world powers.

And so, the Middle East, which is already busy with land and border disputes, is turning its eyes toward the sea. In addition, countries that have no prior experience of the benefits of coordination and cooperation must now pay the costs of the new conflicts.

Israel was the first country to extract gas, from its Tamar and Leviathan fields. These discoveries came at an important time for Israel because the Egyptian gas supplies had come under threat. The discoveries promise to make Israel not only self-sufficient in terms of gas, but also an exporter of it. However, the challenges to exporting Israeli gas seem insurmountable: If Tel Aviv was at peace with its neighbors, then the most cost-effective export route would be on land running from Israel's northern border to Europe. But that route is closed to Israel. So, Tel Aviv is planning to ship its exports through Cyprus. However, there are a lot of challenges there, too: The easiest route from there may be through Turkey, but poor Israeli-Turkish relations render this option impossible for now. Moreover, shipping the exports through Greece means a longer route, and Turkey stands in the way. So the deterioration in Israeli-Turkish relations has come at a very bad time for Israeli ambitions regarding energy exports.

The other option for Israel is to build a natural-gas liquefaction plant off the Israeli coast or in Cyprus and ship the gas to world markets. But this option is expensive and subject to threats and regional tensions.

In the meantime, Cyprus has suddenly become a strategic player that oversees the region’s energy export routes. This is why Israeli Prime Minister Benjamin Netanyahu is courting Cyprus. This is also why the island has become the focus of attention by regional and international officials who are scrambling to visit. But this also made Cyprus subject to violent Turkish pressure. The internal Cypriot disputes negatively affect the country’s role. Turkish Cypriot leaders objected to Nicosia’s unilateral signing of energy sea-drilling contracts. Their objection was supported by the Turkish navy, which threatened to block energy exploration efforts.

With regard to Lebanon, the country has been slow to start taking advantage of its potential wealth. The government and parliament have only recently enacted the necessary legislation opening the Lebanese seas to international energy companies. A broad range of oil and gas companies from the United States, Europe, Russia, China, Japan and Brazil are rapidly becoming interested in the potential Lebanese energy stock. Other players such as Iran, Qatar, and Turkey have also begun looking for ways to participate in that sector.

If we take into account the nature of the Lebanese government coalition and the Lebanese balances and alliances, we conclude that the contracts will go to several companies. Hezbollah and its allies are expected to push in favor of Russian companies to reward Moscow for its support, especially toward Syria, and to encourage Russian support for the Iran-Iraq-Syria-Hezbollah axis. And it is likely that the prime minister will balance that by encouraging contracts with Western companies, specifically French and American. Some Lebanese leaders feel that having both the East and the West involved in the Lebanese energy sector would encourage the major powers to provide security to that sector and contribute to its success in the long term.

If the energy revenues are well managed, the whole of Lebanon will benefit greatly, particularly through the reduction of the country’s public debt and electricity costs. However, the opportunity brought by easy financial returns through energy may be wasted by greatly increasing corruption and exacerbating the Lebanese political system’s failings. The mismanagement of this resource could cause imbalances in the economy and hinder growth in other sectors.

It is interesting that Parliamentary Speaker Nabih Berri has taken a pivotal role in pushing forward the energy issue in Parliament, while Hezbollah is playing an unconventional role in the diplomacy of the issue. Hezbollah has added "protecting Lebanon's maritime energy wealth" to its normal role as a "national resistance." This “Shiite” role is interesting because if the country’s increasing prosperity and that of the Shiite sect become dependent on the safety of the energy facilities off the coast and the international companies operating there, this could affect calculations concerning war and peace. The gas proceeds could become an alternative source of income for Hezbollah over the long term, should its relationship with Iran stall.

At the international level, US energy companies are starting to invest in Israel and some are trying to invest in Lebanon. However, the US government’s focus is on preventing an Israel-Lebanon conflict over the disputed 800-square-kilometer maritime triangle between the two countries. The US has sent envoys to the region in order to mediate the dispute. A settlement may be announced in the coming weeks. Europe seems eager to diversify its gas sources, but is distressed by the differences between Turkey on the one hand and Cyprus and Israel on the other, because these differences are hindering progress in this area.

Russia’s interest in Syria and its smaller neighbor Lebanon is due in part to Russia's desire to consolidate its presence in the emerging energy market in the area. On the other hand, Turkey's plans to build what is known as “the Arab gas pipeline,” which would transport gas from Egypt, Lebanon, and Syria to the West via Turkey, have stalled because of the conflict in Syria and the renewal of Syrian-Turkish animosity.

There is no doubt that the discovery of gas in the eastern Mediterranean is an opportunity for all the region’s economies to prosper. But in the prevailing atmosphere of discord and mistrust, the energy stores may end up being the cause of even greater tension.

It is clear that energy will be a major factor in the geopolitical future of the region. But whether it will be a factor of stability and prosperity or of regional and international conflict remains to be seen over the months and years ahead.

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More from  Paul Salem is the director of the Carnegie Middle East Center in Beirut, Lebanon.