31 May 2023

Rethinking Gas Diplomacy in the Eastern Mediterranean

Recent gas discoveries in the eastern Mediterranean have transformed the region’s energy market and economic relationships, raising hopes for geopolitical change as well. The U.S. pioneered what it called “gas diplomacy”, aspiring to use the region’s new energy wealth to bring its countries in conflict to the negotiating table. Israel and Egypt, the new finds’ main beneficiaries, co-founded a regional gas forum. The European Union (EU) launched a study for a pipeline that would carry Israeli and possibly Cypriot gas to Europe – a project that appeared timely indeed after Moscow’s all-out invasion of Ukraine in February 2022 choked off access to Russian gas. But the pipeline project now seems to be dead, due to commercial and environmental concerns. In this and other respects, the great expectations for gas discoveries in the eastern Mediterranean have proven outsized. All actors should now focus on a more modest objective – cultivating an inclusive approach to exploitation to promote regional integration and stability – and continue the move toward renewable energy sources.

Following major finds just over a decade ago – the Tamar and Leviathan fields near Israel, the Aphrodite field off Cyprus and Zohr close to Egypt – U.S. and European diplomats were optimistic that the new gas reserves would catalyse greater regional economic cooperation and stability by altering political realities in a strategic part of the world. The U.S. spearheaded “gas diplomacy” to advance separate gas deals between Israel and Jordan, Israel and Egypt, and Israel and Lebanon. It also hoped that economically driven actions on gas exports could motivate regional players to make breakthroughs toward conflict resolution in non-energy-related matters.

Challenges of Gas Diplomacy and Regional Cooperation

But even the gas deals that marked the high ebb of gas diplomacy tend to be less meaningful on inspection than they might appear at first glance. Deals between Israel, on one hand, and Egypt and Jordan, on the other, added a positive dimension to bilateral cooperation, but Israel had signed peace treaties with these two countries long since. Israel’s deal with Lebanon – with which it remains formally at war – was arguably more significant, leading as it did to a boundary delimitation agreement between the two countries. Yet Israel’s gas deals with Egypt and Jordan did little to warm what is best characterised as a “cold peace”, and the boundary accord between Israel and Lebanon shows no real sign of overcoming decades of enmity between the two.

Elsewhere in the eastern Mediterranean basin, the advent of gas diplomacy has delivered even less promising results, and indeed energy discoveries have done more to exacerbate than mitigate tensions. Against the backdrop of failing diplomatic efforts, discoveries off the coast of Cyprus have done nothing to bring Greek and Turkish Cypriots together. If anything, they are a source of added friction on the divided island. Meanwhile, the Gaza Marine gas field, which British Gas discovered off the coast of Gaza in 1999-2000, a full decade before Israel hit the gas jackpot with Tamar and Leviathan, remains inaccessible due to Israeli restrictions, and thus offers no relief to the people in Gaza suffering under a stifling Israeli siege.

The Eastern Mediterranean Gas Forum

The assumption that greater cooperation on gas exploitation and exports can pave the way to closer ties between states, and subsequently greater regional stability, helped create some excitement around the establishment, in January 2020, of the East Mediterranean Gas Forum. Co-founded by Egypt and Israel with EU and U.S. backing, the forum has over time also brought together the Republic of Cyprus, Jordan, the Palestinian Authority, Greece, Italy and France. Forum members envision that it will be a platform for economic cooperation and greater regional integration. Yet, even with the Forum up and running, prospects that it will serve as a mechanism for expanding regional cooperation on energy matters remain low. A key obstacle is the absence from the forum (for a range of reasons) of major regional actors on gasrelated issues – including Türkiye, Lebanon, the de facto Turkish Cypriot authorities controlling territory in northern Cyprus and Hamas, the Palestinian faction that rules the Gaza Strip but, under Israeli occupation, has no control over its offshore gas field.

The exclusion of Türkiye in particular has in some cases aggravated tensions between the forum’s members and those who make opposing claims on the Mediterranean’s gas reserves. Rather than a neutral entity that manages a regional resource in a manner that could help states overcome their political differences, the forum is more a strategic partnership for states with shared energy interests.

Hopes that the gas discoveries might help forge deeper bonds between the region and European governments eager to diversify their energy supply – especially as relations with Russia have been strained to the breaking point by the war in Ukraine – have also been disappointed. The problem is one of both supply and demand. On the supply side, the eastern Mediterranean has only limited export potential: existing gas reserves are barely sufficient to cover domestic needs in regional countries, while existing infrastructure is inadequate to export what little is left over. Higher gas prices might make a pipeline from Israel and Cyprus to Greece, or a much shorter Israeli pipeline to Türkiye, commercially viable, but it would take years to complete such projects, a disincentive for would-be investors. On the demand side, the growing consensus around the need to cut emissions by eliminating the use of fossil fuel altogether is dampening Europe’s long-term appetite for gas, militating against over-the-horizon investments in gas infrastructure, especially pipelines. The EU’s proposal for a pipeline from Israel and Cyprus to Greece and the rest of Europe faltered primarily for this reason.

Rethinking Gas Diplomacy

It is time for a rethink of gas diplomacy, to reflect three key elements. First, commercial realities dictate that EU states will look elsewhere to meet the bulk of their near-term energy needs. Conversely, from their side, gas-rich countries in the eastern Mediterranean, rather than seeking to export to Europe or Asia, would do better to turn toward easily accessible markets in the region itself. A concerted effort to meet the region’s own energy needs with the eastern Mediterranean’s undersea bounty could be good for local economies and provide benefits in terms of broader economic integration, provided that it is pursued in an inclusive manner.

Secondly, pivoting to this goal will require certain key states that either sit or are active in the region to work more closely with states that they have tried to keep at arm’s length in energy dealings. Perhaps most prominently, the East Mediterranean Gas Forum should aim to broaden its membership – working, incrementally if need be, toward the inclusion of Türkiye. Only in this way can the Forum truly become a force for integration and stability, rather than recreating and exacerbating the fault lines that are already too prevalent in the region.

Finally, even if there is substantial progress toward regional economic integration, outside actors with an interest in the region’s stability should not assume that resource wealth can be the engine of efforts to end political and territorial disputes. Those will continue to require focusing on political dynamics. In short, part of any successful gas diplomacy strategy will be to understand its limits, and to ensure that it is paired with a political agenda for resolving the region’s conflicts.

 

This is an executive summary of the report by International Crisis Group. The full report can be found here.

International Crisis Group will also host an online event: Eastern Mediterranean Gas: Accelerating Peace?, which takes place on 5 June, 15:00 CEST. Click here to register on Zoom. 

PSI has previously published a policy brief on Natural Gas: the New 'Green' Resource Curse?, where implications of natural gas extraction in Mozambique and Cyprus are analysed and compared. 

Photo credit: Flickr/Steven Straiton