August 23, 2013, Friday

Is Israel-Turkey gas pipeline dead?

Is Israel-Turkey gas pipeline dead?
Recep Tayyip Erdoğan, Prime Minister of Turkey, left, talks to Shimon Peres, President of Israel, right, during a plenary session during the Annual Meeting of the World Economic Forum, WEF, in Davos, Switzerland, in this Jan. 29, 2009. (Photo: AP, Alessandro Della Bella)

2013 is an interesting year in many aspects. We are going through interesting times on energy ties regarding Turkey and the surrounding region as well.

Take the natural gas issue in particular; this year will either be remembered as the time of long-discussed dreams of an Israeli gas pipeline to Europe via Turkey starting to materialize. Or it can be the year of this ambitious program being shelved indefinitely.

The former was a relatively more likely option only until Turkish Prime Minister Recep Tayyip Erdoğan’s latest harsh criticism against Tel Aviv over the Egyptian coup. Some suggest this will affect pipeline talks negatively. This is a hastily made presumption; I would say just wait for the fog in the air to clear.

Some would expect the harsh diplomatic rhetoric between Turkey and Israel to delay or even cancel the pipeline talks. A second option is that economic interests simply just trump politics. I will go with the second option.

Many analysts expect an anticipated pipeline to change the geopolitical and geostrategic map of the east Mediterranean. And we can say this is possible despite the current icy political relations between Turkey and Israel.

Before going into details, let us remember what happened so far this year.

We had actually been receiving the early signals that a possible pipeline deals could be struck in the process leading up to Israel’s March apology for the Mavi Marmara. This was, of course, something led by the private sector. Then, following the easing of tension in March, details of backroom talks surfaced, with Turkish and Israeli investors openly discussing a deal in the media. However, talks were not enough since everyone knew that the strategically critical pipeline -- with an estimated $2 billion investment value -- would need government protection. In May, top Turkish politicians, including President Abdullah Gül, shared with the media that Ankara was warming to a pipeline deal, something that stirred excitement in Tel Aviv’s bureaucratic circles. The problem was that politicians on both sides remained highly skeptical over the other’s reliability in the event of a go-ahead with any pipeline project.

An Israeli cabinet approval in June giving the green light for gas exports to about 40 percent of reserves was a turning point for the future of the pipeline. Talks between private firms then accelerated. Israel already has a pipeline to Egypt, but it would need to build pipelines to Jordan, Turkey and the Palestinian territories.

Reports in February that Turkish industry group Zorlu was lobbying Israeli authorities to approve a possible gas sale to Turkey was supported by further news this month. At the beginning of August, Israel’s Delek Group, led by US Noble Energy, noted that a group of energy companies which had discovered large amounts of natural gas off Israel's Mediterranean coast had said they were in talks to export the gas to Europe via a pipeline to Turkey.

This month, Israel silently inked a deal with Greece and Greek Cyprus, all three pledging to “cooperate to protect regionally important infrastructures in the Mediterranean.” This meant, against all odds, that Israel embraces the “risks” of expanding its gas supply route to Turkey. Recoverable gas in the Levant Basin, which lies largely in Israeli and Cypriot waters in the east Mediterranean and holds some 3.5 trillion cubic meters of gas, enough to meet all of Europe's gas demand for seven years. An LNG station on Cyprus will not be enough to make use of this potential. Furthermore, Turkey’s natural gas imports will increase by 20 percent through 2023 from 2012’s 43 billion cubic meters, an attractive potential for Israel. Turkey will jump at any opportunity to diversify away from its eastern provider, Iran, with whom its political ties have become strained over Syria. An export route to Turkey and into Europe could also cut into Russian sales of gas in the region, something Turkey and Europe won’t have a problem with.

In theory, the planned project does actually seem the most favorable one for both sides. An undersea pipeline from Israel’s offshore gas rigs to the south coast of Turkey will be the shortest and cheapest gas pipeline project Turkey has ever been a part of. It will be the fastest line for Israel to capitalize on the demand from an energy-hungry Europe.

Although not at the top of the Israeli media's agenda at the moment, the professional community is under the impression that there is high probability for such a deal to materialize, a journalist friend of mine in Tel Aviv says. “They actually look at the anticipated reactions from the Turkish side. … It would therefore be great to hear more from the Turkish side,” says Amiram Barkat of Globes.

My answer to this will be: I do not think there is a big shift of axis in Turkish policy regarding the pipeline issue. It is just that the Turkish politicians like to keep a low profile on this sensitive issue at a time of turmoil in Egypt and elsewhere in the region.

Mutual mistrust again remains the biggest obstacle. Then geopolitical issues enter the game. The story doesn’t end with Ankara and Tel Aviv agreeing. Unresolved territorial disputes in the east Mediterranean region, including Cyprus and Turkey as well as Israel and Lebanon, stand in the way, making a pipeline to Turkey difficult.

These are issues that have to be taken care of in macro planning. But will Erdoğan’s stance have long-term repercussions for the pipeline? I don’t think so. That’s why the deal is not stillborn; it is just waiting for the right time to emerge.