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Israel may see Turkish rapprochement logic

A break with its erstwhile East Med allies is unlikely, but a Turkish solution to Israel’s gas export conundrum could appeal

Israel has faced a problem ever since it hit as much as 28tn ft³ of gas in the Leviathan and Tamar discoveries in the Levantine basin. The finds are too much for its domestic market, and every other export option has challenges based on some combination of cost, environmental or geopolitical hurdles.

How, therefore, does it get the gas to a deep enough market that will pay a sufficiently attractive price? It has tentatively moved to export some volumes to Egypt via an existing pipeline. But the quantities involved are far from the potential flows of such large reserves.

Even before Covid-19, estimates of Egyptian domestic demand growth and the payability of its customer base varied widely—as did expectations of Egyptian willingness to allow imports to access its two LNG liquefaction plants at the expense of burgeoning domestic production. And the pandemic has almost certainly dented Egypt’s attractiveness for Israeli exports.

28tn ft3 – Leviathan and Tamar reserves

Weakness in global and, in particular, European gas prices will undermine other options, such as additional brownfield liquefaction trains in Egypt or greenfield floating or onshore Cypriot LNG. A deal for the construction of the $6.6bn East Med gas pipeline—planned to deliver 10bn m³/yr of Israeli gas to Cyprus and Greece, and then link with other projects to access Italy and the main European market—may have been struck as recently as January, but it is likely dead for now.

Turkish overtures     

Could Israel’s diminishing options encourage it to strike a deal with Turkey? Speculation that the countries are plotting to delineate their maritime borders is explosive given the escalating maritime standoff between Turkey, the internationally recognised government of war-torn Libya and the unrecognised (except by Turkey) government of Northern Cyprus on the one side and just about everyone else in the Eastern Mediterranean—as well as actors outside the region, such as the UAE and France—on the other side.

Any rapprochement is hugely unlikely to go that far, says Sujata Ashwarya, author of the 2019 book Israel's Mediterranean Gas: Domestic Governance, Economic Impact, and Strategic Implications, because this would abrogate Israel’s existing agreements with Cyprus. But material progress such as a restoration of full diplomatic relations, which broke down yet again two years ago after the US recognised Jerusalem as Israel’s capital, may well be on the table. 

The attraction is in the logic of a pipeline from Israel’s offshore fields to Turkey which could then plug into existing Turkish projects to deliver gas into Europe. “Commercially, technically and geographically, a pipeline that will run gas from Israeli fields to [the port city of Mersin in] Turkey is the most cost-effective option,” says Raphael Cohen-Almagor, a Middle East politics expert at the UK’s University of Hull. “Turkey's huge domestic market and options for further transit trade can be mutually beneficial for both countries.”

And the solution might at present have a powerful additional advantage: Turkey may have the enthusiasm to contribute financing to a capital-intensive project that might be in relatively short supply elsewhere. Ankara remains keen to continue offshore drilling and has not signalled any throttling back of its ambitions to become a major gas hub.

“Commercially, technically and geographically, a pipeline that will run gas from Israeli fields to [the port city of Mersin in] Turkey is the most cost-effective option” Cohen-Almagor, University of Hull

While its gas hub dream is, in part, a foreign policy tool and includes a nod to a nationalist domestic audience, Turkey’s large existing and potential demand, its geographical position and the volume of new pipeline capacity connecting varying supply sources and the European market also give it a commercial logic.

In the past year, Ankara has inaugurated almost 50bn m³/yr of new import capacity—over 20bn m³/yr for its domestic market and more than 25bn m³/yr for European transit—from Russia and Azerbaijan, with 15bn m³/yr of expansion potential for the latter. Turkey also boasts onward pipeline connections with both Greece and Bulgaria.

Deal or no deal

If political differences between Israel and Turkey could be resolved—a considerable if, notwithstanding the growing optimism—Turkey could be both a destination and gateway for Israeli gas. There are obvious hurdles: relations between Israel and the Palestinians have been in a diplomatic freefall in recent months and weeks, and Israel-Palestine relations have been a previous point of conflict with Ankara.

Few Israelis trust Turkey’s authoritarian president Recep Tayyip Erdogan as an honest broker. And there are suspicions that Turkey’s overtures could be purely for show to attempt to look less isolated in the East Med region.

Yet signs of a thaw, while tentative, have piled up in a way reminiscent of confidence-building gestures in an active diplomatic process. They include an amicable tweet by the Israeli foreign ministry on 7 May; Israel’s absence from a list of countries condemning Turkish offshore drilling on 11 May; and Israel’s national carrier El Al being allowed to conduct cargo flights to Istanbul, the first such flight in a decade touching down last Sunday.

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