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The MOU for Gas Sales from Israel to Europe: Meanings and Implications

The tripartite agreement signed (16.6) in Cairo between Israel, Egypt, and the European Union for the sale of gas from Israel to Europe, is another step, emphasizing the importance and relevance of which the European Union attributes to gas from the Eastern Mediterranean. Its importance, as always, is economic-energetic and political-strategic. The EU, and the West in general, is thus illustrating its intentions to diversify its energy sources, in a way that will reduce, albeit gradually and over the years, the dependence on energy from Russia.

Most interpretations have rightly emphasized the relatively small amount that the Eastern Mediterranean in general, and Israel in particular, can now export to Europe. The quantities are indeed small. It is sufficient to mention that the total annual Israeli gas exports now directed to Egypt (and from it) and Jordan, ranging around 10-11BCM. Theoretically, if all of it is directed entirely to Europe, it will cover less than ten percent of the annual amount Europe purchases from Russia. Still, it’s a sufficient volume to diversify the needs of Europe. However, the economic (and political) implications are much broader, looking onto the coming years.

What are the Economic Implications of the Signed Trilateral MOU?

  • In terms of energy, the EU seeks to ensure its share of gas exported from Israel. It is to be expected that soon the parties will hold concrete negotiations regarding the quantities that Europe will request and be able to receive.
  • The increase in the volume of exports depends on the increase in supply, both from existing (Israeli) sources and from other sources that must be discovered. The agreement will seek to encourage acceleration and investment in alternative routes (even before the agreement, an increase in the amount exported to Egypt through the expansion of the existing pipeline/ construction of another pipeline was agreed). More importantly, it encourages additional investment (by European companies) to participate in the new round of licensing for gas exploration in the Eastern Mediterranean. About two weeks ago, the Minister of Energy announced a fourth round of gas exploration in Israel's economic waters.

What About the Political-Strategic Level?

  • The importance of the political message inherent within it, Europe's intention to disengage from Russian Energy, should not be underestimated, even if its implementation and impact are for the longer term.
  • The EU expresses its clear interest in gas from the East Mediterranean, an area that in the last decade has gained increasing political-strategic importance, including diverse frameworks of regional cooperation (and the Regional Gas Forum, under its umbrella the Memorandum of Understanding was signed, illustrates this fascinatingly).
  • For Israel, it will enrich the already extensive and complex relationship with the European Union. The European Commission President's visit to Israel, and the messages she conveyed during the visit, illustrate Europe's interest in the diversity of its relations, although they do not obscure the well-known disagreements in the Palestinian context (the issue of product labeling from the settlements illustrates this from time to time).

The Tripartite MOU Contains Several Interesting Developments and Opportunities:

  • Options for gas export: Further discoveries of gas in the Eastern Mediterranean, or the expansion of export volumes now, raise questions regarding the export routs. Will the Egyptian rout be able to provide a sufficient solution, even if the capacity of the LNG facilities in Egypt can be upgraded? If not, or maybe in parallel, will it bring back the debate over the gas pipeline through Cyprus and Greece to Europe (the East Med) to the forefront?
  • Israel and Turkey: What will be the implications of the agreement for the two countries' attempt to improve relations between them, and for Turkey's clear interest in cooperation in the field of energy. In principle, the above agreement does not preclude, or contradict possible future Israeli-Turkish cooperation, given the restoration of trust and common interests between them will be achieved, and given the discovery of additional gas quantities.
  • Aphrodite-Yishai gas field: The joint Israeli-Cypriot field (most of it is on the Cypriot side of the maritime border), of which the two countries have not yet been able to settle the dispute and adopt unitization arrangement,contain commercial quantities of gas, which are awaiting immediate development, along with Israeli gas already flowing from Israel. The current circumstances, especially in light of this MOU, emphasize the necessity for an immediate solution, which will add additional quantities of gas to Europe.
  • The Israeli Lebanese negotiations over the demarcation of the maritime border: Europe's clear interest in gas from the eastern Mediterranean should accelerate efforts on both sides, and especially on the Lebanese side, to reach an agreement. Lebanon can and should be integrated into the "Western Race" to reduce its energetic dependence on Russia. Will it take advantage of the opportunity? Previous experience suggests that the answer is usually negative, but is it realistic to expect that the USA, European countries and perhaps some of the Gulf states will succeed this time around in encouraging a compromise? A possible direction will probably become clear in the coming weeks.
  • Palestinian Gas: The interest in gas from the area is turning a spotlight on the gas field in front of the Gaza Strip, Gaza Marin. In the past, several attempts have been made to advance the development of the field, which can greatly contribute to the Palestinian energy market and the humanitarian-economic situation in general, with an emphasis on the Gaza Strip. The political obstacles between Israel and the Palestinians and between the PA in Ramallah and Hamas in the Gaza Strip should not be taken lightly, but can it be expected that the great interest in Mediterranean Gas, combined with Egyptian (and maybe Gulf) involvement, will succeed in propelling the cart in this context?
  • European involvement in the Eastern Mediterranean: The region is known to be characterized, beyond the (proven) energy potential, by a tangle of conflicting interests and conflicts, which even threatens to degenerate into less diplomatic conflicts - between Greece and Turkey, concerning the Cyprus problem. The growing European interest in the region could be an opportunity for intense and creative diplomacy, aimed at calming the disputes, may achieve an ad hoc solution, which may even lead further down the road to more ambitious achievements. Could the war in Ukraine provide an opportunity for constructive efforts in this part of the world?

In conclusion, the trilateral MOU still requires the formulation of more concrete agreements, and especially in relation to the quantities of gas that will be guaranteed to Europe under it. At the same time, it has an enormous important political statement, and especially a potential for deepening cooperation between the European Union and the Eastern Mediterranean in general, and Israel in particular.

CONTRIBUTOR
Michael Harari
Michael Harari

Michael Harari is a Retired Ambassador of Israel, who worked in different countries including Cyrpus, Egypt and Britain. He is a Policy Fellow at Mitvim, The Israeli Institute For Regional Foriegn Policies; a Lecturer at the Political Science Department in Yezreel Valley College in Israel; a Consultant on Strategy, Policy Planning and Energy.

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