"The natural gas deal signed recently has great strategic value for Israel. In the new reality created, any damage by Hezbollah or Hamas to Israel's ability to produce gas will also affect the supply of electricity to Jordan, Egypt and the Palestinian Authority," Institute for National Security Studies (INSS) researchers Dr. Oded Eran, Ofir Winter, and Elai Rettig write in a study published this week.
This interest "will become an important component in the intelligence and security cooperation with neighboring countries in identifying and preventing sabotage, and a catalyst for them to seek calm if fighting breaks out with one of these organizations," they wrote.
On February 19, the gas partnerships in Israel announced the signing of a contract for exporting 64 BCM of natural gas to Egypt for $15 billion over 10 years. The contract, which was signed by the owners of the Tamar and Leviathan gas fields and Egyptian group Dolphinus Holdings, is based on a memorandum of understanding from October 2014. "Presumably the government of Israel played an important role in securing this deal, by promoting it with the Egyptian government and possibly also by covering the guarantees required from Dolphinus for its approval," the researchers assert in their article.
Eran, a senior INSS researcher, told "Globes" that the deal had far-reaching consequences, and "could improve the balance of power in the Middle East and stability with Lebanon and the Palestinian Authority, and ease the Iranian threat."
It is also likely to constitute a turning point for decision-makers in the Ministry of National Infrastructure, Energy, and Water Resources in Jerusalem. Eran says, "Construction of a pipeline between Israel and Italy is not economically worthwhile, and should be reconsidered in view of the deal that has been signed. The amount of natural gas in the eastern Mediterranean Sea is relatively small, compared with gas consumption in Europe, which can be partially supplied from the reservoirs in our region by transporting gas to liquefaction facilities in Egypt and sending it to Europe in tankers."
According to the researchers' study, Egypt had a number of important reasons for supporting the deal, which Egyptian President el-Sisi said "scored a big goal." "First, Egypt seeks to settle the $1.76 billion in compensation that the Egyptian gas companies were required to pay the Israel Electric Corporation (IEC) as part of an international arbitration verdict in 2015. Second, the decision to allocate most of the gas in the Zohr field to Egyptian domestic consumption paves the way for the flow of gas from Israel, Cyprus, and other countries to the liquefaction facilities in Damietta and Idku for the purpose of export to Europe… The third consideration is the promise of estimated revenues of some $22 billion over 10 years."
At the same time, the INSS researchers caution that the deal with Israel has aroused a public debate in Egypt, including severe criticism by Islamic groups. "Islamist elements, primarily Egyptian exiles, criticized 'the import of Arab-Islamic gas stolen from occupied countries, and infusion of billions in the Zionist coffers,'" they write.
As for Israel, beyond the economic advantages, "The "goal" celebrated by el-Sisi appears to have positioned Israel and Egypt as players on the same 'team' working to promote shared objectives," the article states.
"Articles in the Egyptian establishment press stressed the gains to both countries from the deal… This Egyptian view gives additional depth to the peace relations, and highlights the mutual long term interest in fostering them." At the same time, the researchers assert, "…it is still too early to call the deal a breakthrough in the normalization of relations. As there have been energy deals between Israel and Egypt since the 1980s, the current transaction does not set a precedent. Moreover, at this stage it is hard to assess to what degree the fruits of the deal will trickle down to the Egyptian public and reinforce their enthusiasm for peace."
Published by Globes [online], Israel Business News - www.globes-online.com - on March 15, 2018
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