Insight – Europe, Gas And The Endgame

Switching the energy axis from East-West, to South-North

Sep 30, 2022

Russia has long been seen as a competitor to Mediterranean oil and gas
Seven key regional states have struggled to agree how to proceed
Israel has been frustrated at Lebanon’s failure to grasp economic opportunities
Now Gazprom has been cut out of Western Europe; the frenzy to replace it begins
Contenders include Gaza’s Levantine fields and Rothschild-linked Genie energy
Norway, home to NATO chief Stoltenberg, is by far the biggest local beneficiary
Analysts saw the threat of military conflict over gas but failed to predict direction
Syrian war was partly about a route from the Golan Heights to Europe
Trump and Kushner recognized Israel’s right to Golan after discovery of energy
Eliminating Russia from the picture solves several problems as a fait accompli
The decision is made for EU countries; while Turkey becomes Russia’s rival
The business case for a pipeline to Turkey or Floating LNG is now much stronger
Who would be powerful enough to bend geopolitics to business interest?
Former U.S. VP Dick Cheney and an ex-head of the CIA James Woolsey might fit
Along with Lord Jacob Rothschild, Rupert Murdoch and other movers and shakers

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When The Skies Were Free - Clouds, currency and carbon (Jun 12, 2022)
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(3,000 words or about 14 minutes of your company)

Tbilisi, Sep 30, 2022

Germany faces a blow to its industrial might from the loss of Russian gas. Everyone is saying they can’t understand how it benefits the United States to destroy the Nord Stream pipeline and the economy of an ally.

A question some of us were already asking is: since Europe has been complaining about “energy security” for decades, why so slow to find alternatives to Russian gas?

At the rate that Europe was developing renewables, wind and solar were never going to fill the gap, especially while turning off nuclear.

It didn’t add up. Until now.

This is the missing jigsaw piece: and explains why Europe/NATO did not previously act to ensure energy diversity or security.

It was always planning to end its reliance on Russian gas, not by a gradual transition to renewables; nor by a flotilla of tankers carrying liquefied natural gas (LNG) — rather by a kinetic exit from the Russian gas market.

Walking that back a touch, the West may have gambled that in response to sanctions Russia would withhold supplies and voluntarily quit the market.

It may have hoped for the outside chance that it could bankrupt Russia, or provoke regime change, giving Western corporations access to Russia’s wealth of natural resources. The traditional technique is to “make the economy scream” in president Richard Nixon’s phrase, so that a country has to appeal to the International Monetary Fund for aid — which the IMF will only provide if that country sells off its assets.

To tighten the screws on Russia, Western banks seized $300 billion of foreign exchange reserves that belong to Russia's Central Bank. This, too, is a regular trick. Last month a British judge ruled that Venezuela cannot access its gold in the vaults of the Bank of England, valued at $1 billion. In 2018 Syria accused ISIS of passing more than 40 tonnes of gold to the U.S.. Then there’s Libya’s gold — and so it goes.

When the Kremlin failed to take the bait and cut off gas, the only option was to do it for them.

Black gold

The West really prefers its gold black.

In 2015 The Economist magazine wrote “Black gold under the Golan: Geologists in Israel think they have found oil—in very tricky territory.” [1]

“Israeli and American oilmen believe they have discovered a bonanza in this most inconvenient of sites. After three test-drillings, Yuval Bartov, the chief geologist of Genie Oil & Gas, a subsidiary of American-based Genie Energy, says his company thinks it has found an oil reservoir ‘with the potential of billions of barrels’.”

Mediterranean energy is relatively new. Egypt found some gas under the seafloor of the eastern Mediterranean in the 1960s but the Zohr field discovery in 2015 hit the big time. Greece and Cyprus followed in 2018, although with northern Cyprus controlled by Turkey, ownership is divided. Israel found its big fields in the 1990s and early 2000s, and aims to act as a hub for Greece and Cyprus. It has opened talks with Lebanon about developing its waters.

The eastern Mediterranean, or Levantine basin, has proven reserves of 1,700 billion cubic meters (bcm) of gas. However, the U.S. Geological Survey (USGS) estimates it could reach 3,450 bcm of gas and 1.7 billion barrels of oil.

Another USGS survey in 2010 of the Nile Delta and Mediterranean Sea estimated it contained 6,320 bcm of undiscovered recoverable natural gas and 7.6 Gb of oil.

Israel has discovered and developed approximately 1 trillion cubic meters, according to Energy Intelligence.

Lecturers Khaled Kesseba and Konstantinos Lagos of Sheffield Hallam University observed in 2019 that Russia provided almost 40 per cent of Europe’s energy, while Turkey, with limited domestic energy, is projecting military power in the region. [2]

“These developments are clearly worrying Russia… and Europe’s energy dependence has paid off for Russia. The very real risk of losing this influence could result in military conflict. Turkey recently completed the purchase of a Russian anti-aircraft system. This will create a significant power imbalance in the region and give Ankara an advantage in controlling the airspace, especially in disputed areas.”

They identified the trend correctly: military conflict has resulted. Few could have gauged the timing and direction whence the attack would come.

Turning up the pressure

Added urgency is provided by the closing window of opportunity for eastern Mediterranean countries to improve their economic situation.

Oded Eran, writing in the Institute for National Security Studies, funded by Frank Lowy, said there was a risk that bigger competitors in politically more stable regions would muscle smaller players like Israel out of the market. [3]

Previous attempts to bring the Levantine countries together in an economic union had failed but in Jan 2019, energy ministers from Egypt, Greece, Cyprus, Italy, Israel, Jordan, and the Palestinian Authority met in Cairo to establish the Eastern Mediterranean Natural Gas Forum.

With three European Union members involved, the EU agreed to finance a study into a pipeline which would initially carry 10 bcm a year.

Then the United States became interested in the region’s energy resources, attending the second meeting of the forum. The U.S. has helped Lebanon and Israel discuss a border dispute involving 850 square kilometers, while Israel chides Lebanon for being slow to take up economic opportunities in the light of its collapsing economy. Lebanon’s woes deepened with the Beirut port explosion of 2020.

One option is a pipeline from Israel to Cyprus and thence Greece, linking to the European network via southeast Italy.

A second, shorter route, is through Lebanon and Syria to Turkey, where it would connect to existing networks. This is cheaper but more complex politically.

“This option is potentially the most difficult one politically, not only for Israel and Turkey, but also for Cyprus and Greece, as well as Europe more widely, to agree on replacing reliance on Russia with greater reliance on Turkey,” writes Gina Cohen in Energy Intelligence [4]

A third involves piping gas to Egypt and liquefying it but the volume is less than 10 bcm per year, and depends on Egypt’s spare capacity.

The favoured option, at least prior to the detonation of Nord Stream, was a floating LNG terminal. Pipelines from Israel’s Tamar, Leviathan and Cyprus fields will run to a liquefied natural gas terminal off the coast of Cyprus, and thence to the Greek mainland, Italy, and via Bulgaria to Europe.

Russians out

Gazprom was originally involved in processing and drilling rights, and when sanctions were imposed on Russia its place was taken by American and European interests.

The ultimate objective of the project is the EuroAsia Interconnector, patly funded by the European Commission. Using an underwater power cable to connect the national electricity grids of Israel, Cyprus and Greece it aims to ensure steady supply for these countries by using gas fields controlled by Israel to reduce dependence on Russia.

In 2012 the German Marshall Fund and the European Commission’s Bureau of European Policy Advisers met to discuss policy on east Mediterranean energy.

By eliminating Nord Stream from the picture, several problems are addressed at once:

The task of persuading European countries to end their reliance on Russian gas.
The closing window of opportunity to get Mediterranean gas onto the market.
Making Turkey not Russia the main entry point for gas to Europe.
Boosting Turkey’s stature and loyalty; luring it from Russia’s orbit.
The business case for a pipeline to Turkey or FLNG is now much stronger.
It may avert a further escalation of the conflict with Russia.

This is consistent with the West undermining Ukraine’s ceasefire talks back in the spring, when UK prime minister Boris Johnson flew to Kyiv, followed immediately by a hardening in Ukraine’s position that effectively killed negotiations.

The war had to be kept going until the underlying objective had been achieved: knocking Russia out of the market.

Technically, the proxy war with Russia could now end; and Ukraine be allowed to negotiate a peace. Russia has been neutralized as a competitor in Europe.

The players

From a mechanical perspective, laying bombs in an area of the Baltic Sea Regional Security that is monitored by the U.S.. is a considerable technical feat.

From geopolitical standpoint it is remarkably simple: just three or four charges to alter the energy policy of a continent.

Who would be capable of strategising at such a high level, and have the connections to pull off a geopolitical realignment.

Israel gave Genie Energy the first licence, in 2013, to explore for oil and gas in the occupied Golan Heights. In 2019 president Donald Trump recognized Israel’s 1981 annexation of the Golan from Syria. [5]

One could not find a more powerful team. The advisory board of Genie Energy includes Lord Jacob Rothschild, Rupert Murdoch of News Corp, former U.S. Vice President, Dick Cheney, former U.S. Treasury Secretary Lawrence Summers, and former Director of the CIA James Woolsey.

It also included Bill Clinton’s late energy secretary and ambassador to the United Nations Bill Richardson, former United States Senator from Louisiana Mary Landrieu, hedge fund pioneer Michael Steinhardt, and former Genie president Ira Greenstein who worked as strategist with Jared Kushner in the Trump administration.

Kushner also has property leasing agreements with IDT, Genie’s sister company. [6]

Former chief legal officer to to Trump, Jason Greenblatt, also owns stock in Genie. [7]

It is led by Howard Jonas, founder of Genie Energy as well as cloud, communications and payment services company IDT Corporation. Jonas made billions from a telecoms deals approved by the Federal Communications Commission (FCC) and the White House Office of American Innovation (OAI) headed by…. Kushner. [8]

Correlation does not imply causation but informed readers will note that Dick Cheney has form. Put him in a room with a former director of the CIA and the world’s most powerful businessmen, and take into account that these are not men given to idle talk.

Local muscle

The issue of Europe’s energy security and its over-reliance on Russia was discussed for decades, with little apparent movement.

Ukrainian president Volodymyr Zelenskiy’s job was to provoke Russia into cutting the Nord Stream line. On the ground in Ukraine, or more often nowadays in Israel, is Zelenskiy’s patron Ihor Kolomoiskyi, who controlled the television station that made the actor famous.

Kolomoiskyi funds his operations with dark money. He stands accused of taking $5.5 billion from PrivatBank. By crippling a leading commercial lender he has obstructed the country’s reconstruction of its Soviet-era industry and delayed the International Monetary Funds’ loans which are linked to performance in modernizing and privatizing industry.

However the strategic interests of a continent coincide with the financial interests of some of the most powerful people on the planet. The market is more congenial to Genies’ projects such as the interconnector. Morally they might feel they are pushing at an open door. As they get richer, instead of envy they get a virtual pat on the back.

And Jens Stoltenberg, the Sec Gen of NATO, from an influential political family, is a former prime minster of Norway — which just happened to launch its Baltic Pipe on the day Nord Stream blew up.

Geopolitical impact

It is no longer a question of whether Israel could rival the U.S. or Russia as an energy power in the West. It is well on the way.

Sometimes you don’t need to own a thing in order to control it. As the most powerful state in the region it can influence energy policy just as it influences geopolitical strategy and culture in the U.S.. With a population of just nine million Israel is well placed to export most of that gas.

Genie Energy anticipates a demand for electricity that is rising at a rate not seen since the industrial revolution and, because of an antiquated European grid, prices will continue to climb. Retiring coal plants, the conflict in Ukraine and soaring demand makes for a heady mix.

Historical perspective

There is more than a little historical resonance. Cutting supply, driving prices higher is same policy seen in 1917 and 1973. Just over a century ago the Rothschilds were one of, if not the biggest, force in oil and natural resources. J.D. Rockefeller was the new kid in town.

The lesson shows how distribution and the control of pipelines, not simply the oil or gas itself, is the key to wealth.

In the Caspian oilfields of present-day Azerbaijan, Alphonse Rothschild’s bigger competitor was Branobel of the Nobels, brothers of Alfred of the Peace Prize. While the Nobels dominated production, they lacked the transport infrastructure to have a similar impact in the global marketplace.

The Rothschilds solved this with the Caspian and Black Sea Petroleum Company which extended their system of exporting on commission.

The Tsarist government was a Rothschild customer, borrowing money to build the country’s railway system, including the Transcaucasian Railway from Baku to Batum (present-day Batumi) on the Black Sea. In return Rothschild, of the family’s French branch, was granted oil concessions, and in 1877 unified the Russian export trade, selling fuel oil and kerosene for lighting, on commission for 50 other producers.

The Nobels and Rothschilds formed a cartel controlling most of Russia’s oil and kerosene exports, and, as Russia overtook the USA in oil production, they set up the Consolidated Oil Company in London in 1900, one of the predecessors of Shell.

Rothschild provided an example to Rockefeller, showing him that the key to immense wealth was not to pump lots of oil but to control its distribution, according to associate professor Jennifer Siegel of the Mershon Center for International Security Studies. [9]

“As a result, before the 1917 October Revolution, the Rothschilds owned over 35 per cent of the total share capital of 15 large enterprises of the Russian oil industry,” writes Mir-Yusif Mir-Babayev of Azerbaijan Technical University. [10]

The Russian oil industry had briefly exceeded U.S. exports in 1901. Three years later its share of world markets began to fall, from 31 per cent to only 9 per cent in 1913.

In 1911 the Rothschilds had stopped lending to the Tsarist government and the next year completed the sale of all their Russian assets to Royal Dutch Shell, in which they gained a 20 per cent stake.

They were out of Russia before its collapse. The losses of the Rothschilds from the Russian revolution were minimal — in contrast to the Nobels’ Branobel.

Edmund Rothschild (who had succeeded Alphonse) was regarded as the most prudent person in Europe. Yet there’s a footnote. According to the historian Simon Sebag Montefiore, “Stalin worked for the Rothschilds; he burnt down their refinery and ordered the assassination of their managing director — yet later they helped fund Lenin and Stalin.” [11]

Long story short, the Rothschilds may have conspired with Rockefeller to put the Branobel company out of business. They certainly put Russia, which had just overtaken the U.S. as the biggest oil producer, out of the market. They did so by grand geopolitical strategy and paying — even if unknowingly — the future Bolsheviks.

As for the Nobels, by 1920 the Bolsheviks had seized power in Baku. Branobel was nationalized, and Rockefeller’s Standard Oil of New Jersey bought half their shares, believing it would be able to work with the Bolsheviks. It later was allowed to sell its stake. Russian oil output did not recover to 1900 levels for over 50 years.

Back to the future

Russia will have the pipeline’s destruction discussed at the United Nations today. Whether the pipeline will be repaired is moot, given that Western Europe says it does not want the gas.

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