Insight – Europe, Gas And The Endgame

Geopolitics is nothing if not about pipelines, bankers and parallels with 1917

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 the 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 its direction.
Syrian war was partly about a route from the Golan Heights to Europe.
Trump and Kushner recognized Israel’s right to Golan after the 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.

They have form: cut supply, drive prices higher as in 1917, or the Arabs in ‘73.
Russia had overtaken the U.S. in 1901 as the world’s biggest oil producer.
Energy and banking interests removed a competitor; and set it back by 50 years.

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Yamal peninsula, Arctic. Source: Gazprom.

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.