Natural Gas in the Eastern Mediterranean: the Coal and Steel of the 21St Century?
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EMERGING LEADERS PERSPECTIVES Natural Gas in the Eastern Mediterranean: The Coal and Steel of the 21st Century? By Kevin Johnson, Alex Ross, Endy Zemenides June 2015 Executive summary play as important a role in the region as coal and steel played in powering European integration. US strategic Over the past decade, significant natural gas deposits interests will be advanced by such regional coopera- have been found in the Levant Basin of the eastern tion, and the United States can play a key role in (a) Mediterranean. A 2010 US Geological Survey estimat- advancing the commercial viability of eastern Medi- ed that the Levant Basin may contain undiscovered terranean gas fields, (b) securing the resources, and (c) oil resources of 1.7 billion barrels and undiscovered developing regional structures. natural gas resources of 122 trillion cubic feet. In the short term, already commercially viable gas fields in the Exclusive Economic Zones of Israel and Cyprus will transform the economies of those states and promote their energy independence. These resources could also bolster Egypt and Jordan, where energy shortages could threaten the regimes. In the medium and long term, the energy resources of the eastern Mediterra- nean could help reduce Europe’s energy dependence on Russia to a degree. Perhaps the most intriguing prospect these resources present is the development of a structure for regional cooperation that promotes peace in this volatile region. Energy cooperation has already become the basis of unprecedented relations between Israel and Cyprus, and also between Greece, Cyprus, and Egypt. There are several indications that it could significantly contribute to the reunification of Cyprus, a lessening of Israeli-Arab tensions, and to better Greco-Turkish and Israeli-Turkish relations. Eastern Mediterranean natural gas can conceivably THE CHICAGO COUNCIL ON GLOBAL AFFAIRS – 1 The Chicago Council on Global Affairs is an independent, nonpartisan organization. All statements of fact and expressions of opinion con- tained in this report are the sole responsibility of the author and do not necessarily reflect the views of The Chicago Council on Global Affairs or of the project funders. Copyright © 2015 by The Chicago Council on Global Affairs All rights reserved. Printed in the United States of America. This report may not be reproduced in whole or in part, in any form (beyond that copying permitted by sections 107 and 108 of the US Copyright Law and excerpts by reviewers for the public press), without written permission from the publisher. For further information about The Chicago Council or this study, please write to The Chicago Council on Global Affairs, 332 South Michigan Avenue, Suite 1100, Chicago IL, 60604, or visit The Chicago Council’s website at www.thechicagocouncil.org. Table of Contents Executive summary . 1 Introduction . 4 How much is at stake? . 4 Geopolitical benefits . 6 The case of Israel and Cyprus . 6 Integrating Arab regimes: Egypt and Jordan . 7 Geopolitical challenges . 8 Middle East peace, or the lack of it . 8 Turkey: Making “win-win” impossible? . 8 The way forward: Laying the foundations for a true community . 9 Speed things up . 10 Get serious about infrastructure . 10 Form an institution . 11 Don’t stop at gas . 12 The Emerging Leaders Program . 13 Acknowledgments . 13 Author biographies . 14 Endnotes . 15 Bibliography . 17 Introduction have a transformative effect on the economies of the region. On May 9, 1950, as Europe recovered from the destruc- tion of two world wars, France’s foreign minister, Rob- > The mere prospect of joint development and trade ert Schuman, declared an aim to “make war not only in natural gas has resulted in unprecedented polit- unthinkable, but materially impossible.” Thus, the ical cooperation between states in the region. This precursor to the European Union—the European Coal cooperation, occurring at this point only on a bilat- and Steel Community—was born. A common market eral or trilateral basis, can form the foundation for for coal and steel was established among European greater regional collaboration. states. This was not only the first step towards greater > Regional dangers and longtime conflicts threaten regional integration, but a decisive move to ensure that to halt progress on the energy front and even make Germany would not wage war on the continent again. energy resources a sticking point in overcoming Sixty-four years later, the foreign minister of the such conflicts. Republic of Cyprus, Ioannis Kasoulides, addressed > A formal, rules-based structure is needed in the the Chicago Council on Global Affairs. His address eastern Mediterranean that will govern exploration, included an analysis of how recent discoveries of encourage joint development and exploitation, natural gas deposits in the eastern Mediterranean develop infrastructure that benefits the region could have a game-changing effect on the geopolitics as a whole, and become an aspirational goal for of the region. Midway through the address, Minister regional actors that are not ready to join such a Kasoulides declared that natural gas in the eastern structure today. Mediterranean could be the “steel and coal of the 21st century.” One of the top priorities for US foreign policy is to Instability and uncertainty mark the shores of the rebalance engagements, activities, and resources Mediterranean today. To the south, the events of the toward Asia. This rebalance is possible only if the Arab Spring have destabilized Egypt and Libya. Israel regions from which the United States is “withdrawing” is in perpetual battle against Hamas. The Islamic State do not present greater threats after the rebalance. One has seized large portions of Syria. NATO member and of the great strategic successes of US foreign policy EU aspirant Turkey continues to occupy the Republic during the Cold War was denying the Soviets a signif- of Cyprus, an EU member. Turkey also continues to icant presence in the Mediterranean. Stability in the feud with Israel and tolerate or enable destabilizing Mediterranean—in the face of the threats of Islamic forces in the region such as the al-Nusra front, Hamas, fundamentalism, piracy, economic chaos, and Russian and perhaps even the Islamic State. Economic crises assertiveness—is equally important today. Just as the on the northern shores of the Mediterranean at the European Coal and Steel Community began a process very least threaten the viability of the euro and could of regional cooperation and integration that allowed in fact undermine the EU. the United States to focus on other strategic priori- Despite all these challenges, the region’s emergence ties, a similar energy alliance in the eastern Mediter- as a significant source of energy changes the context ranean can free the United States to focus more on within which Mediterranean countries deal with each other regions. other and through which outside powers deal with the Mediterranean. The region faces a potential tipping How much is at stake? point. Yet it is clear that the mere existence of these A 2010 US Geological Survey estimated that the Levant resources is not enough to realize Minister Kasoulides’ Basin, under the Exclusive Economic Zones (EEZs) of vision of a new steel and coal community. We will Israel, Cyprus, Lebanon, Syria, and Egypt, has mean address both the threats and opportunities presented undiscovered oil resources of 1.7 billion barrels and, by energy in the eastern Mediterranean. Our report more significantly, mean undiscovered natural gas re- makes four main points: sources of 122 trillion cubic feet (Tcf). The survey also > The resources at stake are not enough to make estimates the mean undiscovered resources of natural a major impact on the world market or even on gas liquids (NGL) at 3.1 billion barrels.2 These esti- Europe’s energy independence, but they can mates are still just estimates. Yet since 2010 there have 4 - NATURAL GAS IN THE EASTERN MEDITERRANEAN: THE COAL AND STEEL OF THE 21ST CENTURY? Figure 1 which is desperately seeking to reduce its dependency on Russian gas, is 2 to 4 percent of total consumption. The Exclusive Economic Zones (EEZ) of Notwithstanding these modest expectations, when Cyprus and Israel Israeli and Cypriot gas is considered in a larger con- text, it can significantly affect Europe. The closest partner to Israel and Cyprus in eastern Mediterranean energy diplomacy is Greece. Already a key player in bringing Caspian gas to Europe through the Trans Adriatic Pipeline,8 Greece may hold the key to making Europe more energy independent through using east- ern Mediterranean gas. Preliminary estimates peg Greece’s natural gas EEZ Cyprus reserves at over 165 Tcf, more than the combined potential reserves of Israel and Cyprus.9 If market EEZ Israel forces, technological advances, and geopolitical real- ities allow for the full realization of these potential reserves, the Greece-Cyprus-Israel triangle could potentially become the third leading supplier of Europe, behind Russia and Norway. Source: Georgia Logothetis, Hellenic American Leadership Council. The gas infrastructure going through Greece includes a connector to Bulgaria, which is of particular significance in the effort to wean Europe from Russian been significant natural gas discoveries in the EEZs of gas. Bulgaria depends on Russia for 100 percent of Israel and Cyprus.3 Israel’s natural gas reserves include its natural gas supply. Greece depends on Russia for Tamar (confirmed 10 Tcf), Leviathan (estimated 18 to 62 percent of its supply. Serbia, which aspires to EU 19 Tcf), and an additional estimated 3 Tcf dispersed membership, depends on Russia for 73 percent of its over smaller fields. The estimate for Cyprus’ Aphro- natural gas.10 In southeast Europe, especially in coun- dite field is approximately 5 Tcf. Seismic surveys have led to further licenses being granted across the EEZs of Cyprus and Israel, and exploration in the region Figure 2 will continue.