Khaled Fouad(This text was translated from its original Arabic version.)
Executive Summary
The global energy map irreversibly changed with the Russian invasion of Ukraine as the European Union scrambled to find alternative sources to substitute Russian gas. The eastern Mediterranean region has especially acquired significance due to its huge reserves discovered in the first decade of the twenty-first century. This urged the majority of Eastern Mediterranean countries to set ambitious plans to invest in the exploration, production, and transportation of hydrocarbons and achieve rapid economic and geopolitical gains over the short and medium term. Moreover, the Russian-Ukrainian war increased the geopolitical importance of some countries of the Eastern Mediterranean, especially Turkey and Greece, due to their location as the southern eastern gateway to the European continent and the only outlet to the Black Sea.
As a result, the tensions between eastern Mediterranean countries have remarkably increased over the past few months. For instance, the disputes between Turkey and Greece over their maritime borders and exploration plans intensified, the relationship between Egypt and Turkey became further complicated in the wake of the latter’s agreement with Libya on oil and gas exploration, and Lebanon and Israel held tense negotiations to demarcate their maritime borders. In the foreseeable future, it is likely that competition over energy sources will continue to be the main source of instability in the region.
The European quest for independence from Russian gas
Over the past two decades, Russia has exploited its huge exports of natural gas to Europe as a geopolitical weapon and a tool of pressure during its repeated disputes with Ukraine in 2006 and 2009, and during the Russian military intervention in Crimea in 2014, by threatening to cut off or reduce natural gas supplies to other countries.
Despite the policies that the European Union has sought to adopt in the past years to reduce dependence on Russian gas through the diversification strategy[i] announced in 2014, the volume of European dependence on Russian gas reached to fulfill about 40% of the continent’s needs in 2021.[ii] On the contrary, Germany increased its imports of Russian gas to the extent that it has become the largest consumer of Russian gas in Europe, obtaining 55% of its needs from Russia.[iii] Furthermore, Berlin did not abandon the Nord Stream 2 pipeline project, which connects Russia and Germany directly across the Baltic Sea, until shortly after the Russian invasion of Ukraine.
Consequently, before it invaded Ukraine in February 2022, Russia continued to use its strongest trump card by creating a severe energy crisis within Europe. It reduced gas supplies to the continent under allegations of maintenance work and technical problems. From that preemptive step to the invasion, Moscow aimed to undermine any European efforts to impose sanctions on Moscow after the latter’s military intervention in Ukraine by threatening to cut off its gas, and thereby cause large-scale economic and social crises for the European Union.
The energy crisis in Europe: No short-term solutions
At the beginning of the Russian-Ukrainian war, Europe decided to hasten its moves to end dependence on Russian gas. Last May, the European Commission published new strategies that set the course for the European Union to become independent from Russian fossil fuels by 2027 (REPowerEU).[iv] However, a number of challenges prevent this goal from being achieved in the short term, such as:
First, Europe will not be able to achieve its strategy without receiving huge quantities of liquefied gas (LNG) coming via sea tankers from the major LNG exporters. Nevertheless, Europe currently lacks the required infrastructure, as it only has 24 stations[v] capable of receiving liquefied gas and re-gasifying it (Regasification Plant) – a number that only meets half of the European Union’s gas needs.[vi] As a result, most European Union countries are accelerating their steps towards building floating terminals to receive liquefied natural gas (FSRU), which take less time to construct in comparison to ground stations. Germany alone, after issuing a law for the urgent development of liquefied gas infrastructure,[vii] plans to construct five floating terminals and three ground terminals.[viii] However, according to forecasts,[ix] Europe’s LNG infrastructure will not be able to fully meet the continent’s gas needs before 2030.
Secondly, the excess export capacity of the global LNG markets will remain limited until the middle of the current decade, for two main reasons:
(1) Most of the export capacity of the major global LNG exporters is already tied to long-term contracts, especially with the Asian market, which is the main growing market for LNG. For example, Qatar – the world’s first exporter of liquefied gas – has committed about 70% of its exports in long-term contracts with Asian customers, which means it will be able to supply Europe at present with only about 10% to 15% of its total exports,[x] at least until it completes its expansion works in its northern field in 2027.[xi]
(2) The earliest tangible increase in global production of liquefied gas will not be before the beginning of 2025, as increasing the production of natural gas requires investments that take several years. For example, the United States is currently establishing three liquefaction stations for natural gas on the Gulf of Texas coast. These stations are expected to be operational at the beginning of 2025 and to contribute to the export capacity of the global liquefied gas market by about 5.7 billion cubic feet per day.[xii] Moreover, one of the largest global liquefaction stations that Russia is building in the Arctic (Arctic LNG 2) was not ready by the end of 2022 as planned,[xiii] due to Western sanctions and the withdrawal of all foreign companies from this giant project.
Europe reconsiders the value of the Eastern Mediterranean
Moscow has maintained its pressure on the European Union by gradually reducing gas exports to reach only 9% of the continent’s gas needs by the end of last September,[xiv] compared to 40% last year. The Russian gas cuts were directly reflected in energy prices in Europe, which multiplied 10 times compared to average prices over the past decade.[xv] This massive inflation of prices negatively affected social stability and prompted European governments to direct hundreds of billions of dollars to subsidize the affected companies and families. For example, Germany announced a €200 billion emergency plan to mitigate the impact of higher energy prices on consumers and factory owners. [xvi]
As a result, Europe moved in two parallel paths: the first in the near term is to reduce the risks of energy shortages in the coming winter (2022-2023), which the European bloc has come closer to achieving to a great extent, as it has been able to reach gas storage levels to limits that would be relatively sufficient to secure gas for its consumption in the coming winter months.[xvii] However, the greatest threat will remain in case Russia decides to cut off all of its gas supplies to Europe during the winter season. The second is to make gas deals and develop its infrastructure in the medium and long term. In this context, the European Union and its governments concluded deals[xviii] for additional quantities of gas in the coming years with Qatar, America, Norway, Algeria and Azerbaijan. The European Union also looked toward the eastern Mediterranean region to become one of the most reliable places to secure gas supplies in the coming period.[xix]
Demarcation of the maritime borders between Lebanon and Israel… Complicated negotiations and an exceptional agreement
The growing European interest in gas reserves in the Eastern Mediterranean region prompted Israel, which possesses huge gas reserves in the Leviathan and Tamar fields, to take serious and urgent steps to exploit the opportunity,[xx] through two main tracks: the first aims to maximize Israeli gas production by attracting and encouraging international energy companies to invest in hydrocarbon exploration and production. The second is to increase Israeli gas exports to the European Union by finding other means to export gas to Europe besides the current system that liquefies it in the two Egyptian gas liquefaction stations at Idku and Damietta.
The Israeli efforts to maximize production and increase natural gas exports seek to make Israel one of the alternatives that Europe will rely on to detach itself from Russian gas over the next few years. This will give Israel a foothold in the new energy map that is taking shape in Europe and strengthen its influence within the European Union.
Lebanon, which imports all of its energy needs, is facing a severe electricity crisis this year, as most Lebanese neighborhoods depend on costly private generator companies.[xxi] Despite Lebanon’s endeavor to find an urgent solution to its electricity crisis through a gas deal with Egypt and an electrical interconnection project with Jordan, neither of the two deals has yet to start implementation due to financing obstacles – a fact that contributed to exacerbating the electricity crisis and made it one of the main challenges facing the caretaker government.
These developments were the main motives for both Lebanon and Israel to move forward with negotiations to demarcate the disputed maritime borders.[xxii] Moreover, the political crises in both countries also played a significant role.[xxiii] In Lebanon, President Michel Aoun – whose non-renewable term ended on October 31- sought to achieve success in the energy issue before leaving power, especially given the repeated failure of the Lebanese parliament to elect a new president, and the growing expectation of a presidential vacuum. Likewise, in Israel, Prime Minister Yair Lapid tried to claim a tangible achievement to raise the likelihood of victory before the holding of elections- the fifth in less than four years -, an attempt that ultimately failed.
Disputed maritime boundaries for a decade
The dispute over maritime borders between Lebanon and Israel dates back to 2010 when Lebanon submitted a request to the United Nations to define its maritime borders (EEZ) with Israel.[xxiv] From the Lebanese perspective, its maritime borders with Israel begin with a line that starts from Ras al-Naqoura – the town that defines the coastal land borders between Lebanon and Israel – and extends 133 km in the Mediterranean waters to point 23, in what is defined as Line 23. Meanwhile, Israel announced in mid-2011 that its maritime borders with Lebanon starts from Ras al-Naqoura but ends at the northeast of point 23 by about 17 km, in what is defined as Line 1. The two countries’ differing perceptions have resulted in the existence of a small triangle of disputed waters covering an area of about 860 km2.