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Arab Pipelineistan's High Stakes
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Once again this week the Arab Gas Pipeline had to be shut down – with no gas flowing to Israel and Jordan. An “unknown armed gang” bombed the al-Sabil gas terminal near the coastal city of el-Arish, less than 350 kilometers northeast of Cairo in the Sinai Peninsula.

On March 27, an “unknown armed gang” tried to blow up the terminal but failed. On February 5, they did succeed – the flow of gas to Israel and Jordan was interrupted.

The Sinai Peninsula is a de facto red zone. Local Bedouins rule. Security is spotty. Weapons smuggled to Gaza and other parts of the Middle East flow through the Sinai – that is, within striking distance of the Arab Gas Pipeline.

The Arab Gas Pipeline is the star of Arab Pipelineistan – linking Egyptian gas to the north to Israel and to the south towards the Gulf of Aqaba and from there across Jordan to Syria and via Damascus towards Lebanon.

The Arab Gas Pipeline has the potential to grow east and west – turbulent politics and economic allowing. From Damascus it could go to southern Turkey, and then connect to the perennially troubled, still in the making, Nabucco project exporting gas to Europe. The other possibility is an extension towards Italy and Spain including Libyan and Algerian gas.

In strategic el-Arish, the Arab Gas Pipeline breaks in two; one of the arms goes northeast, to the Israeli city of Ashkelon. The el-Arish-Ashkelon pipeline has been supplying Israel since 2008. For the moment, Israel gets 1.7 billion cubic meters a year; before Tahrir Square there were plans to increase it to 2.1 billion. As it stands, Egypt supplies about 10% of Israel’s energy mix, and is responsible for over 30% of Israel’s electricity. Over half of the total natural gas consumed in Israel comes from Egypt.

Few may know that Egypt – with 63 billion cubic meters a year – is one of the largest producers of natural gas in the Maghreb. In Africa, it’s only behind Algeria (80 billion). While Egypt is increasing production, Algeria is decreasing. Cairo and Algiers are fierce competitors in the natural gas market. At the same time, Egypt is also investing heavily in liquefied natural gas (LNG) – to be transported by sea – so it may offset its dangerous dependency on Middle Eastern Pipelineistan.

Egyptian gas exports are regionally strategic – but especially to Israel. Sabotage may hurt the Israeli economy and its military/energy security. Bit it also hurts Egypt’s regional and international credibility as a gas hub; the Hosni Mubarak regime was very keen to cultivate this image.

Because president Anwar Sadat and then Mubarak killed any attempts to diversify the Egyptian economy, the country has to rely on tourism; remittances from Egyptian workers abroad; tolls in the Suez Canal; payment for dodgy privatizations; and their oil and especially gas exports. A hefty chunk of all these proceeds ended up in Mubarak’s Swiss banks accounts.

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No wonder Israel defended Mubarak until the last minute. Mubarak’s sons Gamal and Alaa pocketed hundreds of millions of dollars in “commissions” from the sale of Egyptian gas to Israel. As much as Tel Aviv paid these “commissions” to get gas at a ridiculously low rate, average Egyptians could not even dream of enjoying at least some financial benefit for working in the gas fields. No wonder in mid-April new Egyptian Prime Minister Essam Sharaf ordered a serious review of the pricing deals with Israel.

The new gas rush

Now there’s another huge game at play in Arab Pipelineistan. Texas-based Nobel Energy has found massive natural gas deposits – trillions of cubic meters – in the eastern Mediterranean. The waters encompass all number of key regional players; Israel, Lebanon, Cyprus, Gaza, Egypt and Turkey. No treaties demarcate these territorial waters. What everyone may eventually enjoy is no less than over 300 years of assured energy; at least in theory, that would mean the end of a regional energy war.

Turkey is at the moment involved in a complex push to develop regional Pipelineistan not only along an east-west axis but north-south as well; this means it must cultivate a complex web of relations with no less than nine countries – Russia, Azerbaijan, Georgia, Armenia, Iran, Iraq, Syria, Lebanon and Egypt. Before Tahrir Square, serious negotiations were already ongoing regarding an extended Arab Pipelineistan that could link Cairo, Amman, Damascus, Beirut and Baghdad. This would certainly do more to unify and develop the Middle East than any “peace process”.

The same applies to the newfound eastern Mediterranean gas. An ideal world would point to multi-nation corporation in charge of exploiting these new gas finds, maybe located in Cyprus, which is neutral and a member of the European Union (EU) to boot. That would simplify the sale of much of this gas to energy-hungry Europe, thus alleviating its dependency on Russian gas.

Russia’s energy giant Gazprom anyway won’t fail to be part of the action. It has already offered Lebanon its prospection services. China is already on the spot, ready to buy from anyone. For the moment, the heart of the action in this New Gas Rush is Cyprus airport. The Delek corporation – which controls the second-largest quota, after Noble Energy, of the extraction rights in Israel – wants to install a LNG refinery in Cyprus, on a site strategically located between two American naval bases.

So reality will be messy – especially with Israeli/US interests trying to get the upper hand while Arab governments think they could use this new gas bonanza as a way to pierce the economic/military hegemony of Israel.

At least one front of the great 2011 Arab revolt might seem to be spelling a rosy future, as in “natural gas”; commodity, capital and infrastructure leading to development for all. Or maybe not; and this will turn out to be yet another lethal chapter of ongoing energy wars.

(Republished from Asia Times by permission of author or representative)
 
• Category: Economics, Foreign Policy • Tags: Eurasia, Natural Gas 
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