A year or two ago we might not have guessed that at the beginning of 2022 we would witness a war that in the eyes of many is the largest and most significant in Europe since World War II. War is a bad thing. Innocent people are harmed, economies are destroyed and a lot of suffering is caused to everyone. But if we try for a moment to look at it from an Israeli egocentric point of view, it is possible that in the long run this war creates a unique opportunity for the Israeli gas market, and can also bring a significant dividend in the field of international relations.

The world is thirsty for energy, and natural gas is one of the cleanest and most efficient energy sources available. A gas pipeline from a country with a surplus of gas to a country that lacks gas, in addition to the economic benefits it brings to the gas supplier, can help strengthen relations between the countries and, as Germany has come to recognize, creates a dependency that multiplies the entities’ power in international relations. The gas pipeline from Israel to Jordan and Egypt, which was an unrealistic dream but a few years ago, is an important factor in strengthening relations with Arab countries, apart from the large amount of money it brings to the country and to the investors in the gas companies.

In the past, there was hope that such a pipeline would also be established between Israel and Europe, and on the one hand flow gas from Israel to Europe and on the other hand flow dollars from Europe to Israel, and in addition, as a bonus, strengthen relations with Europe and become another important player in international diplomatic interests. Not only hope, but also actual plans. In 2020, then-Energy Minister Yuval Steinitz announced the construction of such a pipeline at a cost of $ 6 billion. The planned pipeline was to be 1,900 km long, part of it offshore and reach Italy. The idea was even supported at the time by former US President Donald Trump, who was concerned about Europe’s dependence on Russian gas and sought to build alternatives.

Gina Cohen, a gas consultant and university lecturer on natural gas, says that practical steps have also been taken in connection with the project. A Greek-Italian company named Poseidon received a budget of 35 million euros from the European Union and added another 35 million euros from its own resources and started undertaking the feasibility of the project. The study is expected to be completed by the end of the year. After the feasibility study, gas sales contracts have to be signed, which can take another year and then the construction itself, which will take a few more years. A long-term but very useful project.

But a short time ago this hope seemed to have vanished. With the change of government in the United States, the tone of the world’s biggest power also changed, and surprisingly in early January, a letter was sent from the United States government to the Greek government objecting to the project for environmental and economic reasons. The real behind-the-scenes reasons for American opposition seem to have been more political than anything else. The United States wanted to get closer to Turkish President Erdogan, who opposes the pipeline, in the wake of the talks, and also tried not to anger Putin and Russia, Europe’s main gas supplier.

Cohen explains that the United States is not really a party to the matter, and it has no ability to determine for Europe and Israel what to do, but geopolitically its support is extremely important, and the surprising opposition was certainly an obstacle to the project.

It now appears that there could be an opportunity for a policy change once again. As we recall, one of the hot topics in the field of energy in Europe is the Nord Stream 2 gas pipeline. The pipeline is intended to double the amount of gas flowing from Russia to Germany, thus actually further increasing energy dependence in Russia. This is why the United States and Britain have opposed it over the years, and why Germany’s response to Russian aggression is weak and hesitant. The West has tried to use it as a lever of pressure but nothing seems to move Putin, who has apparently decided to undermine world order. Germany was eventually forced to announce that it was suspending the costly project that was already ready for operation, and Biden imposed sanctions on the project and its operators.

But in the end Europe needs energy. Europe tried to turn towards more renewable energy sources as a replacement for conventional energy, but got stuck without enough energy sources and was forced to turn to “intermediate solutions”. France prefers nuclear energy reactors, but Germany strongly opposes them and continues to vigorously close its nuclear stations. According to Germany, the use of natural gas should be given preference to during this interim period, whose end is not in sight.

In light of this, Germany understands that alternative energy sources must be found, as German Chancellor Olaf Schultz recently said. The problem is that obtaining such sources is not so easy, and not so cheap. The United States is trying to help (and of course it also has an economic interest) and is directing LNG to Europe via ships. This is a much more expensive form of gas and is limited in terms of the possible volumes that can be transported. Efforts are also being made to bring in Qatar and the UAE to join the effort to supply Europe with the gas it so desperately needs. But all these efforts cannot replace the volume that Russia supplies to Europe.

Stopping Russia’s gas and oil imports to Europe would be tantamount to a death blow to its economy, and could bring it to its knees and force it to stop behaving like a global brain bully, but Europe simply is unable to do so, and will not be able to do so either in the foreseeable future. Also last year, even before the crisis broke out in Ukraine, Europe suffered from an over-dependence on Russian gas, which caused price increases in the energy market and acted as a political pressure lever. This is also the reason why no one is mentioning or implementing this harsh and effective sanction against Russian even as a possibility. Europe needs Russian gas, and this dependence highlights the fact that Europe simply has to diversify its energy sources.

Here Israel can enter the picture, but it must exercise its full weight in the matter. Israel, along with neighboring Cyprus, holds large gas reserves. Some believe that we need to maintain energy security and not export more of the expensive gas to other countries, after we already supply gas to the countries of the region. Against this contention it is said that the reserves in Israel are now sufficient for decades, and it is very possible that there are considerably more reserves to be discovered deep offshore (if the Minister of Energy allows exploration).

In addition, the energy sector is about to evolve in many different ways. The price of solar electricity is still expected to fall and technology will continue to advance and  new and more sophisticated solutions will be developed. It would be a shame to give up a powerful, profitable and such an important tool for Israel’s international relations – namely thee further export of gas –  because of fears far removed from today of something that might occur in come, at a time when we cannot guess what the energy market will look like at that time.

Gina Cohen says that Israel must take into account two very important points at this stage. The first is that this is a great opportunity to increase the pressure on getting the EastMed project approved and enjoy all the benefits it could bring. The second, no less important, is that Israel needs to learn the lesson of the mistakes carried out by Europe, which wanted to run towards renewable energy sources and set itself unrealistic goals and ended up facing a broken trough. Israel currently has energy and gas sources, but it must not stop exploration and lose an important year without any logical reason and needs to carry on doing exploration efforts that could increase Israel’s reserves and inherent benefits and must ensure that it continues to invest in the country’s gas sector in particular. Israel must avoid the mistakes done by Europe.

Politically, it seems that even Biden will agree that there is no longer really any point in trying not to annoy Russia, and Erdogan will also be forced to swallow his price. Such a gas pipeline will not completely solve Europe’s energy problems but will be an important tier in building energy alternatives and strengthening Israel’s relations with Europe, especially the tripartite alliance between Israel Cyprus and Greece, but also in relations with Germany, Italy and many other countries that can benefit from this project.

The attention of world leaders may not be available now for other things, but as soon as Israel, together with Cyprus, is allowed to, it must push with all its diplomatic power in that direction. The gas companies can of course benefit from this and will donate with all their might to a mission that will be worth many billions to them, and the revenues to the state will also increase as a result, so it is important to act on the issue together to take advantage of our one-time opportunity.


Gina Cohen
Natural Gas Expert