“If it bleeds, it leads” is a common axiom in journalism with respect to the priority of news coverage.
In a region like the Middle East where violence is altogether too common, events portending prosperity are naturally viewed with skepticism or overlooked entirely. Thus, with very little fanfare, Israel will very soon be exporting natural gas to the world’s most populous Arab nation, Egypt.
In February an international group of energy firms led by Houston based Noble Energy signed a $15 billion agreement to supply natural gas to Egypt from two Israeli very large gas fields (respectively named Tamar and Leviathan).
The exports to Egypt are earmarked for Egypt’s liquified natural gas (LNG) plants, which will convert the gas to LNG and ship it for export.
Egypt and Israel have been at peace since the 1978 Camp David Peace Accord arranged by President Jimmy Carter and Egypt has exported natural gas to Israel for several years.
The deal for Israel to export to Egypt is a role reversal for an Arab nation not without political ramifications. The deal, in fact, was nudged along with assistance from the US State Department and was modeled along the lines of similar deals between Israel and Jordan that were also brokered with US government support. Issues included domestic political perception in each country and normal bureaucratic and political delays.
The Eastern Mediterranean waters off of Israel, Cyprus and Egypt, are estimated to have natural gas reserves of 125 trillion cubic feet, which would be enough to supply all US demand for five years. In addition to Noble Energy, Exxon Mobil, Royal Dutch Shell, Total (France) and Eni (Italy) are all investing billions in the area.
Egypt has long been one of the ‘have nots’ in the Arab world with respect to oil. Egypt does, in fact, have some oil. It produces about 600,000 barrels a day, with a retail value of about $18 billion annually. Still, with Egypt’s large population, this would translate to only about $220 per capita. This is much less than the aggregate figure for the Middle East, which is $1,605 per person.
However, Egypt wisely made a conscious effort to become a player in the natural gas processing arena, focusing on liquification plants to process and export LNG. It also has many fleets of buses and taxis that are powered by natural gas.
Now Israel and Egypt, quietly, will jointly be pursuing natural gas profits together.
Meanwhile, Iraq, also quietly, is turning a page on its war-torn recent past. Just this month, the world’s ruling body on international soccer, FIFA, ruled that Iraq may hold official matches in the cities of Arbil, Basra and Karbala. This ends three decades of sanctions on Iraq going back to Saddam Hussein’s invasion of Kuwait in 1990 and represents a chance for Iraq to enjoy normal and peaceful exposure to the wider world.
Already, Iran and Saudi Arabia are vying for cultural and economic influence.
Iraq’s shares Arab ethnicity and a common language with Saudi Arabia, it’s Sunni neighbor to the west. Prior to Saddam invading Kuwait, Iraq’s relations with other Arab nations, including Saudi Arabia, were quite comfortable.
Iraq shares Shia religiosity with Iran, its Persian neighbor to the east. During the reign of Saddam Hussein, Iraq and Iran waged open warfare until both countries were exhausted and then observed an uneasy peace.
During and after the second Gulf War, Iran made a conscious effort to leverage its common Shia faith into political and economic power in Iraq. However, ethnic differences remain and many Iraqis remember the bitter war between Iraq and Iran. To many Iraqis, Iran’s recent overtures into Iraq amidst the turmoil of recent years smack of opportunistic colonialism.
In addition to its cultural affinity with Iraq, Saudi Arabia should be able to at least hold its own with Iran with respect to influence in Iraq for a very positive reason, prowess in the oil industry.
Iraq is fifth in global oil reserves and with peace and law and order on the horizon, has taken steps as a nation to get back into the global economy in earnest. The Iraqi parliament voted March 5 to re-establish a National Oil Company to regulate oil production and exports and fairly distributes its revenues to the different regions of Iraq.
Iraq is in need of a national company that has high technical and administrative capacities and can stay abreast of developments and techniques, away from the government’s routine — just like Saudi Aramco, for instance.
Iran, meanwhile has its hands full in trying to re-establish its oil industry as a world player. Even though economic sanctions have officially been lifted by the West, Iran has succeeded in only securing about $1 billion in investment from Total of France and some interest from China and Russia.
Saudi Arabia for its part is playing it smart by giving Iraq what it needs at this point, capital. It has pledged over $1.5 billion in loans and aid to assist in reconstruction of areas damaged by Islamic State. Iran, with capital needs of its own, has not been able to step up to help rebuild Iraq’s oil infrastructure. In fact, Iran’s influence in Iraq should wane markedly as Iraq increasingly finds its economic footing.