Eastern Mediterranean: Will Gazprom advance Russia’s influence in the region?

Mona Sukkarieh.

Three thousand four hundred billion cubic meters of recoverable natural gas and 1.7 billion barrels of recoverable oil have brought attention to the Levant Basin and the countries surrounding it, a region mired in conflicts and whose strategic importance was, until the discovery, on the decline. Beside satisfying domestic needs, the large discoveries have the potential to make some of these countries important energy exporters. Even before the first major field comes on-stream (production in Tamar is expected in the first half of 2013) the prospect of gas exploitation is already altering the geopolitical map and causing a reconfiguration of alliances in the region.

Gazprom logo.

The deterioration of Turkish-Israeli relations and the resumption of aggressive rhetoric and measures by Turkish officials towards Greek Cypriots have brought Israel and Cyprus (and beyond it, Greece) closer, making the Cyprus-Greece corridor the most likely route for Israeli energy exports in the future. The changing alliances were further confirmed by two significant visits paid by Israeli Prime Minister Benyamin Netanyahu to Greece (August 2010) and Cyprus (February 2012), two countries which, for long, enjoyed close relations with Arab middle-eastern countries while maintaining minimal relations with Israel. During a recent visit by Greek Defense Minister Panos Panagiotopoulos to Israel, the idea of an involvement of the Greek navy in the protection of energy installations was discussed. The implication of an EU country in securing these installations would not be surprising given that the development of the fields is expected to be a priority for Europe whose domestic gas demands will continue to rise, making the discovery of reserves in the waters of an EU-member state (Cyprus) highly important in its quest to lessen its dependence on Russian gas. Europe would seem like the most obvious partner, but economic hardships may force these countries to look for alternative partners. Enter Russia, which maintains very good relations with Cyprus and Greece, and even Israel. Moscow has made it clear it is interested in the gas potential in the eastern Mediterranean.

Gazprom, a company which has rarely ventured outside of Russia and its near abroad, is looking to expand globally. It’s activities in the Middle East have so far been limited, but this is set to change. Russia, aware of the potential presented by the discovery of vast gas reserves, has multiplied both symbolic and significant gestures towards countries in the region. President Vladimir Putin made an official visit to Israel in June 2012, which focused largely on bilateral energy cooperation and the establishment of an Israeli subsidiary of Gazprom to contribute in developing offshore gas fields.

Cyprus, heavily exposed to the Greek crisis and in need of cash, particularly since it has been excluded from international capital markets, initially sought the EU’s help but, once rebutted, turned to Russia, with which it enjoys solid ties, for a €2.5 billion loan. The country currently presiding the EU is eyeing a further €5 billion in loans. Russia is particularly interested in the island’s resources and several of its companies are competing for licenses, leading many in the EU to voice concerns over the likely strong influence Russia is expected to have on the Cypriot gas sector.

Russia is not only interested in the eastern Mediterranean. A recent trip by Iraqi Prime Minister Nouri al-Maliki to Moscow and the conclusion of a $4.2 billion defense deal signaled that the relations between the two countries are back on track. Energy cooperation was at the heart of discussions between the two heads of State, confirming Russia’s interest in all major gas sources that have the potential to supply the European markets. Indeed, it was hoped at one point that Iraq would be the main supplier to the proposed Nabucco pipeline, designed to reduce European dependence on Russian gas but whose implementation looks increasingly unlikely due to doubts concerning the viability of supplies and a change in the geopolitical landscape favoring rival projects, including the Gazprom-Eni South Stream pipeline project. Despite a brief period of tension over the summer, due to the signature by Gazprom-Neft (Gazprom’s oil subsidiary) of two contracts for oil development in the autonomous Kurdistan region, Maliki confirmed his willingness to open up the country to Russian oil and gas companies after it was rumored that Gazprom would put its plans on hold until the Kurdish regional government and the central government resolve their dispute.

Whether by producing or transporting gas, Gazprom, and Russia behind it, is seeking a double objective: (1) to diversify its markets so as not to rely completely on the European market and (2) to counter Europe’s plans of diversifying gas supplies by seeking to control a maximum of natural gas sources in the outskirts of Europe meant for European markets in order to continue to project influence in Europe. Whether its bids are successful remains to be seen, but Russia is determined to make an early entry to secure a position as a key player in the gas market and, beyond, as an influential actor in the middle east at a time western influence in the region seems to be declining.

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