Today we revisit the turbulent region of historic Palestine, which is divided in identity, polity, and energy. Last week the Palestinian petrol crisis pressed governments and suppliers for action to avert economic catastrophe. An agreement was reached to end the stalemate, but fuel source and supply to the area is still a burning question.

High-tech industries blossom in Israel. "The only treasure we have is between the ears of our people," says an economist in Israel's foreign ministry. "Luckily, today the outside world has opened to us."

This official is referring to the heavy investment of companies like Intel, Applied Materials, and Microsoft. But high-tech brainpower necessitates high energy from natural resources, and the electricity supply required to keep the processors whirring and R&D dollars flowing like milk and honey depends almost entirely on imported natural gas.

Israel has a 40% target for energy from natural gas in the coming years, and a diversity of supply will help to guarantee the flow in times of untidy political and economic alliances.

Russia's Gazprom, for example, holds 25% of the world's liquid natural gas (LNG) reserves.

Russia is also a member of the Quartet, the current geopolitical cadre (US, EU, UN, and Russia) working to salvage the remnants of the two-state path to peace, even while Moscow undermines the other 3 in their efforts to isolate the Hamas-led PA government.

But equivocation has never been a problem for any government, and in the Mediterranean energy trade, foreign ministers and infrastructure chiefs keep a number of hats close at hand.

Consider Turkey, for example. This past fall, I was a guest at a luncheon given by the Israeli and Turkish ambassadors to the United States. Though Turkey bears the Muslim crescent and star on its flag, the land that bridges Europe and Asia has been secular since the founding of the modern state. A strong relationship with Israel, in military, economic, and tourist relations, has been a corollary of founder Mustafa Kemal Ataturk's policy of "Peace at Home and Peace Abroad."

 

‘Atta Turk!

This past week, Turkish and Israeli officials met in the Turkish resort town of Antalya, where 380,000 Israelis vacation each year. The topic of discussion was not which resort has the best mai-tais, but how Israel and Turkey can beset cooperate to bring natural gas to the Eastern Mediterranean.

There have been over 100 bilateral agreements between Israel and Turkey, and this new wave helps Turkey to become a major hub in the Eurasian energy trade by acting as a way station for natural gas, much of which is Russian in origin.

The proposal announced last week, which builds on an abrogated 2004 version, would channel water to Israel, the West Bank and Gaza, and Jordan, and energy from Turkey to Israel and then on to the Far East, primarily India, China, and South Korea.

This may seem like a roundabout way to get to the Orient, but consider that Kazakhstan is currently planning a circuitous route westward for its oil and gas to arrive in the EU, bypassing Russia. Pipelines are not always laid as the crow flies, and in a world of energy uncertainty, more paths mean more options in times of turmoil.

 

What about Us?

Understandably, Israel's current gas supplier Eastern Mediterranean Gas (EMG) is fuming over the prospect of market competition. EMG, which is based in Egypt but has a cooperative directorate involving Israelis, has no effective rival because Israeli company Yam Thetis is running low on supplies.

However, with the British Gas exploration projects of Gaza's coast and Russian Gazprom circling like a biblical griffon vulture, EMG is actively denouncing Russian promises to sell gas in Israel at a discounted and fixed price. Russia sells for $6 per million BTU to Turkey, but has proffered a $3.20 rate to Israel. EMG asks, "why?"

The reason is that competition makes companies ask questions they never had to ask before, and with Israel's high (and achievable) aims for energy supply from natural gas, new Prime Minister Ehud Olmert and his government want surrounding countries drooling over the new open market.

If Gazprom lives up to its promise of 3-4 billion cubic meters per year of delivery capacity, whether through Turkey or otherwise, Russia will have insinuated itself into Israel and the Palestinian areas at a level it has not achieved since the Arab-Israeli wars of the sixties and seventies.

Russia would become more than a redundant placeholder at the Quartet table. But that influence cuts both ways, and Israel is well advised to be wary of Kremlin influence despite the allure of Russian supplies.

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