/

Betting on East Med gas is the wrong horse

2023 views
6 mins read

After years of official support by the US Administration for energy projects in the East Mediterranean, Washington has shed its clothes.

As expected, Washington’s perceived support for a regional offshore gas pipeline connecting Egypt-Israel-Cyprus with mainland Europe has been cancelled, even though the Biden Administration has not yet officially killed the total project.

After years of vying for a strong regional US military-economic presence to counter Turkish claims and threats coming from the Syrian civil war and partly finance the so-called East Mediterranean Offshore Gas Pipeline, the project has been culled.

Former US President Donald Trump pushed for the construction of the multi-billion pipeline and bringing in US shale gas as LNG into the region.

At the same time, US interests were never focused on Cypriot interests or EU energy security, but mainly as a counterweight against Turkish president Erdogan’s regional adventures or Russia’s growing position in the area.

Some analysts, such as myself, criticised the financial, commercial viability of the East Med pipeline project, were always pushed away by proponents, as even the EU was behind the idea.

Logically, East Med offshore gas reserves’ only viable options have always been either a full-scale LNG connection via Egypt or a direct connection to the Turkish markets and its existing Turkey-EU pipeline infrastructure with some more political constraints.

At present, analysts now need to look at a situation in which years of opportunity have been lost and money has been washed down the drain.

Washington now openly expresses its reservations about the project, which in non-diplomatic terms means we are pulling out.

Surprisingly, Washington is questioning the commercial and financial viability of the offshore pipeline.

The latter is a real Gotzpe, as most oil and gas analysts have stated this from the start.

The costs and technical challenges have always hung like a Sword of Damocles over the ambitious project.

Only the EU-USA and some Greek and Cypriot politicians were willing to dream the dream.

Oil and gas operators and financial institutions from the start stayed away.

Israel’s position has been ambiguous, officially supporting but investing mainly in new options to bring natural gas via the Sinai to Egypt’s LNG liquefaction plants in the Nile Delta.

No other options are viable if targeting non-Levant markets.

Energy hypocrisy

Washington’s energy hypocrisy is clear.

At the same moment, they question the East Med pipeline project based on financials and ‘not-green friendly’; other pipelines in the Balkans are being supported.

For Washington, support to a project or pipeline is not commercially linked but based on geopolitical assessments.

With US LNG glutting EU ports, Washington’s energy tsars are not interested in East Med.

However, geopolitical and military advisors in the capital see a growing Russian threat in the Balkans, especially Serbia, Kosovo, and of course, Ukraine.

Energy diplomacy is now reshaped to other regions.

The dramatic change of US positioning in the East Med is clear but may not be recognised in Athens, Nicosia or even Israel.

At the same time, there is a thaw in the US-Turkish relations, Washington is considering pulling out of Syria, other major flashpoints are on the screen.

Ukraine, Taiwan or Iran, are focal points right now; a bit of offshore natural gas in East Med is not a cherry for Washington.

East Med parties should for once realise that to wait for Uncle Sam to provide support or cough up cash is a fallacy.

US geopolitical power projections are not anymore EU-East Med focused.

Asia and Russia are trumping all.

Biden’s Administration is not linked to Cyprus, looks at Erdogan as weakened, and Egypt-Israel is too quiet.

Athens and Nicosia should book tickets to Paris, Rome and maybe Germany, not only for natural gas investments but a full-scale regional approach to bring in interested parties.

France already is at the table, Italy via Egypt a real player, but Germany needs gas and isn’t in love with Turkey.

Relying on statements as made by the US embassy in Athens, stating “the USA continues to strongly support regional efforts that enhance and promote cooperation and regional stability, including the 3+1 mechanism in which the Republic of Cyprus, Greece, Israel, + the United States participate”, are just diplomatic means of saying you are on your own.

The refocus on a EuroAsia or EuroAfrica interconnector by Washington is just a clear but empty political gesture.

Maybe they should have asked US Secretary Blinken after meeting with the Turks if he is still interested in East Med.

Most probably, Blinken would have stated that NATO cohesion with Turkey vs Russia is more important than the economic viability of a major offshore gas project that could support and strengthen EU energy security of supply.

Now the time for all in the East Med Gas Forum is to reassess the situation and head without delay to plan B, Egypt LNG expansion.

It should already have been plan A, but well, who wants to make Uncle Sam and the EU Commission unhappy!

Cyril Widdershoven is a geopolitical and energy analyst