Archive for ‘Oil & Gas’

May 7, 2012

The Importance of Water: The Ancient Key to Power in the Middle East

by Gedalyah Reback

Historically, the Middle East hosted the most well-known empires known to us today. The Assyrians, the Babylonians, the Egyptians and rulers from modern Turkey dominated the region. Rarely if ever was there a power centered in the Land of Israel or Syria that dominated the region. Only with Islam’s Caliphate, centered in 7th century Damascus, did that change. The reason is simply because this area doesn’t have the natural resources to support a large population that Egypt’s Nile or Anatolia’s forests or Iraq’s rivers do. All that is changing today and Israelis should be well aware of it. There are key elements to Israeli technological innovations and its military policies that make it an unprecedented phenomenon in Middle Eastern power.

Water

The main reason Egypt, Anatolia (Turkey) or Iraq have been the homes to the major Middle Eastern powers is because of the access to natural resources. Egypt & Iraq don’t have much in terms of wood or stone – as a matter of fact many of the bricks common citizens used in construction were mud bricks. What they lacked in such things they maintained in water. In the desert Middle East particularly, that has been the fundamental element to power. The Assyrian and Babylonian empires both centered themselves on the Tigris & Euphrates rivers of Iraq. Egypt, of course, has had the Nile. Israel has only the Jordan and it hardly supports a massive population.

But two things have changed the game that give Israel a power advantage. For one, Israel has developed the desalinization industry, converting sea water to fresh drinking water to support a rapidly growing population. Secondly, Egypt and Iraq might be overpopulated. Without this Israeli technology, its use of the aforementioned rivers is excessive. Even though Israel, Jordan & the Palestinians have decimated the health of the Jordan River, desalinization replaces the supply, in fact increasing it and even making Israel a possible exporter of water.

The more Israel increases this resource, the greater its power might become. The fact that producing more water is tied to continuing to develop and refine new technologies also speaks well to the economic power of Israel. This is one of many reasons that Israel’s diplomatic issues and impasse with the Palestinians does not undermine Israel’s strength as much as it would a small state centuries ago.

Navy

Indisputably, that power would be nowhere if it weren’t for the stimulus of Western weapons that have enabled Israel’s modern army. But it’s not just the most capable air force in the Middle East that is giving Israel its might. Israel might control the most powerful navy in Israel’s history. While it has nowhere near the manpower that Turkey has, it does own 4 Dolphin submarines bought from Germany with 2 more on the way. Further, because of Israel’s newly found natural gas wealth resting miles off the coast, its navy is considering an unprecedented build-up of armor to defend against Lebanese and Turkish attacks.

Historically, the empires of the Middle East relied on land power – infantry & cavalry – to conquer and defend. In fact, between 1100 & 1500, the Ayyubid and Mamluk Empires of Egypt had virtually no naval power. The Crusaders had such an advantage that those empires decided to desert the coast of modern Israel and move cities inward, merely to avoid giving their enemies usable ports and a strong foothold on land. Every time a ruler would have the initiative to build a fleet, budget cuts or pressure from conservatives ended the project early. The Ottoman Empire did not repeat this mistake, but they did not possess the power to defeat European naval powers like the Portuguese & Spanish in the early 1500s to stop the rapid expansion of European colonies and thus European power.

With increasing threats from smuggling, terrorists and even Turkey, Israel is on the verge of creating the certifiably strongest navy in Middle Eastern history. Merely maintaining one that can tango with the other powers in the region reads well for Israel’s future in the region, certain to solidify military abilities that historic powers have lacked.

If Israel continues its water projects and rehabilitates the Jordan River & Dead Sea, it would consequently be extending its technological abilities and the ecological health of the country. In so doing, it would enhance the natural strength of the country and the availability of natural resources. If that is an indicator of where countries can go, the Jewish State would theoretically be on the path to becoming, at least on a regional level, a superpower.

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April 25, 2012

Israel’s Navy Could Be Fighting off Africa

by Gedalyah Reback

Despite the fact India lacks what might be becoming a standard element of modern navies, its services have been in high demand from other countries seeks its help in the Indian Ocean. The European Union wants to protect shipping along the African coast, for example against Somali pirates. European countries are trying to build the naval abilities of “Somalia, Djibouti, Eritrea, Kenya and Tanzania.” Where Israel is in this project is a question for market researchers as much as it is for Israel’s political leaders. The project is trying to hand over responsibilities to local actors, and India is the natural choice. But Israeli private contractors have operated in the region for years, even preventing one pirate attack on an Italian ship.

Israel has strong relations with Kenya & Tanzania, so she’s perfectly placed to make an impact with its own thriving defense industry. Even Russia & China are part of international efforts to patrol the area, joining NATO’s (North Atlantic Treaty Organization) Operation Ocean Shield.

Where’s Israel’s leadership comes in is here, with NATO. Recently, Turkey refused to allow Israeli reps at a NATO conference in Chicago. Every country in the alliance has a veto on policy decisions, and Turkey has used its power several times in the past. Other Mediterranean countries who are not part of the alliance were also in attendance. Until the fallout with Turkey, Israel’s relationship had been growing with NATO, virtually to the point of being an unofficial member. As Israel’s naval powers grow, it will want to extend its reach further, especially off the coast of countries where Israeli diplomats have been attacked and Islamist militant organizations are operating, i.e. Somalia. Israel will get that chance this summer, when Turkey’s other rival and Israel’s new energy business partner Cyprus becomes the President nation of the European Union. That will put Israel’s navy in an optimal position to be more directly involved with the European Union in both the Mediterranean & the Indian Ocean defense project.

The European Union is the backdoor for the IDF to cooperate with European armies when Turkey is blocking its access to NATO. The two organizations, despite being headquartered in the same city and actually having 21 members in common, do not coordinate policy, projects or operations well at all. The main reason is actually the Turkish dispute with Cyprus, making the second half of 2012 one of the more interesting times for European politics in recent history. With disputes about the Euro, possibly a new French president and the relationships in the eastern Mediterranean deteriorating, diplomats will be busy trying to patch up Turkey’s faltering diplomatic relationships before they infect European initiatives in both the EU & NATO.

Israel's been aiming to expand its diplomatic footprint in Africa itself for years.

But Cyprus will be in command, and the Cypriots have used their political position against Turkey before. In 2005, Cyprus vetoed another idea, to invite Turkey to join the so-called “European Defense Agency.” That agency is more a loose accord to get armies from the EU and outside the EU to talk to each other. The contracts Cypriots have been signing with Israelis over joint exploration for gas & oil make it a real opportunity for Israel to get into the economic and security projects of the European Union.

Personally, while I’d like Israel and Turkey to patch things up, Israel needs more leverage in future negotiations over the two countries’ relationship in order to make getting back together worth it. This is an opportunity for Israel to do that.

April 22, 2012

Israeli Gas Drillers Get Nearly $1 Billion in Investments from US

by Gedalyah Reback

It was announced April 22nd that the group of owners developing one Israel’s large offshore gas fields, Tamar, will be getting just over $900 million in loans from a consortium of 11 companies and banks in the near future.  The money is a huge boon for the developing Israeli energy industry.  It also indicates the potential for the export element of the business the industry is aiming for.  The connections are coming from principle Tamar developer Noble Energy, based in Texas, which owns about a third of the field.

In January, the controlling group signed a deal with a smaller Israeli energy provider to supply gas for nearly 20 years, declaring they wished to increase competition in the Israeli market.  That deal is worth $5 billion.

Tamar is a large gas field whose vast area has caused diplomatic and security issues to pop up with Lebanon and Hezbollah. The field is one of several that is also the target of joint development projects with Cyprus. Cyprus’ interests have angered Turkey, creating tension with Ankara as well. Turkey does not recognize the government of (southern) Cyprus, preferring the Turkish Northern Cyprus government as the official representative of the island. Israel has been looking at enlarging its navy in anticipation of security issues to offshore development sites in the future. Lebanon has refused to negotiate with Israel up till this point, instead filing complaints with international bodies and refusing to ratify a joint development agreement with Cyprus.

The symbols of the main companies involved are here: Noble Energy (NBL); Delek Drilling (DEDRL); Isramco Negev (Isral) & Avner Oil (Avnrl).

April 21, 2012

Israel’s Navy Expanding to Defend Offshore Gas

by Gedalyah Reback

Israel has expanded its relationship with Greece for two reasons. The first is because Greece is the natural alternative to having an alliance with Turkey, which is falling apart. The second is Greece is the natural patron of Cyprus, the other country about to win big from natural gas fields discovered in the Mediterranean Sea. Israel is planning to develop several fields, so naturally they will want a strong relationship with the other country nearby, Cyprus. The fields are in the “territorial waters” of the two countries, that is the area of ocean or sea water that is within legal range of a country’s coastline.

But that also involves Lebanon. Lebanon is nowhere near as advanced as Israel in its ability to explore for mineral deposits offshore. But now that Israel has hit the jackpot, Lebanon is making claims that some of the fields are in Lebanese water. The maps would have to be manipulated to make that true, but that hasn’t stopped Hezbollah and the rest of the Lebanese government from making an issue out of it. Hezbollah added fuel to the fire, threatening Israel if it crossed into the ambiguously defined Lebanese waters. In kind, Israel promised it would defend its gas deposits with force.

There is teeth to the Israeli words while little to Hezbollah’s. Despite what little naval options Hezbollah or Lebanon would have, Israel is stacking up. The navy is negotiating with South Korea and Hyundai to buy a bunch of new frigates. Israel recently had a spat with South Korea’s military industry because Jerusalem chose to buy a squadron of training planes from Italy instead of the Koreans. Filling the need to bulk up the navy and stay on good terms with South Korea is like killing two birds with one stone. Some even want Israel to stock up on bigger sorts of ships like destroyers and cruisers.

Israel is also replacing its joint naval war games with the Turks by conducting new ones with the Greeks. Greece is a patron to tiny Cyprus, so any business or military affairs happening on the island resonate in Athens. Greece is equally involved in the cultivation of the natural gas deposits as Cyprus or Israel, so the Greek navy will be the first natural ally for the Israelis in the Mediterranean.

Cyprus might end up mediating between the Israelis and the Lebanese on a maritime border. Cyprus already has working agreements with both countries on exploration, but both could be undermined if either country cannot begin working offshore. Lebanon refuses to ratify its agreement with Cyprus until it gets clarity on its southern border, forcing Cyprus to get pro-active about solving the dispute. Israel and Lebanon are also beginning to cooperate in other ways on the waters of the Mediterranean Sea – blocking Palestinian activists from crossing into Israeli waters on Land Day and Nakba Day. There is room to settle the dispute, but it might have more to do with Hezbollah’s willingness to cook up an issue to fight about then actually taking a pragmatic approach to the issue.

Turkey is the big reason though to bulk up. Initially you’d think I’m talking about the Flotilla incident in 2010, when the Israeli navy boarded a ship and killed nine Turkish activists on their way to protest the blockade of Gaza. The reason to buy bigger boats has more to do with Turkey’s relations with Cyprus. Turkey has a tense relationship with Cyprus. In 1974, Turkey invade Cyprus and carved out the northern third of the island as a separate country for Turkish residents – Northern Cyprus. Only Turkey recognizes the country, and in September 2011 signed a joint exploration deal with the tiny country to search for gas off the Northern Cypriot shore.

Turkey has had fierce rhetoric since and its own naval maneuvers, rattling its sabers in the direction of the Greek, southern Cyprus working with the Israelis. In December, Turkey drove ships toward the fields claimed by Israel and the southern Cypriots and fired in the direction of the fields. Israel and Cyprus have asked for help from the US to keep the Turks back, but the tensions are hot as Turkey seeks to stake a claim for itself and its tiny Northern Cypriot neighbor. The International Crisis Group in the beginning of April accused Turkey of a series of provocations against southern Cyprus, and told Turkey to discipline itself.

April 2, 2012

Quick Thought: Israel Should Join the European Union

by Gedalyah Reback

It’s a topic that isn’t broached so often. The reasons aren’t clear. It might have to do with Israeli hesitation toward Europe because of historical baggage. But considering the idea Israel might join NATO comes up every so often, it isn’t so much of a leap. So what keeps this off the radar? Shouldn’t Israel want to join the group?

There are negatives that I can think of, but as a personal exercise I’d like to cover the positives. There are immediate benefits and potential in all of them.

1. Movement

The benefit to Israelis would be the ability to move about Europe more freely and for longer periods of time. It would give Israelis more opportunities to study abroad and build relationships with future business and political partners in important countries from the UK to Germany to Poland. The reverse would also be a benefit. European Jews would more often visit Israel, probably with a heavy level of extended stays by students and retirees. This is something Israel has coveted for decades, a way of channeling more European Jews to the Holy Land to become permanent residents and citizens. It would probably launch at the least a small rekindle of European Zionism in the Jewish community there.

2. Money and Energy

Really these two topics are linked. Since 1992, Europe has added 2.5 million jobs. The opening of borders has let new import/export relationships develop, plus there is a higher-level, professional exchange of knowledge and business that would be incredibly valuable to Israel’s high-tech sector. Israel’s joining the Union would serve as free publicity for Israel’s start-up industry, plus even work in the reverse. With so many foreign interests investing in Israeli companies, the time is coming for Israeli entrepreneurs to buy up foreign assets for themselves.

The opening to tourists is the obvious and most easy-to-understand benefit of the whole project. With easier access to Israel for travelers, that means more cash for the tourist industry, taxes for the government and eventually government investment in various sectors that would in turn sell to continental Europe. Even if Israeli prices were to be equal to Western European prices, there would be extra cash flow.

A major sector that would benefit would be Israel’s growing energy market. Israel has always needed oil, but soon it will be producing natural gas. Depending on how large the exports can be, an internal EU market for fuel would be a major boon for Europe to welcome Israel into the Union and for Israel’s economy. Plus, a massive amount of research & development for alternative energy is happening in Israel. There are infinite possibilities for exporting an untapped and extremely interested market like the one that exists in Europe. It goes hand and hand with Israel’s other R&D, in high-tech.

Other benefits would be in certain import/export markets like cars. The potential for more cars on the road here could mean lower taxes for Israelis and more infrastructure development also. It could even make negotiating building highways in Palestinian territory easier if European automakers and the EU’s political power are behind the push. It would open up access across the country.

3. Customs and Security

The major benefit would probably be in customs, not even the probably infinitely better relationship with NATO. On the customs front, Israel would have more ready access to European travelers and cooperation with other countries’ enforcement agencies and border patrols. It would make monitoring any threats from militant Muslims in Europe easier, particularly from France or Germany.

As mentioned before, entering the European Union would be more reason to join NATO. NATO’s major benefit is its collective defense protocols. First implemented after September 11th, the attack on the United States was defined as an attack on the entire alliance, making the invasion of Afghanistan, overthrow of the Taliban and crushing of Al-Qaeda all NATO priorities and missions, not merely those of the US. Thus, an attack by a foreign power, whether directly or via an affiliated terrorist organization, could be designated an attack on all of NATO, and automatically trigger a cooperative counterattack against an aggressive country like Pakistan, Iran or potentially a future hostile Egypt.

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This is a very blanket list of positives to the idea. Ideologically, economically and defensively, the move makes a lot of sense. It’s worth exploring for Israel’s future in terms of infrastructure, external security and even the potential to attract more Jews to become citizens of Israel.

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