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Monday, 5 February 2018

Energy and geopolitics in the Eastern Mediterranean

Speakers: Constantinos Filis (Panteion University) and Vassilis Kappis (University of Buckingham)

Energy and geopolitics in the Eastern Mediterranean (EM). Dr Vassilis Kappis (University of Buckingham) and Dr Constantinos Filis (Panteion University).

This seminar, chaired by Ezgi Basaran, comprised two distinct presentations, with only implicit overlap apart from the regional commonality. Dr Kappis looked at big power rivalry in the region, while Dr Filis examined prospects for energy exports.

Dr Kappis quoted de Blij to postulate that geopolitics is the interplay among geography, power, politics and international relations. A branch of political geography in essence, it considers the strategic value of land and sea in the pursuit of national interests and influence. In Mackinder’s theory, who controls the heartland controls the world island, while Spykman argued that who controls the Rimland controls the continent; he is regarded as the godfather of containment.

Post-cold war the West was dominant over Rimland. NATO had absolute control over the Eastern Mediterranean, as well as further east. The Gulf War and NATO’s eastward expansion, most recently with the inclusion of Montenegro in 2016, demonstrated this. The Bush doctrine, post-9/11, intensified the push to the east; this was a “unilateral moment” in international politics, emphasizing pre-emptive wars in the view that deterrence alone was not adequate.
Starting from the mid-2000s, Russia became increasingly “allergic” to the West moving towards its sphere of influence. Russia struck back in Georgia in 2008, and became involved in the Ukrainian conflict. A surprising halt ensued. Although analysts were worried that Russian-backed rebels could threaten Kiev itself, the conflict did not even reach Odessa, despite the significant emotional attachment the latter exerts to Russians. Moscow’s sights were turned to the Eastern Mediterranean, with the Russian presence in Syria turning the tide of war in favour of Bashar al Assad. This experience shows that both land and sea areas of the Rimland remain geopolitically relevant to Russia and the West. The US is still dominant, spending ten times as much on defence as Russia, but Russia has the capacity to challenge Western dominance and does not need to finance foreign bases. The US has 7100 nuclear warheads, while Russia has 7700.

The outlook of the Eastern Mediterranean seems grim, featuring recently an increasing range of conflicts and security challenges, from the Arab spring, to the rise of ISIS and the Syrian conflagration. The US meanwhile shifted its attention to the Asia/Pacific, and left only a few ships in the Eastern Mediterranean while instability was mounting. The Tartus and Latakia bases in Syria have been (re)constructed by the Russians in Syria and are protected by advanced S-400 missile systems, among others, bringing the critical NATO base of Incirlik in Turkey within their range. These developments are unprecedented and potentially game changers.

The EU’s capacity to be a security provider remains limited. The US provides 72% of NATO spending, the UK 6% and France 5%. The EU is likely to increase its defence budget, but there has been a power vacuum that Russia has been slowly filling. Meanwhile, there is a regionalization of security links with Egypt, Greece, Cyprus, Israel, Lebanon and Jordan increasing their political coordination and security cooperation.

Dr Filis looked at potential Eastern Mediterranean energy exports in the context of EU energy vulnerability. Future EU gas demand is uncertain, but likely to remain stagnant, falling from about 500 bcm in 2000 to 460 bcm in 2040. Indigenous production however will continue to decline, reaching less than half its 2000 level by 2040, while imports will likely almost double over the period, from 240 bcm in 2000 to 370 bcm in 2040. Imports now are 68% of demand; by 2040 they will comprise 85%.

While the US will probably be totally independent, the EU will face rising competition for energy resources from China, India and others. New supplies will be needed, diversification will be a priority, and the Eastern Mediterranean is promising. Azeri production is lower than expected, the Turkmens are exporting to China, Iran is complicated, and the US is likely to sell to Asia.

The proven reserves in the Eastern Mediterranean are twice those of Azerbaijan., and large undiscovered reserves are expected. Eastern Mediterranean gas production will likely grow enormously, from 55 bcm in 2005 to 160 in 2035. Asia is not likely to be an attractive market, because of increased supplies from Australia and East Africa.

Options for exporting Eastern Mediterranean gas include landing it in Turkey, the nearest major market. Alternatives include using existing LNG facilities in Egypt, which is cost effective but would imply Israeli and Cypriot dependence on Egypt. Greece has comparative advantages, including that it would connect to south east Europe, at present dependent on Russian gas. Greece is promoting the idea of an undersea pipeline, but this is only likely to be taken forward if the alternatives do not move ahead. There is less support now for the Turkish option, in part because it would give Turkey increased leverage over both the producers and the EU. Israel does not want a major facility in Israel or Cyprus because of security concerns however; at the moment it prefers Egypt as a receiver.

Final outcomes depend on prices of oil and gas. Russian pipeline gas is very cheap, at about $5.5 per MMBtu, with other suppliers around $7 and Eastern Mediterranean $7.5 per MMBtu.

In conclusion, the EU will need over 100 bcm of natural gas after 2030. EM sources could provide 30-50 bcm. EM producers should cooperate in order to make their energy extraction cost-effective.

Charles Enoch (Director, PEFM Oxford, St Antony's College)

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