Turkey open to energy ties with Israel

Tentative rapprochement between countries could pave way for joint energy projects but it is still too early to talk of specifics, Turkish minister says

Reuters / YNET

A tentative rapprochement between Turkey and Israel could eventually pave the way for joint energy projects but it is still too early to talk of specifics, Turkey’s energy minister said this week.

A US-brokered thaw between Turkey and Israel could alter the energy equation in the eastern Mediterranean, in theory allowing newly discovered Israeli gas to be piped to import-dependent Turkey and on to other markets.

Israel, once energy poor, is expected to become a gas exporter by the end of the decade. Its huge offshore Leviathan field contains an estimated 17 trillion cubic feet (tcf) of gas, making it the world’s largest offshore discovery of the past decade when it was found in 2010.

Seventeen trillion cubic feet (481 billion cubic meters) is equivalent to almost a year’s worth of European gas demand and enough to cover Israel’s gas needs for generations.

US President Barack Obama last month brokered a first step in reconciliation between the two former allies, whose relations were frozen after the 2010 killing by Israeli marines of nine Turks aboard a Gaza-bound aid ship.

Prime Minister Benjamin Netanyahu apologized to his Turkish counterpart Tayyip Erdogan over the killings and pledged compensation to the bereaved, meeting a long-standing Turkish demand. Turkey, for its part, appeared to back off a separate demand that Israel stop blockading Gaza.

“The reason for Israel’s apology was not energy projects. But the consequence could be energy projects,” Yildiz told reporters at an energy conference in Ankara.

“We have said we are not closed to these in the future. But at this stage … it is early to talk about energy projects.”

Because Israel’s domestic energy market is so small, exports are key to the development of the find. It would be cheaper to export gas via a pipeline to Turkey than converting it to liquefied natural gas to reach export markets by ship.

Turkey could become a large consumer of Israeli gas and serve as a transit route to other export markets, but there are concerns, behind the conciliatory rhetoric, about how quickly Turkish-Israeli relations will be restored.

Diplomatic coup

US Secretary of State John Kerry urged the two nations to restore full relations during a trip to Istanbul on Sunday, saying such a move was vital to regional stability.

Despite Obama having pulled off a diplomatic coup – a three-way telephone call with the Israeli and Turkish prime ministers, who had not spoken since 2011 – some officials in Washington are worried Turkey might be backtracking on the deal.

An Israeli delegation had been due in Turkey this week to begin discussing details of the compensation agreement, but Turkey postponed the meeting due to a foreign trip by a senior government official who is involved in talks with Israel.

Neither country has said when their ambassadors would go back, a prerequisite for the restoration of relations necessary for bilateral energy talks.

Yildiz also said that Turkey wanted to see the Iraqi constitution respected in any deals between energy firms and the northern Iraqi Kurdistan region.

He told Reuters in an interview last week that he saw no obstacles to public or private firms striking oil exploration deals with Kurdistan and that Turkey would play an active role in any arrangement under which crude export revenues are shared between the central government and Kurdistan.

Yildiz added that Turkey’s state oil company TPAO had applied for exploration rights off the coast of Lebanon, which shares a border with Israel. Israel and Lebanon have never agreed upon a maritime border.

“For the field offshore Lebanon, several firms have applied including TPAO. We’re hoping to hear on the pre-qualification results soon and we hope TPAO will be one of them,” Yildiz said.

“TPAO will participate in the Lebanon (project).” Dozens of companies have submitted pre-qualification bids to explore for oil and gas in Lebanon’s offshore waters.

Interest in drilling in the eastern Mediterranean has grown since natural gas fields were discovered off Israel.

Names of the pre-qualified companies will be announced on April 18 and the government aims to agree its first exploration and production agreement by February next year.


David’s Harp / When talking Turkey, think natural gas
There is one place where Israel can throw its weight around vis-a-vis Ankara: its new-found energy resources.
By David Rosenberg | Apr.10, 2013

A funny thing happened on the way to the rapprochement between Israel and Turkey. In the intervening years, while Turkish Prime Minster Recep Tayyip Erdogan was calling Zionism a “crime against humanity” and Danny Ayalon humiliated Ankara’s ambassador by having him sit on a low couch, bilateral trade between the two countries grew by some 40 percent.

Of course, the figures don’t include Israel’s defense exports, which are not counted in the official figures and have plummeted to nearly zero, nor do they take into account the hordes of Israelis who are no longer tanning themselves alongside Antalya’s pools and beaches. Israeli exports to Turkey fell a little last year, too, but they were already on the upswing again even before Netanyahu phoned in an apology to Erdogan last month. Exports of Turkish products have grown non-stop through all this period.

The Turkish media reported this week that even Erdogan’s son, Ahmet Burak, has been doing business with Israel through his shipping company. And even in defense, the one area where Turkey has officially imposed an embargo on Israeli companies after the Mavi Marmara flotilla incident, Elta, a subsidy of Israel Aerospace Industries, delivered some $100 million worth of electronic equipment for four airborne early-warning and control aircraft that Boeing is selling Turkey.

Not so popular in Turkey

You could take the brisk trade between the two countries as a sign that despite all Erdogan’s bluster, he was never really serious about isolating Israel, but you shouldn’t. The Turkish prime minister’s anti-Israelism isn’t tactical — a protest against the death of the nine Turks killed on the Mavi Marmara, a principled stand against Israeli oppression of Palestinians or aimed at cementing his country’s status as the emergent leader of the Arab world. It is all of those things, but in the end it is his Islamism, even if moderate by, say, Iranian standards, that makes him no friend of the Jewish state.

Erdogan’s term as prime minister will soon be over, but Israel has no reason to assume that relations with Turkey can ever go back to what they were in the 1990s. Erdogan has his eyes set on the presidential palace, where he plans to rule the country Putin-style by enhancing the power of the office at the expense of his successor in the prime minister’s residence. In any event, what Erdogan says is what the majority of Turks feel.

“Israel is not very popular in Turkey and never really was despite the blossoming of strategic relations between Jerusalem and Ankara in 1996,” writes Steven Cook, a foreign policy analyst in a recent issue of The Atlantic. ”Israel’s only real constituency in Turkey includes only parts of the business community.”

And there lies the key to Israeli-Turkish trade. The two countries have what to trade and there is a clear business incentive for doing so. The Turkish public’s dislike of Israel could be navigated by the fact that most of what Israel makes is hidden deep inside the bowels of a smartphone (software and chips) or way back in the supply chain (fertilizers and chemicals). It makes it hard for a consumer to identify, let alone turn her nose up at, and it’s a source of endless frustration to Israel’s opponents everywhere, not just in Turkey.

Business could have gone on as usual for the countries and perhaps even prospered without a sulkha (an elaborate apology) imposed by Obama. Ironically, the U.S. president’s efforts, like much else he does in the realm of foreign policy, may backfire. Rather than letting bad relations simmer on a low flame as they have for the past several years, he has now created new sources of tensions. Turkey’s demands for compensation are now a subject for active negotiation not a passive standoff. As the talks go badly, as they likely will, they will become a source of new grievances and claims.

Israel is in an uncomfortable position: It is dealing with a country that is politically, militarily and economically powerful. Turkey is a near neighbor that has more assets with which to throw its weight around the region than any other local pretenders to the regional throne, like Egypt, Iran and Saudi Arabia, ever had. Ankara is the perfect partner for defense and intelligence cooperation — stable, democratic mostly and deeply involved in Syria.

What can Israel offer in return to even out the strategic balance? Our strong suit has always been defense and intelligence, not just vis a vis Turkey but with the United States and other countries as well. But Erdogan doesn’t seem to be an interested buyer, at least as far as we can tell. Trade has some value, but let’s face it, trade with Israel is relatively small change for Turkey: In 2011, we accounted for 1.8 percent of all of Turkey’s exports; the rest of the Middle East made up close to 20 percent.

Putting a foot on the gas

But there is an area where Israel can throw its weight around and that is natural gas. The start of production at the Tamar field is the first card Israel has been dealt in the global energy game. It’s a low one, since Tamar’s gas is going to domestic purposes only, but the Leviathan field is another story. It has enough gas to export and Turkey, whose economic ambitions are as large as its political ones, is a giant nearby market. Turkey imports all its natural gas needs, which amount to 40 billion cubic meters – six times what Israel consumes. Moreover, Turkey’s gas consumption is projected to grow by 50 percent over the years.

The problem for Ankara is that all this gas comes by pipeline from places like Iran, Azerbaijan and Russia, or by tanker as liquefied natural gas from Algeria. These are not the kind of countries you want to rely on. Russia has famously used its gas assets to squeeze its neighbors politically and Iran is subject to sanctions. Algeria has avoided the turmoil of the Arab Spring, but it is hardly a paragon of political stability. Israel, by comparison, is stable and desperate to be Turkey’s friend. Who could be a better supplier?

Ankara is giving hints of that. Last November Mithat Rende, the politically well-connected director general for Multilateral Economic Affairs at Turkey’s Foreign Ministry and the officials responsible for his country’s Mavi Marmara policy, suggested at an energy summit that constructing a pipeline under the Mediterranean would be the “best way to export Israeli gas.”

The Turkish conglomerate Zorlu Group has been working in recent months to convince the Israeli government and the Leviathan gas field partners to approve energy exports to Turkey, TheMarker reported in February. Zorlu’s plan is to lay an undersea pipeline from the Leviathan field 130 kilometers off Haifa to Turkey’s southern coast. The pipeline would deliver between 8 billion and 10 billion cubic meters of gas annually.

For this to happen, of course, a lot of issues have to be worked out, not least Turkey’s bloody-mindedness about Cyprus. Neither Turkey nor Israel is going to commit themselves to such a big, expensive and unalterable commitment like an undersea pipeline if disagreements on the scale of the Mavi Marmara affair are going to get in the way. For Erdogan and his successors, they will have to decide whether economics trumps religion, at least sometimes. For Israel, it involves a change in mentality from being a country whose assets in the international arena are defense and intelligence to being a mini Saudi Arabia.