Energy and the Arab-Israeli Conflict

Article excerpt

Israel has very limited indigenous hydrocarbon resources and is located next to the energy-rich Persian Gulf region. This study is divided into two parts. In the first part Israel's energy outlook is profiled. Specifically, the paper examines the country's oil and natural gas exploration and potential. In the second part the seemingly successful negotiations to export natural gas from Egypt to Israel is discussed. This is followed by an analysis of the efforts to export the Iraqi oil via Israel (the Mosul-Haifa pipeline) and the attempt to revive the scheme in the aftermath of the 2003 war in Iraq. Finally, the article examines the shortlived experience in exporting Iranian oil to Israel under the Shah and the current status of the Trans-Israel pipeline. The study suggests that a regional energy-cooperation would benefit all parties and international energy markets. However, such cooperation is unlikely in the near future.

Key Words: Israel; Iraq; Iran; Syria; Egypt; Palestine Authority; Persian Gulf; Energy Policy; Security Policy; Oil; Natural Gas; Trans-Israel Pipeline (Tipline); Mosul-Haifa Pipeline.

Energy and the Arab-Israeli Conflict

Israel has one of the most advanced economies in the Middle East. Like other well-developed societies, Israel needs sustainable and affordable energy resources to maintain its high standard of living. The country, however, has very limited indigenous energy resources. Furthermore, the decades-long mutual hostility between Israel and its Arab neighbors has created an ironic geopolitical environment. The extremely energy-poor Israel is located next to the world's richest energy deposits in the Persian Gulf. The Persian Gulf region holds approximately 61 percent of the world's proven oil reserves and about 40 percent of proven natural gas reserves.1

In theory, energy cooperation between Israel and Persian Gulf producers would be beneficial to both sides. The later would further diversify their export markets while the former would save millions of dollars by importing oil and natural gas from nearby producers. Furthermore, Israel could serve as a transit route to hydrocarbon exports from the Persian Gulf to Europe and the United States. Finally, regional economic cooperation is seen as the sine qua non of a durable peace. In other words, economic cooperation would establish interdependence between the rival parties and lay the foundations for comprehensive and long-term peace.

Despite these theoretical advantages, there has been very little, if any, energy cooperation between Israel and its neighbors. Israel imports most of its oil needs from Russia, Azerbaijan, the North Sea, West Africa, and Mexico. Since the late 1990s Tel Aviv and Cairo have negotiated lucrative natural gas deals.

This study examines Israel's energy outlook. This will be followed by an analysis of the negotiations to export natural gas from Egypt to Israel. Finally, the short-lived efforts to establish energy partnership between Israel and Iraq (the Mosul-Haifa pipeline) and Israel and Iran (the TransIsrael pipeline) will be discussed. The study suggests that this lack of energy cooperation between Israel and its neighbors is driven more by pragmatic reasons and less by ideology. Oil and natural gas can, and should, play a role in fostering the efforts to establish peace in the Middle East.

Israel Energy Outlook

As of January 2007, Israel's proven oil reserves are estimated at 0.002 billion barrels and its natural gas reserves at 1,275 billion cubic feet (bcf).2 These very limited hydrocarbon proven reserves mean that Israel is heavily dependent on foreign supplies to meet its energy needs. Confronting this vulnerability, Israel, like many other energy consuming countries, has pursued a multi-layered energy policy. This includes encouraging indigenous production, diversifying energy forms and sources, and establishing a strategic petroleum reserve.

According to the Israeli Ministry of Environment, the economy has been based almost entirely on imported fossil fuels, mainly coal and crude oil. …