Turkey and Israel May Reconcile After Years of Tension
An energy pipeline project under consideration could help Turkey and Israel renew their partnership after years of strain. On March 23, Israeli financial daily Globes announced that more than 10 companies had submitted bids for the tender of a proposed undersea pipeline that would export natural gas from Israel's offshore Leviathan field to southern Turkey. The statement came shortly before Today's Zaman reported a meeting between Israeli Prime Minister Benjamin Netanyahu's personal envoy for energy and security issues, David Meidan, and the chief of Turkey's National Intelligence Organization, Hakan Fidan, in which both parties reportedly agreed to work toward reopening embassies and normalizing relations, which have been fraught since the 2010 flotilla incident that left several Turks dead.
Israel and Turkey currently find themselves isolated in the region, giving both countries a reason to begin working together again, especially now that Turkey's ruling party has consolidated its power in the recent elections and feels more secure against a domestic backlash. While several technical and political obstacles make it unlikely that the proposed Leviathan pipeline will be constructed anytime soon, the issue could be used as a springboard for normalizing Israeli-Turkish diplomatic relations and opening the door to more bilateral investment and intelligence cooperation.
On the surface, relations between Turkish Prime Minister Recep Tayyip Erdogan's Justice and Development Party, or AKP, and Netanyahu's Likud party have been extremely tense since the May 2010 Mavi Marmara incident, highlighted by fiery rhetorical statements, the recalling of ambassadors and a freeze on billions of dollars worth of defense deals. During the early stages of the diplomatic break, Turkey found itself attempting to capitalize on the Arab Spring, anticipating that a strong anti-Israel stance would ensure AKP leadership at a time when Islamist political forces in the region were gaining momentum. However, three years later the Islamist parties Turkey courted in Egypt and elsewhere have mostly been sidelined or crushed, and Ankara's overall strategy has largely backfired.
Outside the Levant, tensions continue to brew with Baghdad over Erdogan's attempts to strike separate energy deals with the Kurdistan Regional Government, and the prospect of U.S.-Iran rapprochement could boost Shiite regional influence. Most recently, Russia's annexation of Crimea emphasized Ankara's perceived vulnerability to Moscow, given Turkey's overwhelming dependence on Russian energy supplies. And on the domestic front, Erdogan's peace process with the Kurds has ground to a halt, the national economy has grown stagnant thanks in part to the tapering of U.S. Federal Reserve funds, and the ruling AKP has witnessed a series of scandals amid a bitter split with former allies represented by Fethullah Gulen's movement. For the time being, Erdogan's policies have left his country isolated in a rapidly changing regional environment.
Despite these setbacks, Ankara is not without options. While Turkey's traditional partnership with Israel had certainly suffered in public perception, trade ties between the two have actually increased over the past few years, roughly doubling in size from 2009 to 2013. With total trade volume during that period rising from $2.6 billion to $5.1 billion, private trade flourished despite the political rift. The past year has also seen leaks of high-level intelligence meetings as the two sides continue to quietly cooperate on regional issues such as Syrian instability and jihadist activities.
Disagreements persist about the final details of a Mavi Marmara compensation deal, though neither side appears to be letting the resolution of that issue stand in the way of other discussions. In fact, according to reports released March 27, Israeli Defense Minister Moshe Yaalon agreed to allow construction materials and electrical equipment into the Gaza Strip to help build a Turkish-sponsored hospital, with unnamed Israeli officials commenting that reconciliation efforts with Turkey played a part in his decision. It seems clear that both parties never intended to fully sever ties and have merely prolonged the Mavi Marmara dispute for the sake of domestic politics. And with Erdogan relatively secure for the time being following the AKP's electoral victory in late March, Israeli-Turkish relations may normalize in the near future, in part because of the ambitious new pipeline initiative.
Obstacles to the Pipeline
As a consequence of its lack of relations with both Israel and Cyprus, Turkey found itself sidelined from their joint exploitation of enormous offshore natural gas discoveries in the Eastern Mediterranean. The proposed pipeline system has been hailed as Turkey's entrance into the energy game.
The 450-kilometer (280-mile) subsea pipeline would be the Middle East's most ambitious native pipeline, stretching from Israel's offshore Leviathan field, 130 kilometers west of Haifa, to the Turkish port of Ceyhan. The pipeline would run from a floating production, storage and offloading (FPSO) ship before heading northeast at an average depth of 2,000 meters (6,500 feet) along the Cypriot coastline. With a capacity of 16 billion cubic meters, the initiative has been lauded as a way to enable Turkish (and eventually European) energy diversification away from Moscow. According to energy holding firm Turcas Petrol, one of the companies to place a bid on the project, the total cost would be around $2.25 billion. In essence, the Leviathan pipeline would require an operating depth rivaled only by major international initiatives such as Medgaz, South Stream and Blue Stream, and the cost incurred to produce energy would be among the highest in the world. This in turn would require a highly experienced international energy firm to develop the necessary infrastructure.
Yet the technical obstacles are only compounded by the political constraints; few major corporations will be willing to take on the risks of a project in the politically charged environment of the Eastern Mediterranean. The ideal route for an Israeli-Turkish pipeline would move along the Levantine coastline, either onshore or through the shallower seabed, both of which would significantly reduce operating and construction costs. However, this would require the pipeline to travel through Lebanese and Syrian territory, where political and security risks would lead to frequent disruptions. Damascus and Beirut have also expressed open hostility to this option. This leaves the only alternative route traveling through Cypriot waters, which requires Nicosia's approval -- and thus, a Turkish-Cypriot diplomatic rapprochement. Cyprus has repeatedly said that it would not sign off on the pipeline until Turkey, which is the sole international backer of the breakaway Turkish Republic of Northern Cyprus, recognized the existence of the Republic of Cyprus and moved to end the island's 40-year division. Resolving one of the region's most intractable and polarizing conflicts will require a good deal of time and energy, leaving the project's 2017 planned operating date doubtful at best.
Prospective Bidders on the Project
Though obstacles abound, the project has garnered a lot of interest. Of the more than 10 companies that bid on the natural gas tender for the project, two are reportedly Turkish firms: Zorlu Group and Turcas Petrol (the latter in a joint bid with German electric utility RWE). Zorlu's bid is particularly interesting: Led by billionaire chairman Ahmet Nazif Zorlu, the holding group is one of the largest corporations in Turkey and is known to have close political connections with the AKP, largely to secure preferential business contracts. Soon after the AKP came to power, Zorlu Holding capitalized on the privatization of public land to build the massive $2.5 billion Zorlu Center on the prime real estate of Istanbul's European shore. In fact, Zorlu was among those caught up in the corruption probe on Dec. 17, 2013, and has been accused of violating the law in the process of gaining contracts for his facility.
The company maintains major investment projects in Israel and is heavily involved in the power plant sector. It is notable that tensions between Israel and Turkey did not affect the group's energy operations in Israel, where it continues to expand its presence. In fact, in 2012 Zorlu invested $277 million in the Ashdod and Ramat Negev natural gas facilities, even receiving a large loan from Israeli investors. If Ankara were to push reconciliation through energy cooperation, it would make sense to leverage a corporation known to have close ties with the AKP leadership, especially one with a good deal of influence in Israel.
Turkey and Israel appear ready to act on the opportunity to mend ties. Erdogan has likely judged his grand regional strategy a failure and seems willing to revert back to his traditional alliance structure. Confronted with rival (and in several cases, openly hostile) regimes on nearly all fronts, Ankara is in desperate need of a regional ally. For its part, Israel faces a level of instability on its borders that has not been seen in decades, as well as the threat of a new U.S. balance of power strategy centered on a resurgent Iran. The potential for a U.S.-Iranian rapprochement is pushing regional powers Turkey and Israel to consolidate their relative strength to counterbalance this emerging trend. Both sides have found themselves increasingly isolated, and their shared constraints and security concerns are naturally pressuring them toward reconciliation.
Defense and intelligence cooperation, in addition to more bilateral investment, will allow both sides to better position themselves regarding expanding Iranian influence, growing jihadist activity and the eventual aftermath of the Syrian civil war. Pushing the pipeline initiative provides a useful tool for re-establishing bilateral political cooperation, where each side can claim the necessity of energy diversification without having to face a domestic political backlash for capitulating to the other. The pieces are lining up to the extent that we are likely to see a package deal of sorts, where Israeli compensation for the Mavi Marmara and normalization of ties emerges alongside an agreement on connecting energy infrastructure. Political and technical obstacles will likely place the Leviathan-Turkey pipeline out of reach, barring an unlikely settlement of the Cyprus issue, but the project's short-term significance lies in the political gap it could bridge between the former allies.
Natural Gas Europe is pleased to provide this article in cooperation with Stratfor, a Natural Gas Europe Knowledge Partner. For more visit http://www.stratfor.com/ Follow Stratfor: @stratfor on Twitter | Stratfor on Facebook