Renewed Tensions Increases Uncertainty Surrounding Turkey as an Energy Hub

While Cyprus gets a step closer to materializing its ambition of becoming a regional energy hub by planning the construction of a liquified natural gas terminal on its island, Turkey seems to be falling behind. Israel is currently in the process of deciding whether or not to export its gas and how much of it will be left at home. This fundamental decision will determine the fate of a country that until very recently was energy-poor, energy-dependent and vulnerable to regional geopolitics in terms of ensuring its energy needs. The High Court of Justice is currently deliberating on whether the cabinet has the prerogative of taking a final decision on the matter or whether the cabinet’s decision needs to be approved by the Parliament. A court hearing is expected on September 17 with a decision to follow by the end of the year.

While exports quotas remain an issue, export routes are not very obvious either. Building an LNG terminal in Israel has been considered although it has been said that Israel lacks a coastal site to host it. A floating LNG was also amongst the options considered but often quickly dismissed due to the fact it is a new, high cost technology vulnerable to security concerns. Cyprus frequently urged Israel to consider processing its gas via the island’s LNG to reach customers in Europe and East Asia and pool costs with the cash-strapped island. Cypriot officials quickly insisted that the plan would go ahead with or without the help of the Israelis; but a little help wouldn’t hurt either. Transporting the gas via a pipeline to an energy-poor Turkey blessed with centrality has also been considered by Israel. Such a scenario would realise Turkey’s ambitions of becoming an energy hub connecting an energy-rich East to an energy-hungry West and loosen Russia’s tight grip over Europe’s supply.

A recent US-brokered apology formulated by Netanyahu to Erdogan back in March this year over the deaths of nine Turkish on the Turkish Mavi Mamara aid ship attempting to break the Gaza Blockade in 2010 came at a time when Israel was considering export destinations and routes. The apology restored broken diplomatic ties between the two countries and was interpreted as a possible hint for a future energy collaboration.

However, things have slightly changed since. Erdogan accused Israel of being involved in Egypt’s army’s overthrow of President Morsi. With a tension rising again between the two countries, the prospect of a strong energy duet seems more unrealistic than ever. Israel might be re-prioritizing its options. With Woodside still awaiting a court decision before it turns its back, Israel might still choose to complete the deal with the Australian giant and build its own LNG allowing it to tap into international export markets.

Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.   Follow Karen on Twitter: @karenayat