Israel using gas exports to boost its diplomatic influence

A visit to the Leviathan gas rig off the coast of Haifa illustrates Israel’s opportunity to up its gas game and wield its diplomatic power across the globe. The gas rig is actually quite big.

With three main levels and pipes that seem to go on forever – leaving one wonder how someone figured out how to connect them all.

Leviathan is the largest gas rig in Israeli waters that receives gas from the country’s largest gas reservoir located well over 100 km away. The gas flows through the rig where it is cleaned and then propelled directly to Israel where it immediately powers the country.

Russian invasion of Ukraine has opened what some in the industry call “historic opportunities” for the Jewish state to up its energy game and, in return, increase its diplomatic value and standing in the Middle East and beyond.

The illustrations are bountiful, but two are important: In March, President Isaac Herzog flew to Turkey and met with President Recep Tayyip Erdogan. Last month, Turkish Foreign Minister Mevlut Cavusoglu visited Jerusalem for talks with Foreign Minister Yair Lapid.

Ankara is heavily reliant on Russia for energy – including 45% of its natural gas and 17% of its oil. Reconciliation with Israel and improving relations is the key for Turkey to be able to potentially diversify its suppliers and cut back its dependence on Russia.

The second example was the flip-flop that Israeli Energy Minister Karin Elharrar did on May 30 when she announced that her ministry would be issuing licenses for new exploration of natural gas in Israeli waters. It was a sharp turn from what the Yesh Atid had announced just six months earlier in December 2021.

Elharrar said, “In the coming year we will focus on the future, on green energy, on energy optimization and on renewable energy, and while we do so we will put aside the development of natural gas, which, as is known, is a short-term solution.”

By May 30, Elharrar was singing a different mantra, “The global energy crisis provides an opportunity for Israel to export natural gas, along with the honest and real concern for what is going on in Europe.”

A global energy crisis and the recognition that Israel can play a role in resolving it and at the same time improving its international standing, makes the big difference.

“The world changed and we cannot ignore it,” said Energy Ministry Director General Lior Schillat. “There is a rise in the demand for gas especially in Europe since the Russia situation and they need a steady supply and the minister did a reassessment in the middle of the year instead of at the end of the year since we think it is possible to increase the supply.”

Oded Eran, Israel’s former Ambassador to the European Union, said that the developments in Europe are a historic opportunity for Israel and the energy minister’s policy reversal needs to be looked at through that prism. On the one hand, Eran explained, was the populist-driven decision last December to stop exploration which had wanted to put Israel on track with the climate change camp while ignoring the economic and diplomatic opportunities that gas provides the country.

Until now, Eran added, Israel was not viewed as an international energy player but just as a regional one. “But now with the war in Ukraine, you can see that Israel is not unimportant,” he said.

As an example, Eran referred to US President Joe Biden’s promise in March to transfer 15 billion cubic meters (BCM) of liquefied natural gas to Europe by the end of 2022 to help with the shortfall caused by the war in Ukraine. Israel, he said, already exports about 10 BCM of natural gas to Jordan and Egypt.

“This is not far from the amount that Biden promised Europe,” he said.

Rising Indian purchases of Russian coal and crude oil

According to a Reuters report, Indian purchases of Russian coal have spiked in recent weeks despite global sanctions on Moscow, as traders offer discounts of up to 30%.

Russia, facing severe Western sanctions, had warned the European Union in April against sweeping sanctions on coal, saying they would backfire as the fuel would be redirected to other markets.

India has refrained from condemning Russia, with which it has longstanding political and security ties, but urged an end to violence in Ukraine. New Delhi defends its purchases of Russian goods as part of an effort to diversify supplies and argues a sudden halt would jack up prices and hurt its consumers.

The US officials had told India there was no ban on energy imports from Russia but they (US administration) do not want to see a rapid escalation in imports from Russia.

As European importers shun trade with Moscow, Indian buyers are mopping up huge quantities of Russian coal despite high freight costs.

Its purchases of coal and related products jumped more than six-fold to US$331.17 million in the recent 20 days from the same period a year earlier, according to unpublished Indian government data reviewed by Reuters.

Similarly, Indian refiners have snapped up cheap Russian oil shunned by Western countries. The value of India's oil trade with Russia during the period under review jumped more than 31-fold to US$2.22 billion, the data showed.

"The Russian traders have been liberal with payment routes and are accepting payments in Indian rupee and United Arab Emirates dirham," one source said. "The discounts are attractive, and this trend of higher Russian coal purchases will continue."

Offshore units of such Russian coal traders as Suek AG, KTK and Cyprus-based Carbo One in places including Dubai and Singapore offered discounts of 25% to 30%, triggering bulk purchases of Russian thermal coal by traders supplying to utilities and cement makers, the sources said.

Another source said the Singapore-based unit of Suek was also accepting payments in dollars.

Suek and KTK did not immediately respond to requests for comment. Reuters could not immediately reach Carbo One.

The EU ban has barred new coal contracts and by mid-August will force the member nations to terminate existing ones.

India bought an average US$16.55 million of Russian coal a day, more than double the US$7.71 million it bought in the three months after Russian invasion on Ukraine on February 24, this year, according to Reuters calculations.

Oil purchases averaged US$110.86 million a day in the 20-day period, more than triple the US$31.16 million it spent in the three months ended May 26, 2022.

Indian bulk buying of Russian coal is set to continue, with June imports expected to be the most in at least seven and a half years, Refinitiv Eikon ship tracking data showed.

Bulk shipments of Russian thermal coal started reaching India in the third week of May, with orders mainly from cement and steel firms and traders, according to shipping data compiled by an Indian coal trader.

 

Pakistan should forget buying Russian oil for the time being

I am an ardent supporter of buying Russian oil being sold at huge discount. However, on the second thought, without mincing my words, I would say Pakistan should forget buying Russian oil for the time being. The country must solicit better terms and conditions from countries currently meeting Pakistan’s requirements.

First and the foremost, Pakistani refineries are not tuned to refine Russian oil. Even if Pakistan decides to buy Russian oil, the prerequisite is making these refineries capable of refining Russian oil. At this juncture, Pakistan neither has the foreign exchange nor the time to re-tune the refineries.

Second making payment to Russian suppliers is a stumbling block. Even those European countries, heavily dependent on Russian oil and gas, are being pressurized by United States to gradually curtail their purchases of energy products from Russia. The payment process is also being made difficult. On top of all, Pakistan also does not have ample rubles.

Third, Pakistan already enjoys deferred payment facility from Saudi Arabia. The kingdom is also willing to give more foreign exchange, but it would certainly not approve taking money from it and buying oil from Russia.

Pakistan can also increase purchase of motor gasoline and diesel purchase from these two brotherly countries to avoid any retuning of the refineries in Pakistan.

UAE is already a joint venture partner in Pakistan’s largest refinery, Pak-Arab Refinery (PARCO) located at Mahmood Kot near Multan and black and white oil pipelines in Pakistan.

Forth, the sailing time from Saudi Arabia/United Arab Emirates to Pakistan is certainly shorter as compared to any of the Russian ports. Therefore, the benefit of discounted price would be eroded to a significant extent by higher freight cost.

Along with buying crude oil and POL products from Saudi Arabia and UAE, Pakistan should also negotiate with Qatar to sell LNG at concessional price that too at a deferred payment.

On the diplomatic front Pakistan should also convince United States to let the country buy LNG from Iran. The argument is simple, “If India being a member of QUAD can buy oil from Russia despite sanctions; Pakistan should also be allowed to buy gas from Iran”.     

As such the negotiations regarding ‘Iran Nuclear Deal’ has been dragged for too long. If United States is willing to allow Venezuela to export oil, sanctions on Iran should also be withdrawn immediately to save the world from crude oil and energy products becoming too expensive.

This is also to remind the policy makers that Iranian President Ebrahim Raisi has already assured Pakistan’s Foreign Minister Bilawal Bhutto Zardari the willingness of his country to meet Pakistan’s demand of oil, gas and electricity.

Iran can fulfill Pakistan’s energy needs, says President Raisi

According to Tasnim News Agency, Iranian President Ebrahim Raisi expressed the country’s readiness to satisfy Pakistan’s demand for oil, gas and electricity. In a meeting with Pakistani Foreign Minister Bilawal Bhutto Zardari, held in Tehran, Raisi hailed the close ties between the two neighbors, saying the people of Iran and Pakistan are like relatives.

“We consider Pakistan’s security to be our own security,” he said, adding, “Some do not like the good relations between the two Muslim, neighboring, friendly and brotherly nations, but the development of relations leads to economic prosperity and more security for the nations of the region.”

There are no restrictions in Tehran for the development of relations with Islamabad, Raisi noted, saying, “We are ready to promote comprehensive cooperation with Pakistan and the Islamic Republic of Iran has the necessary capacity to meet Pakistan’s needs in various fields, including oil, gas and electricity.”

The Iranian president called the fields of energy, transit and cooperation and coordination in the regional issues and crises as important aspects of relations between the two countries, his official website reported.

For his part, Bilawal expressed satisfaction with the visit to Iran, adding, “As much as I am a child of Pakistan, I am also a child of Iran.”

Thanking Iran for exporting electricity to Pakistan, the Foreign Minister said, “We are fully prepared to complete and conclude the previous talks in the fields of security, trade and energy.”

Pakistani Foreign Minister also praised the government of Iran for its assistance in extinguishing the widespread wildfires in Pakistan’s Baluchistan province.

 

European leaders visit Ukraine

I am a bit surprised but a lot disturbed to read this news. German, Italian and Romanian leaders visited a small town Irpin to show support for Ukraine. However, little effort is being made to negotiate ceasefire. 

I also fail to understand why people of Ukraine have been made scapegoat to push Russia out of the energy market. United States has done this to Iran, Iraq, Libya and Venezuela in the past.

French President Emmanuel Macron said Thursday that there are signs of war crimes in a Kyiv suburb following “massacres” by Russian forces. He spoke in the town of Irpin while on a visit with the German, Italian and Romanian leaders to show support for Ukraine.

He denounced the “barbarism” of the attacks that devastated the town, and praised the courage of residents of Irpin and other Kyiv region towns who held back Russians forces from attacking the capital.

The four European leaders arrived earlier in Kyiv to the sound of air raid sirens as they made a high-profile show of collective European support for the Ukrainian people as they resist Russia’s invasion.

The visit, which includes a planned meeting with President Volodymyr Zelenskyy, carries heavy symbolic weight given that the three Western European powers have faced criticism for not providing Ukraine with the scale of weaponry that Zelenskyy has been asking for.

They have also been criticized for not visiting Kyiv sooner. In past weeks and months a number of other European leaders had already made the long trip overland to show solidarity with a nation under attack, even in times when the fighting raged closer to the capital than it does now.

The French president’s office said that Macron, German Chancellor Olaf Scholz and Italian Premier Mario Draghi, representing the three largest economies in Europe, traveled to Kyiv together on a special overnight train provided by the Ukrainian authorities.

President Klaus Iohannis of Romania — which borders Ukraine and has been a key destination for Ukrainian refugees — arrived on a separate train, tweeting on arrival, “This illegal Russian aggression must stop!”

“It’s a message of European unity for the Ukrainian people, support now and in the future, because the weeks to come will be very difficult,” Macron said.

The Russian forces are pressing their offensive in the eastern Donbas region, slowly but steadily gaining ground on the badly outmanned and outgunned Ukrainian forces, who are pleading for more arms from Western allies.

Several air raid sirens rang out while the European leaders were in their hotel preparing for the rest of their visit, and Kyiv authorities urged people to seek shelter. Such alerts are a frequent occurrence.

As he left the hotel, Macron, putting his hand on his heart, said in English, “I want to show my admiration for the Ukrainian people.”

German news agency dpa quoted Scholz as saying that the leaders are seeking to show not only solidarity but also their intent to keep up financial and humanitarian help for Ukraine, and a supply of weapons.

Scholz added that this support would continue “for as long as is necessary for Ukraine’s fight for independence.”

Scholz said that the sanctions against Russia were also significant and could lead to Moscow withdrawing its troops, according to dpa.

Scholz, Macron and Draghi have been criticized not only for helping too little but for speaking to Russian President Vladimir Putin.

Many leaders and regular people in the Baltic and Central European nations, which were controlled by Moscow during the Cold War, believe that Putin only understands force, and have viewed the efforts by Macron and others to keep speaking to Putin following his invasion as unacceptable.

Hopes were high among Ukrainians that the visit could mark a turning point by opening the way to significant new arms supplies.

Tamara Malko, a resident of Pokrovsk, in the Donestsk region of eastern Ukraine, said Macron and Olaf had been “very cold” toward Ukrainians so far, and hoped for a change.

“We want peace very much, very much and have high hopes for Macron and Scholz,” she said. “We want them to see and understand our pain.”

Luhansk regional governor Serhiy Haidai said the visit will not bring anything if the leaders ask Ukraine to conclude a peace treaty with Russia that involves giving up territory. He said that is something Ukrainians would never accept.

“I am sure that our president, Volodymyr Zelenskyy, is not going to make concessions and trade our territories. If someone wants to stop Russia by giving them the territories, Germany has Bavaria, Italy has Tuscany, the French can concede Provence, for instance,” he said.

“Listen, this is Russia. These are wild people. Today it will be one territory, tomorrow another one, the day after tomorrow another. And another thing: Many heroes of Ukraine died protecting the country as a whole. Nobody will forgive us if people die but we make concessions to the aggressor.”

The visit comes as EU leaders prepare to make a decision June 23-24 on Ukraine’s request to become a candidate for EU membership, and ahead of an important NATO summit June 29-30 in Madrid.

Also Thursday, NATO defense ministers are meeting in Brussels to weigh more military aid for Ukraine. On Wednesday, the US and Germany announced more aid, as America and its allies provide longer-range weapons they say can make a difference in a fight where Ukrainian forces are outnumbered and outgunned by their Russian invaders.

On Tuesday, during a trip to Ukraine’s neighbors Romania and Moldova, Macron said a “message of support” must be sent to Ukraine before EU heads of state and government “have to make important decisions” at their Brussels meeting.

“We are in a moment where we need to send clear political signals — we, Europeans, we the European Union — toward Ukraine and the Ukrainian people,” he said.

Macron is deeply involved in diplomatic efforts to push for a cease-fire in Ukraine that would allow future peace negotiations. He has frequent discussions with Zelenskyy and has spoken on the phone several times with Russian President Vladimir Putin since Putin launched the invasion in late February.

Scholz had long resisted traveling to Kyiv, saying he didn’t want to “join the queue of people who do a quick in-out for a photo opportunity.” Instead, Scholz said a trip should focus on doing “concrete things.”

Germany on Wednesday announced that it will provide Ukraine with three multiple launch rocket systems of the kind that Kyiv has said it urgently needs to defend itself against Russia’s invasion.

 

Israel-Egypt-European Union sign initial gas export agreement

The energy ministers of Israel, Egypt and the European Union signed a memorandum of understanding to export Israeli gas to Europe, at a ceremony in Cairo on Wednesday. The agreement comes as Europe looks for alternative sources of energy to Russia in light of its invasion of Ukraine.

The gas will be transferred from Israel to Egypt via an existing pipeline. Egypt will use its facilities to liquefy the gas for export to ensure a steady stream of natural gas to Europe, while ensuring the energy security of all sides.

“The MOU will allow Israel to export natural gas to Europe for the first time, and that is even more impressive when considering that significant agreements we have signed in the past year, making Israel and its energy and water market a key player in the world.”

The arrangement is meant to continue until at least 2030, and will be gradually reduced until 2050. The sides agreed to work together on carbon capture and the reduction of carbon emissions, as well as to cooperate with the private sector on green energy and energy efficiency initiatives.

In addition, the sides agreed to work on a plan to make gas exports to Europe more efficient. The EU will encourage European companies to take part in searching for and producing natural gas in Israeli and Egyptian economic waters.

Energy Minister Karin Elharrar characterized the signing as a great moment in which little Israel becomes a significant player in the global energy market.

“The MOU will allow Israel to export natural gas to Europe for the first time, and that is even more impressive when considering that significant agreements we have signed in the past year, making Israel and its energy and water market a key player in the world,” Elharrar stated.

European Commission President Ursula von der Leyen, who was present at the signing, tweeted, “With this... agreement we will work on the stable delivery of natural gas to the EU from the East Med region. This will contribute to our EU energy security. And we are building infrastructure fit for renewables – the energy of the future.”

Von der Leyen addressed the important role of EU-Israel energy cooperation in her remarks to Prime Minister Naftali Bennett in Jerusalem on Tuesday.

“The EU was the biggest, most important client of the Russian supplier – for oil, gas and coal,” she said, “But with the beginning of this war and the attempt of Russia to blackmail us through energy, by deliberately cutting off the energy supplies, we decided to cut off and to get rid of the dependency on Russian fossil fuels and to move away from Russia and diversify to trustworthy suppliers.”

Russia provided Europe with about 40% of its natural gas consumption per year – more than 150 billion cubic meters (bcm). Israel cannot take Russia’s place altogether, but Eastern Mediterranean states can provide about 20 bcm annually, most of which would come from Israel. The US promised Europe 15-20 bcm of liquefied natural gas following the Russia sanctions, and Qatar is expected to export 20-30 bcm to the continent.

Talks between the EU and Israel toward a framework agreement for transferring gas officially began in late April.

Energy Ministry Director-General Lior Schillat said last month, “The Europeans and Americans expect that the energy crisis will influence the continent not only in the next couple of years but for the next decade as they try to reduce dependence on Russian gas. Israel, as part of this effort, will have to build infrastructure to send more gas to Egypt and then to Europe. It is a long-term effort.”

Gas exploration and production company Energean brought the Karish reservoir in Israel’s northern waters online earlier this month, which works toward the Energy Ministry’s aim of doubling Israel’s gas export capacity in the coming years.

“Today, the local market uses 12 billion cubic meters and we export another 4 to Egypt and 3 to Jordan,” Schillat said. “We will start with low numbers of additional exports and increase as Israel’s capacity grows.”

China EAEU relations at stake

Western sanctions on Russia over its Ukraine invasion are forcing China to recalibrate ties with the Eurasian Economic Framework (EAEU), an economic union of post-Soviet states, with collaborations under the Belt and Road Initiative now at risk of secondary sanctions.

Beijing and Moscow signed a joint statement on cooperation between the EAEU and belt and road projects in 2015, a year after the union between Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan was established.

China and the EAEU agreed on greater economic coordination in 13 areas, including customs, trade, intellectual property rights, e-commerce and government procurement.

The enhanced coordination meant countries would not have to choose between Russia and China, said a commentary by the China Institute of International studies.

But with Russia now subject to sweeping Western sanctions after invading Ukraine, China’s economic relations with its northern neighbour and other EAEU countries is increasingly tricky.

“Collaboration between EAEU and Belt and Road Initiative is affected because sanctions from America and Europe increased the risk of secondary sanctions for Chinese companies,” said Zhao Long, a researcher at the Shanghai Institute for International studies.

Contractors and investors involved in EAEU and belt and road joint projects could run afoul of restrictions if they seek financing or conduct other business with companies that have been targeted by Western sanctions, he said.

The risk of these secondary sanctions has prompted hundreds of businesses and multilateral institutions to suspend ties with Russia.

The Asian Infrastructure Investment Bank and Bank of China have curtailed Russian access to capital markets, according to a database compiled by Yale University’s School of Management.

Chinese tech giant Huawei has also halted new orders and furloughed some staff in Russia, the database showed.

Oil and gas behemoth Sinopec has suspended talks with Russia for a gas chemical plant worth up to US$500 million, and at least five Chinese companies stopped work on Russia’s Arctic LNG 2 project in northern Siberia at the end of May this year.

“The war in Ukraine is impacting bilateral developments between Russia and China, and the coordination within the Eurasian union,” said Paul Stronski, senior fellow at Carnegie’s Russia and Eurasia Program.

China says ‘no limits’ in cooperation with Russia

“On sanctions, we are seeing Beijing being quite supportive of Moscow in this war, which is surprising given China’s normal approach to condemn separatism and interference in the internal affairs of another country. That is essentially what Russia is doing.”

But beyond diplomatic support and motivation to buy cheap energy, many Chinese companies have been wary of running afoul of US or EU sanctions because both economies are far more important export and trade markets for companies in China, Stronski said.

The impact of sanctions imposed on Russia will be felt across the EAEU because the design of the union ties them to Russia’s own fate, according to Kataryna Wolczuk, an associate fellow at Chatham House’s Russia and Eurasia programme, and Rilka Dragneva, professor at the University of Birmingham’s school of law.

Kazakhstan and Kyrgyzstan, for example, are likely to see negative impacts on their currencies and remittances, while restrictions will affect the trade of key commodities, they wrote on the think-tank’s website last month.

Katarzyna Czerewacz-Filipowicz, an Associate Professor at Bialystok University of Technology’s faculty of engineering management in Poland, said firms like Cargotor, Maersk and Mediterranean Shipping Company have suspended rail freight services through Russia as a sign of solidarity with Ukraine.

“Sanctions have also been applied to Russian railways, and this is probably why the uncertainty about the Belt and Road Initiative arises,” she said. “However, it is worth emphasizing that the sanctions include access to financial markets and transactions in securities. Thus, they do not cover cargo transit contracts via Russia.”

A rail line from the Chinese border through Kazakhstan, Russia, Belarus and into the European Union, which was heavily subsidized by the Chinese side and seen as vital to get goods from China to Europe through the EAEU, is now dead, said Stronski.

“European suppliers now are wary about putting their goods on a train via Russia given the reputational risks, or fears that Russia will hold up these goods,” he said. “Chinese producers have grown wary of using the route, given all the same reasons.”

Increasingly alert to external uncertainty, China is prioritizing risk control and prevention for its belt and road push this year, according to a report released in early March by the National Development and Reform Commission.

And Chinese companies have already begun scaling back international investment under the initiative.

Some 194 belt and road projects valued at US$13.66 billion were announced last year, down from 399 projects valued at US$80.51 billion in 2020, according to a report by financial data provider Refinitiv released in December last year.

As for Russia, international isolation will hasten its pivot to the East by building the friend-shoring alliances, said Zhao at the Shanghai Institute for International studies.

“Members of the EAEU will hasten the free flow of trade, services, capital, labour and the progress of local settlements in the region before 2025,” he said. “They’ll also strengthen security initiatives with their allies in order to broaden the post-Soviet space of influence.”