Geostrategic Alliances in the Eastern Mediterranean and MENA: A Universal Paradigm Shift (SpringerBriefs in International Relations) [1st ed. 2022] 9783030975951, 9783030975937, 3030975959

Table of contents :
Acknowledgments
Contents
About the Authors
List of Figures
List of Tables
Chapter 1: Introduction
Part I: Times of Change: The Energy Perspective of Things
Chapter 2: Energy and the International System
References
Chapter 3: The Economics of Energy: Restrictions Not to Be Overtaken
References
Chapter 4: The Eastern Mediterranean and MENA Regions: Revisionist Areas in the International System?
References
Chapter 5: The Aftermath of the New Energy Mandate
References
Part II: Energy Dynamics and Transitions in MENA and Eastern Mediterranean: From Hydrocarbons to Electricity
Chapter 6: Energy Resources in Eastern Mediterranean and MENA
6.1 The Situation at the Eve of 21st Century
6.1.1 MENA as a Major Producing Area
6.1.2 The Eastern Mediterranean, a Forgotten Region
6.1.3 The Geography of International Oil Companies
6.2 EM Resources Discoveries: A Major Shift?
6.2.1 Israel: Looking for Leviathan
6.2.2 Cyprus: Aphrodite and the Maritime Border Dispute
6.2.3 Other Regional Players
6.3 The Balance Change: EM vs. North Africa
6.4 Conclusion
References
Chapter 7: From Resources to Final Customers, the Transportation Issue
7.1 The European Markets as the Final Destination
7.1.1 From Europe to Asia?
7.1.2 Energy Transitions and the Impact for Europe
7.1.3 Western Balkans New Appetite for Gas
7.2 Towards New Gasoducts
7.2.1 The Importance of EM for the EU: Avoiding the Russian Territory
7.2.1.1 Southern Gas Corridor
7.2.1.2 Eastern Mediterranean Projects
7.2.2 The Turkish Gambit: Between Russia and the EU
7.3 The LNG Issue: A Major Gamechanger?
7.4 Turkey and Greece: Becoming the New Gas Hub for Southern Europe
7.4.1 The EU in the Middle
7.5 Conclusion
References
Chapter 8: Energy Transitions in EM and MENA Regions, Towards New Alliances?
8.1 Energy Transitions in Resources Rich Areas
8.1.1 The Threat of Dutch Disease
8.1.2 Adaptation of National Energy Mixes
8.1.3 Towards New Business?
8.2 Renewable Energy Sources in Major Oil and Gas Producing Countries: Contrasted Situations
8.2.1 MENA: Algeria vs. Morocco
8.2.2 Gulf Countries and the Need to Diversify
8.2.3 Eastern Mediterranean Countries
8.3 International Cooperation in Energy Transition: A Specific Geo-Economic Issue
8.3.1 European Countries and Companies
8.3.2 Chinese Companies in Regional Energy Transitions
8.3.3 Regional Interconnection: Still a Dream?
8.4 Conclusion
References
Part III: Eastern Mediterranean Systemic International Regionalism in Process
Introduction
Reference
Chapter 9: Eastern Mediterranean Geopolitical Conception
References
Chapter 10: Turkey Extroventism
References
Chapter 11: Eastern Mediterranean Geopolitical Sub-System
References
Chapter 12: Eastern Mediterranean Regionalism Quest
References
Chapter 13: Regional and Global Actors´ Involvement in the EM-MENA Region
References
Chapter 14: Erdogan, Sisi and the Fate of Egyptian-Turkish Relations
References
Chapter 15: The New `Great Game´
References
Chapter 16: Two Opposing Geostrategic Blocks for the Prize of Euro-Africa Trans-Mediterranean Trade and Energy Connection
References
Chapter 17: Greek Foreign Policy Changing Geometry and the Re-Definition of the West
References
Chapter 18: Afterword

Citation preview

SPRINGER BRIEFS IN INTERNATIONAL RELATIONS

Thrassy Marketos Nicolas Mazzucchi Thomas A. Alexopoulos

Geostrategic Alliances in the Eastern Mediterranean and MENA A Universal Paradigm Shift

SpringerBriefs in International Relations

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More information about this series at https://link.springer.com/bookseries/16771

Thrassy Marketos • Nicolas Mazzucchi • Thomas A. Alexopoulos

Geostrategic Alliances in the Eastern Mediterranean and MENA A Universal Paradigm Shift

Thrassy Marketos Department of Economics University of Peloponnese Tripolis, Greece

Nicolas Mazzucchi Fondation pour la Recherche Stratégique Paris, France

Thomas A. Alexopoulos Department of Economics University of Peloponnese Tripolis, Greece

ISSN 2731-3352 ISSN 2731-3360 (electronic) SpringerBriefs in International Relations ISBN 978-3-030-97595-1 ISBN 978-3-030-97593-7 (eBook) https://doi.org/10.1007/978-3-030-97593-7 © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

To my beloved Wife and Children, Calliope, Clio, and newcomer Dimitris, who patiently tolerate my daily routine —Thomas To my beloved wife Coralie, whose support helps me to improve myself everyday —Nicolas To my beloved wife Elli and daughter Rozalia —Thrassy

Acknowledgments

This book would not have been possible without the assistance of the Springer Nature editorial and publication team, who has been with us in the whole duration of the project, and we thank them for all their encouragement, support, and suggestions that improved the final outcome. The authors would also thank their respective families for their support in their works, being present all along the research and writing process.

vii

Contents

1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part I

1

Times of Change: The Energy Perspective of Things

2

Energy and the International System . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 11

3

The Economics of Energy: Restrictions Not to Be Overtaken . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13 20

4

The Eastern Mediterranean and MENA Regions: Revisionist Areas in the International System? . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23 28

The Aftermath of the New Energy Mandate . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29 30

5

Part II 6

Energy Dynamics and Transitions in MENA and Eastern Mediterranean: From Hydrocarbons to Electricity

Energy Resources in Eastern Mediterranean and MENA . . . . . . . 6.1 The Situation at the Eve of 21st Century . . . . . . . . . . . . . . . . . 6.1.1 MENA as a Major Producing Area . . . . . . . . . . . . . . . . 6.1.2 The Eastern Mediterranean, a Forgotten Region . . . . . . . 6.1.3 The Geography of International Oil Companies . . . . . . . 6.2 EM Resources Discoveries: A Major Shift? . . . . . . . . . . . . . . . 6.2.1 Israel: Looking for Leviathan . . . . . . . . . . . . . . . . . . . . 6.2.2 Cyprus: Aphrodite and the Maritime Border Dispute . . . 6.2.3 Other Regional Players . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 The Balance Change: EM vs. North Africa . . . . . . . . . . . . . . . . 6.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . .

33 33 33 36 37 40 41 42 43 43 45 46 ix

x

Contents

. . . . . .

47 47 48 51 54 54

. . .

55 59 61

. . . .

64 66 67 67

. . . . .

69 70 70 70 72

. . . .

74 74 76 77

. . . . . .

79 79 80 81 82 83

9

Eastern Mediterranean Geopolitical Conception . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

87 88

10

Turkey Extroventism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

89 91

11

Eastern Mediterranean Geopolitical Sub-System . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93 94

7

8

From Resources to Final Customers, the Transportation Issue . . . 7.1 The European Markets as the Final Destination . . . . . . . . . . . . . 7.1.1 From Europe to Asia? . . . . . . . . . . . . . . . . . . . . . . . . . 7.1.2 Energy Transitions and the Impact for Europe . . . . . . . . 7.1.3 Western Balkans New Appetite for Gas . . . . . . . . . . . . . 7.2 Towards New Gasoducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.1 The Importance of EM for the EU: Avoiding the Russian Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2 The Turkish Gambit: Between Russia and the EU . . . . . 7.3 The LNG Issue: A Major Gamechanger? . . . . . . . . . . . . . . . . . 7.4 Turkey and Greece: Becoming the New Gas Hub for Southern Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4.1 The EU in the Middle . . . . . . . . . . . . . . . . . . . . . . . . . 7.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Energy Transitions in EM and MENA Regions, Towards New Alliances? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 Energy Transitions in Resources Rich Areas . . . . . . . . . . . . . . . 8.1.1 The Threat of Dutch Disease . . . . . . . . . . . . . . . . . . . . 8.1.2 Adaptation of National Energy Mixes . . . . . . . . . . . . . . 8.1.3 Towards New Business? . . . . . . . . . . . . . . . . . . . . . . . . 8.2 Renewable Energy Sources in Major Oil and Gas Producing Countries: Contrasted Situations . . . . . . . . . . . . . . . . . . . . . . . 8.2.1 MENA: Algeria vs. Morocco . . . . . . . . . . . . . . . . . . . . 8.2.2 Gulf Countries and the Need to Diversify . . . . . . . . . . . 8.2.3 Eastern Mediterranean Countries . . . . . . . . . . . . . . . . . . 8.3 International Cooperation in Energy Transition: A Specific Geo-Economic Issue . . . . . . . . . . . . . . . . . . . . . . . . 8.3.1 European Countries and Companies . . . . . . . . . . . . . . . 8.3.2 Chinese Companies in Regional Energy Transitions . . . . 8.3.3 Regional Interconnection: Still a Dream? . . . . . . . . . . . . 8.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part III

Eastern Mediterranean Systemic International Regionalism in Process

Contents

xi

12

Eastern Mediterranean Regionalism Quest . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

95 96

13

Regional and Global Actors’ Involvement in the EM-MENA Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

14

Erdogan, Sisi and the Fate of Egyptian-Turkish Relations . . . . . . . 103 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

15

The New ‘Great Game’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

16

Two Opposing Geostrategic Blocks for the Prize of Euro-Africa Trans-Mediterranean Trade and Energy Connection . . . . . . . . . . . 111 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

17

Greek Foreign Policy Changing Geometry and the Re-Definition of the West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

18

Afterword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

About the Authors

Thrassy N. Marketos has studied Law in the Athens State University, holds MSc in Public International Law/University Aix–Marseille III (France), and PhD in International Relations/Panteion University (Athens, Greece). He has worked for the Hellenic Ministry of Foreign Affairs and is Analyst on Eurasia Energy Geostrategy issues. He is Scientific Researcher and Eurasia Energy Geopolitics Visiting Lecturer in the MSc “Economy, Defense, Security,” Economic Sciences Department, School of Economics and Technology in the University of Peloponnese (Tripoli, Greece). In addition, he is Research Associate and Eurasia Energy Geopolitics Lecturer in the Institute for Continuous Education (IDE) of the Hellenic Ministry of Defense (Athens, Greece). He serves as Research Fellow and Member of the Advisory Board “Geopolitics-Energy” in the South East Europe Energy Institute (IENE, Athens, Greece). He has written the following books: Russian Federation Geopolitics in Post-Soviet Central Asia (Syllogos Pros Diadosin Ofelimon Vivlion, 2008), China’s Energy Geopolitics: The Shanghai Cooperation Organization and Central Asia (Rutledge, 2009), and Energy Geopolitics Crossovers in Central & Eastern Mediterranean at the Prize of the Energy Union Policy in Aspects of the Energy Union (Palgrave/Macmillan, 2021), as well as several papers on Eurasia Energy Geopolitics. Nicolas Mazzucchi is Research Fellow at the Foundation for Strategic Research (Paris, France) where he is in charge of “energy-primary goods” and “cyber” domains. He holds a PhD in Economic Geography from Université Paris-1 Panthéon-Sorbonne. He has worked for years on energy security, energy digitalization, and energy emerging technologies issues. Before joining the Foundation for Strategic Research, he used to work for the French MoD on energy issues, and is still a lecturer for the French MoD Superior Education (War College, CHEM, etc.). He is an alumni of the French War College and the US DoS International Visitor Leadership Program on energy issues. He is also scientific advisor in foresight for Futuribles International (Paris, France) and French representative for the EDA Consultation Forum for Sustainable Energy in the Defense and Security Sector. xiii

xiv

About the Authors

He is author of numerous articles and several books, among them Energie, ressources, technologies et enjeux de pouvoir (Armand Colin, 2017). Thomas A. Alexopoulos is an Assistant Professor of Energy & Environmental Economics in the Department of Economics at the University of Peloponnese, Research Director of the E-Cube Lab, and Research Fellow at the International Center Research Center for Economic Analysis (http://rcea.org) with chapters in Canada, in Poland, and in Italy. He got his first degree (MEng) from the National Technical University of Athens, School of Electrical and Computer Engineering, and holds master’s degrees in energy systems from the Heriot-Watt University and in economic analysis from the University of Peloponnese, where he was later granted his PhD with honors and under full scholarship from the A.G. Leventis Foundation (Zurich, Switzerland). He has worked as a research fellow at the University of Bologna, Department of Economics, Italy, and as an adjunct professor at Hellenic Open University, Greece. His research field is in energy finance, energy economics, applied econometrics, and environmental economics. His academic work has been awarded by the John S. Latsis Foundation, and published in several prestigious international journals such as The Energy Journal, Energy Economics, Environmental and Resource Economics, Energy Policy, and others. He is on the editorial board of Energy systems (1868-3975) and Operations Research Forum (2662-2556). He has also participated in a series of international conferences around the world and has contributed as an author to several volumes. In addition, he represents the University of Peloponnese in the United Nations Sustainable Development Solutions Network (UN SDSN).

List of Figures

Fig. 2.1 Fig. 3.1

Fig. 4.1 Fig. 6.1 Fig. 6.2

Fig. 7.1 Fig. 7.2 Fig. 7.3 Fig. 7.4 Fig. 8.1 Fig. 17.1

Study disciplines in Energy Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Flows of Crude oil exports in percentages of total, in Billion dollars (Source: OEC, 2019. Crude Petroleum. Data retrieved from: https://oec.world/en/profile/hs92/crude-petroleum). *The Countries of the Arabian Peninsula are not included . . . . . . . . 16 Algeria’s energy flows in 2017 (Source: The Authors) . . . . . . . . . . . . 24 Evolution of gas demand worldwide in bcm; source: IEA . . . . . . . . 39 Gas Reserve/Consumption ratio for selected Eastern Mediterranean countries; sources: IEA, BP, author’s calculations (nota: Cyprus with no gas consumption has fare more than 100 years on R/C) . . .. . . .. . .. . . .. . . .. . . .. . .. . . .. . . .. . .. . . .. . . .. . .. . . .. . 45 EU Natural gas imports by region; source: Eurostat . . . . . . . . . . . . . . . 49 US Crude oil and products imports by country (thousand barrels); source: US Energy Information Administration . . . . . . . . . . . . . . . . . . . . 52 Europe Gas Dependence According to EIA Stated Policies Scenario (EIA, 2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Fossil Fuels Consumption in Turkey (ktoe); sources: IEA, BP (author’s calculations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 MENA and EM Electricity Generation (TWh); Source: BP . . . . . . 72 “Philia Forum” participating countries, Athens, 11.02.2021 . . . . . . 116

xv

List of Tables

Table 4.1 Table 4.2 Table 4.3 Table 7.1

Energy Flows in percentages of the MENA countries (Source: The Authors calculations) . . .. . . . . .. . . . . .. . . . .. . . . . .. . . . . .. . . TFC allocation per End-User (Source: The Authors calculations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Composite indexes and energy related elasticities per country . . . . Comparison of Greece and Turkey gas infrastructures . . . . . . . . . . . . .

25 26 27 65

xvii

Chapter 1

Introduction

French historian Fernand Braudel in The Mediterranean and the Mediterranean World in the Age of Philip II, highlighted the importance of the Mediterranean as the core of European civilization and, therefore, as a “world-system” during the Middle Ages and the Renaissance, making the region the first “globalized” area in history. Yet from the end of sixteenth century, the balance to the Atlantic tended to marginalize the Mediterranean in global trade and strategic struggles between major powers. The emergence of Asian powers and the Chinese will of transcontinental integration through the Belt and Road Initiative, position again the Mediterranean at the core of major strategic struggles. Therefore, the evolution of strategic issues in Eastern Mediterranean and MENA region has to be understood and analyzed through the cooperation and confrontation issues between Eastern Mediterranean-MENA states and external major powers such as China, European Union, Russia and the United States. Being both a maritime space and the bridge between Africa, Asia and Europe, this whole region is again the core of a new “world-system”. The International Chamber of Shipping in its report for 2018, estimates that international maritime trade covers 90 percent of world trade, playing an important role in economic growth, especially in Asia. The United Nations Trade and Development Agency (UNCTAD) notes that maritime trade increased from 4008 million tons in 1990 to 10,702 million tons in 2017, compared to international air trade, which accounts for only 35 percent of international trade (IATA-2016). It is therefore not surprising that world naval forces (Anglo-Saxonic world/USA, Britain, Australia, Canada, New Zealand), having won from 1588 till present, the primacy in international power sharing and in all major wars—including the Cold War (1948–1991) -, they control the flows of world trade, the flow of money through banks, industrial raw materials and energy, hence world wealth. The emergence of the United States as the hegemonic power of the post-Cold War world (1992–2010) ensured the faithful observance of the above regime. Since then, the gradual rise of a multi-polar new international system, promoted one of the land powers, China, in © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_1

1

2

1 Introduction

good cooperation with Russia, to jeopardize the control of the South Channel of international maritime trade by the naval powers: the one where when a ship departs from a port in Asia, via the South China Sea, the Straits of Malacca, the Indian Ocean, the Strait of Aden, the Red Sea, the Suez, the Mediterranean and the Strait of Gibraltar, may end up in a port in Western Europe. This sea route -21,000 km, 48 days-, is dominant in international trade. However, given the climate change and related melting of the Arctic Ocean ice, the North Channel of the international maritime trade -from an Asian port, through the Barring Strait, Siberia, Archangel, to a Western Europe port (12,800 kms, 35 days) -, is estimated that by the year 2050 will become more attractive to the world trade system. Indicatively, from 2013 to 2020 this channel was used by more than double ships. At the same time, as China and Russia increasingly develop rail, road and air freight networks -overland routes of the new Silk Road, China’s ‘One Belt-One Road initiative-OBOR, resulting in the latter’s increase in detriment of maritime transport-, they pave the way for greater control of the international trade. Consequently, for the first time in world history, land powers may end up reducing the influence of naval forces in international trade. As a matter of fact, there is intense competition between the US and China-Russia power poles -greater than during the Cold War-, as ground forces (China, Russia) trying to control the Southern Corridor of International Trade spread instability along the way, in the Eastern Mediterranean, in the Indo-Pacific Ocean, in the Persian Gulf-Aden and in the Red Sea. Due to the United States partial withdrawal from the Eastern Mediterranean (second Obama presidency, 2014–2015), Russia— through the development of S-400 anti-aircraft missiles in Turkey, Syria and Crimea, and the possible deployment of Russian naval forces beyond Syria and in Turkey-, to some extent controls the region. So any Greek-Turkish conflict would change the Lausanne and Montreux Treaties, allowing Russia’s exit in the Mediterranean. Accordingly China is putting pressure on Iran and Turkey through tempting economic deals so that to avoid the Southern Channel. Opposing the above mentioned China-Russia strategic plan, maritime powers (other ways, the West) have been developing in the last decade the US-GreeceIsrael-Cyprus and Greece-Egypt-United Arab Emirates-Saudi Arabia synergies, so that under the cover of France and India to secure control of the South Channel. These synergies goal -in addition to controlling international maritime transport trade and related communication channels (SLOCs)-, is to exploit natural gas and shale gas resources in methane hydrates marine zones, rare earths and wide range energy networks, part of which are the Europe-Asia and Europe-Africa intercontinental electric corridors, passing through Israel and Egypt respectively (Euro-Asia, Euro-Africa Interconnectors). Eastern Mediterranean-MENA has also a very specific role in energy, any major event there having global consequences. MENA has been since the end of WW2 the core of oil and gas exploitation and exportation to consuming markets. The independence of MENA countries during the 1950s–1960s leading to the creation of OPEC to initiate a cartel of oil producers. The 1973 OPEC decision to stop the

1 Introduction

3

exportation of oil in retorsion of Kippur War manifested the ability of oil producing countries to transform their economic power into a geopolitical power. Yet the consequences of this coup tended on the following years to weaken their position with the emphasis put on exploration and production outside MENA region. Even with a lowered influence, MENA region remains the world’s first area in terms of oil and gas reserves and production, playing a key role in the development of emerging countries all over the world in fueling their growth through hydrocarbons supplies. Eastern Mediterranean is slightly different as the region was considered, until the end of the 2000s as a transit region more than as a production region. Yet the discoveries of gas in the Levantine basin, in Israel and Cyprus, fueled a new appetite for the region, revealing the ambitions of regional and global powers. Again, the hydrocarbons resources and production are the basis to a new geopolitical struggle, between Turkey and the other regional players. Resources combined with the exportation infrastructure are designing new geopolitics in the whole region with major consequences for Europe and beyond. Besides the geopolitical aspects of the new and the existing gas fields, gas market liberalization has replaced older arguments, usually spurring from standard national foreign policies, on the diplomacy field. It is now common practice for new investments in the gas industry, first to fulfill standard criteria out of cost-benefit and socio-economic analyses and afterward to assess the geopolitical aspects of it. Even in states, like Russia and China, where public intervention in the gas market is strong, firms seek to ensure their investment viability along with the national energy policy. LNG growing supplies and legislation towards market deregulation, e.g. EU’s third energy package, have further converged the formerly regional gas markets into a global one. Consequently, new investments now face more competition, as they stray from the protected environments of monopolies or even Cournot duopolies and operate more under a Bertrand model competition. As such, all the participants engaged in the gas industry seek to maximize their profits and minimize their risks, by quantifying and assessing several, energy-related, attributes. The national energy balance sheets, the primary energy supply and final consumption allocation, income and price elasticities of various energy sources, but also composite indicators like the Economic complexity and the Relatedness indexes are essential in these analyses. The above mentioned electrical infrastructure, combined with the planned EastMed gas pipeline (Israel -perhaps Egypt- Cyprus-Greece-Italy -or alternatively to Bulgaria and Serbia), the natural gas Vertical Corridor, the ‘Eastern Mediterranean Gas Forum’ (EMGF) operation, and also the emerging trans-Mediterranean geostrategic trade and energy axes from Egypt or Libya, are designed to ensure the connection of the aforementioned Southern Trade and Energy Corridor with the European Union and the United States. The whole plan is to avoid control of the Southern Corridor by land forces (China and Russia, along with volatile Turkey). Eurasian powers plan to operate in the future as an alternative to the existing international economic system.

Part I

Times of Change: The Energy Perspective of Things Thomas A. Alexopoulos

Chapter 2

Energy and the International System

Our world, as we know it today, is the result of historic events but also of underlying factors with a continuous impact in time. The end of World War II, is considered by many historians as the starting point of today’s global status quo. Adopting the definition of Steans and Pettiford [1], that an actor in the international system is an entity that has the ability to act and influence, to one degree or another, in one way or another, the operation of the system and the developments, then from simple observation alone, it appears that the international system consists of a set of interdependent actors—state, transnational, or non-state—whose dynamic interaction shapes the prevailing conditions trends and developments. Actors therefore in the international system include states, international organizations, multinational corporations, civil society, and social movements, and perhaps even personalities of great scope and international impact. If we attempted a simple general categorization, there are two major dominant schools of thought through which the operation of the international system is approached and analyzed. These are, the school of realism and school of idealism, which obviously are not a single and monolithic whole but rather two broad categories with one of their main dividing lines being the importance they attach to the role of the state. The School of realism, which has its roots in Thucydides, Machiavelli, Hobbes and others, considers the state as the main and most important agent in the international system, which in other respects is not ruled by another agent or authority. The international competition, therefore, is a zero-sum game between states. On the contrary, the school of Idealism/liberalism accepts the increasing impact, in global scale, of the markets, international corporations and organizations, against the decreasing power of the states. In other words, it accepts this ongoing international competition as a positive sum game, in which all the participants are favored, although in an unequal manner [2, 3]. After the end of WWII, the school of liberalism started to prevail gradually, and became the dominant school of thinking after the Cold War. Having this in mind, the present global status quo is more liquid compared to past, and depends even more on different and © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_2

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unequally weighted power factors. This is apparent, for instance in the institutional legacy of the Bretton Woods Agreement, that is the International Monetary Fund and the World Bank. Based on Weiss [4] report for the US Congress, the informal agreement among World Bank member countries that a U.S. citizen is selected as the head of the World Bank and a European citizen, typically runs the IMF, is subject to increasing criticism on the basis that it does not reflect any more the current status of power worldwide given the increasing integration of developing countries in the global economy. If we attempt to express the power of states, as a function of a number of factors then this could be: Power ¼ f ðEconomy, military, Tecchnology, Geography, Demography, Human Capital, Natural Resources, Democracy, Alliances, Endogenous, ExogenousÞ

Given the factors included, the interdependencies between them and the different and dynamic weightings with which they may be embedded in the function, it comes as a corollary, the increasing number of revolutionist countries and the liquidness in global power balances in general. Without legitimacy, the reshuffles in the international system, the succession to the world leadership, are often marked by conflicts and warfare. Of course, this process is obviously much more complex and dynamic, given the multitude of all agents and the numerous small or large interests, and changes in the status of power, could be better explained as a tree of choices and possible outcomes that an agent has or plans to follow. It all comes to the ratio between potential benefits and costs. In case of a quotient greater than one, this agent could consider himself a revisionist, with all the consequences entailing his decision. In this context, we witness today an unprecedented pandemic from Covid-19, which has caused millions of human casualties, shocks in global economy with plunges in national GDPs, in exports of products and services but as well devastating impacts in our social life and mental health in general. It could be argued, that our world was not ready, or had not the overflow in resources, at this time in history, to remedy Covid-19 consequences. This is apparent in the uneven recovery to pre-pandemic GDP per capita, with estimations of full recovery for some countries at end of 2020 (e.g. China and Turkey) and for others no earlier than end of 2024, regardless if they belong in the group of advanced countries or in the emerging one. Drivers for this are the differences in the extent of government support in businesses and people, differences in the productive structure of each country (i.e. countries based more on services, like tourism, etc. are more susceptible compared to countries producing goods), and differences in public health and vaccination policies resulting in the consensus “more jabs to more jobs” [5]. Besides the general liquidness of the international system in the last decades, and the unprecedented shock from Covid-19, our society, today, face increasing demands related literally with all aspects of our lives. Latest reports from major organizations are indicative of this increase. By 2030, middle income class is expected to be more than 5 billion, with China and India representing most of it. This increase suggests changes in consumption patterns and in demand for

2 Energy and the International System Fig. 2.1 Study disciplines in Energy Analysis

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Economics

Engineering

Geopolics

Energy analysis

food, water and energy [6], resources already in intense exploitation. Food industry is continuously increasing and adapting, in order to satisfy different consumers choices, higher quality standards regarding both food safety and environmental concerns and to keep it affordable. The level of increase and adaptation varies worldwide depending on the agricultural policies, natural constrains, economic structure and marketing strategies a country or an area follows. As European commission’s [7] report stresses, . . .through trade, consumption has been growing faster than population in the last two decades, resulting in a rise of consumption per capita.

Despite the adverse trends in consumption per capita depending on the type of food (higher—lower value) the area (rich-poor continents) and the economic state (Advanced -Emerging), there is an aggregate rising demand for food, threatening food security and consequently contributing to the liquidness of the international system even more. +Although necessary to sustain life, food supply is not so heavily intertwined with other factors, exogenous to food industry and related more with geopolitics and international balances, as it is the case with Energy. Energy, in turn, is equally necessary for life as it is food or water, consisting together the most fundamental components for human kind. Strictosensu, energy is the capacity to do work or to produce heat [8]. It is classified as either primary or secondary, with the first being unconverted or original energy as found in nature, and may only involve extraction or capture, and the latter being energy derived from any form of transformation of primary energy sources. In addition, it is associated with many forms, including for example thermal, electrical, mechanical, chemical, nuclear or other various forms of potential or kinetic energy. In history, not considering the human body which is as an open system with energy inputs and outputs that produces work, the invention of fire was the first usable form of energy. Till then, humanity has harnessed various and complex energy forms in our service, and at present, energy besides its physical hypostasis, it is considered a fundamental product or service (depending on the form) for modern economies similar to capital or labor [9]. Furthermore, it is an industry that involves different disciplines from the fields of engineering, economics and geopolitics, which a person should be familiar with for a comprehensive understanding of an energy analysis (Fig. 2.1).

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Let’s assume the case of an installation of a new nuclear power plant in a country in the MENA area, e.g. the Akkuyu nuclear power plant in Turkey, an analyst should first consider the data and restrictions ensuing from the engineering discipline, given these, to assess the investment in economic terms and afterward to discuss potential risks and changes arising from global and or regional balances in the international system. Of course, not all analyses are conducted in this discrete way, and sometimes an overall assessment of all inputs deriving from all three disciplines is required through an explicit function. Similar to food and water, energy consumption per capita has grown significantly over the last century, with projections of 1.2% annual growth demand after 2025 [10]. This is attributed both to the higher quality of leaving we enjoy in the domestic sector and due to the modus operanti of modern economies demanding high levels of production, more transportations and shiftings in general. Nevertheless, trends and patterns in energy demand and supply are far from being uniform with evenness of growth. Τhe contingent or country of operation, the economic and or social development state, the indigenous energy sources, the specific fuel mix, but also the deregulation state of energy markets or even shock events like covid-19 pandemic are, among other, factors acting upon the energy system. Based on IEA’s World Energy Outlook (2020), in the United States, coal demand will decline faster than expected in this decade, only in 2020 coal production fell to historically low levels while underwent an annual decrease of 24% since 2019 [11]. In the same path, although milder, is the demand for oil and nuclear power while the opposite happens in natural gas and renewables. In the European Union, despite a rebound in gas and oil demand they will decline steadily by 2030. Coal will drop significantly by half compared to 2019 with Renewables rising more than 40% above 2019 levels. Japan will also restrict the use of fossil fuel with an increase in renewables and in nuclear power as well, with progressive power plant re-startings. India will increase its demand on all available energy sources, and China following a suchlike increase except for coal where air quality policies, and market liberalization will decrease its aggregate demand. As for the Middle East and North Africa regions, projections are for a strong dependence on oil and gas sources of more than 80% of new demand growth, given that their prices will remain low. Due to their strained finances and unstable political climate, it is likely, that the recently discovered reserves of natural gas will be used domestically, mainly for electricity production [12] stressing the key role they will play a part in their economies. These projections are highly dependent on the post-pandemic rebound of economies. The present economic depression not only flattened energy consumption in all final consumers, except maybe in the domestic sector, but it also resulted in all energy efficiency programs to run behind. Companies and households postponed purchases of more efficient cars, trucks, appliances and equipment in general, while industries avoided efficiency upgrades in the risk of uncertain revenues keeping their focus on core business expenditures and new investments. The aftermath of the current pandemic, is the emerge of different patterns with advanced economies, like in Europe and in the US, returning to lower demand levels than in 2019, accelerating

References

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the installation of new RES power units and decreasing their demand in coal. In the Asia Pacific region, stronger economic growth results in higher demand for all fuels, conventional and renewable, while in oil and gas exporting countries, like in the Middle East and Eurasia, lower exporting revenues will render fossil fuels their main energy source for their, either way, unsound economies. The interplay between these megatrends, given also climate change, environmental degradation and their effect on economic growth [13], the escalating resource scarcity, the increasing impact of migration and the new security paradigms with diversified threats and actors, threatens our peaceful days and poses new challenges to be tackled.

References 1. Steans, J., & Petifford, L. (2005). Introduction to international relations: Perspectives and themes (2nd ed.). Pearson. 2. Cohn, H. T., & Hira, A. (2021). Global political economy theory and practice (8th ed.). Routledge. 3. Strange, S. (1996). The retreat of the state: the diffusion of power in the world. Cambridge University Press. 4. Weiss, M. (2019). Selecting the World Bank President [online]. Available from: https://fas.org/ sgp/crs/row/R42463.pdf [cited 12 July 2021] 5. OECD. (2021). OECD Economic Outlook, Volume 2021 Issue 1 [online]. Available from: https://www.oecd-ilibrary.org/sites/edfbca02-en/1/3/1/index.html?itemId¼/content/publica tion/edfbca02-en&_csp_¼db1589373f9d2ad2f9935628d9528c9b&itemIGO¼oecd& itemContentType¼book [cited 15 July 2021]. 6. Hristova, M. A., Larcher, M., et al. (2020). Megatrends interlinkages - Briefing “Security and geopolitics in a changing climate”. European Union/Joint Research Centre - Megatrends Hub [online]. Available at: https://knowledge4policy.ec.europa.eu/publication/security-geopoliticschanging-climate_en [cited 16 July 2021]. 7. European Commission, DG Agriculture and Rural Development, Unit Analysis and Outlook. (2019). Global food supply and demand Consumer trends and trade challenges [online]. Available at: https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/docu ments/market-brief-food-challenges-sep2019_en.pdf [cited 17 July 2021]. 8. Britannica Encyclopedia, The Editors. (2021). Physics Energy [online]. Available at: https:// www.britannica.com/science/energy [cited 20 July 2021]. 9. Alexopoulos, T. (2018). To trust or not to trust? A comparative study of conventional and clean energy exchange traded funds. Energy Economics, 72, 97–107. 10. IEA. (2020). World Energy Outlook 2020. IEA. https://www.iea.org/reports/world-energyoutlook-2020 11. US EIA. (2021). Today in Energy - In 2020, U.S. coal production fell to its lowest level since 1965 [online]. Available at https://www.eia.gov/todayinenergy/detail.php?id¼48696 [Cited 24 July 2021]. 12. Alexopoulos, T. (2017). The growing importance of natural gas as a predictor for retail electricity prices in US. Energy, 137, 219–233. 13. Thomakos, D., & Alexopoulos, T. (2014). Economic growth as a proxy for environmental performance: Exploring the informational content of the Environmental Performance Index. International Journal of Energy and statistics, 4(04).

Chapter 3

The Economics of Energy: Restrictions Not to Be Overtaken

In today’s globalized environment, maintaining the status quo of the leading powers goes through key markets, such as energy markets. Therefore, it is imperative to understand which are the constraints imposed by energy markets and energy economics, in general, that shape the balance in the international system but also whether they are capable of changing the geopolitical correlations in the Middle East and eastern Mediterranean. The first concept to be considered is the so-called energy balance sheet. Each country meets its energy needs, and not only, with a specific mix of energy sources and specific ways to obtain them. In general, the following relationship applies to each country’s energy flow: Endogenous Production þ Imports ¼ Consumption þ Exports þ Losses Both, the left and the right-hand side of the equation affect and are affected by the prevailing conditions within the country, but also the alliances and cooperations with other countries or regions. Imports may be zeroed in case of a geopolitical or other crisis, energy consumption maybe vary considerably, depending on the country’s current economic sentiment or national production, even endogenous energy production could be altered as a result of international treaties, e.g. Kyoto Protocol, The Paris Agreement and others. National energy balance sheets, either in a table format or presented in a Sankey diagram [1, 2] highlights the limits a country has for new energy policies but also dictates potential new alliances in terms of energy agreements. Next, there are limitations regarding the spatial distribution of the various primary energy sources. Countries, that do not have enough production from primary energy sources, are forced to import energy from other suppliers, national or private, and do so with as much diversification as possible. In case of not meeting their energy demands given also such imports, countries are turning to nuclear power, asking companies with the appropriate know-how to build such facilities inside their © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_3

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territories. The provision of this know-how costs and depends on the international circumstances every time, making it difficult, or not, available in several cases. The inequalities, therefore in the energy balance arise from constraints related to geological features, but also from the applied energy policies of each country. It might be argued, that countries with low diversification in their energy mix, or with significant amounts of energy imports, are more likely to turn to revisionism or recede from the current Status Quo, in times of unrest. Another energy-related factor setting the behavior of countries within the international system is the energy intensity based on their economic activity in terms of GDP per capita or using purchasing power parities rates. Energy intensity index, in its simplest form, is expressed as the ratio of the energy used (total energy supply or available final consumption) for the weighted, per inhabitant and purchasing power, real national income [2, 3]. A large part in literature, uses income and price elasticities of energy demand, for energy intensity. The majority of the estimated econometric models are based in the following one: LogE pc ¼ a þ b ∙ log RGDPpc,ppp þ c ∙ log P þ ε ∂E =E

pc ,c¼ where, b ¼ ∂RGDPpc,ppppc =RGDP pc,ppp

∂E pc =E pc ∂P=P

, with pc standing for per capita and ppp

for purchasing power parities. Further analyses [4–6], separate elasticities in short and long term, as there are different technological and behavioral responses depending on the type of energy and end-user (e.g. electricity compared to oil, industrial compared to residential, etc.), the technological adaptation rate and the adopted methodology. In cases, where the equipment, matched with a specific source of energy, is difficult to be substituted, then price elasticity is usually lower in the short run than in the long run. The same goes with equipment that has no substitutes as energy inputs. To tackle parameter instability further studies have applied a time-varying coefficients approach for different clusters of countries, such as OECD and non-OECD, or low, middle and high income countries and so on [7–9]. Consideration has been given also on the examined source of energy, e.g. electricity demand has different elasticities compared to oil or natural gas, as it is addressed, in the majority, in retail consumption, and has different features as a market, with first and foremost, the instant energy supply and demand. It should not be discounted that energy is consumed through equipment and that adapting to a price shock often requires equipment change. Therefore, an asymmetric response of energy demand to changes in energy price might exhibit. A sharp and large increase in price will lead users to choose more functional equipment with better efficiencies, but in the case of falling prices, the reverse will not necessarily happen. An increase in the price of energy leads to a partially irreversible decrease in energy demand, and even in the event of a subsequent reduction in prices, public demand control policies adopted during the increase period will not be called into question. Also, asymmetries may be justified by technical progress, which is partly autonomous, resulting in efficiency improvement over time, regardless of the evolution of energy prices.

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In general, econometric analyses [10, 11] conclude on the existence of asymmetric responses in price elasticities due to lagged adjustment and symmetric instant response to changes in national incomes. Based on the above literature it could argued that countries with high, greater than unit, absolute income elasticity of energy demand relies more on energy inputs, than in countries with inelastic behavior. This, in turn, could lead countries or coalitions to non-conventional policies within the international system, when safe paths for economic growth are not guaranteed. On that note, the study of Darmstadter et al. [12] separate three stages in the evolution of income elasticity. In the first stage, a continuous increase of elasticity is observed mainly due to heavy industrialization, at the second stage where elasticity has already reached its peak above unit and there is a steady decrease thanks to technology and energy substitutions, and last, a state of constant elasticities where energy efficiency reaches a plateau of improvements, there is heavy rely on electricity coupled with a more and more energy intensive tertiary sector. Tough this pattern of elasticity is, in general terms, unchanged in time, technology has an overall positive impact lowering the peak value that a country has to pass through in its industrialization stage. Regarding price elasticity of energy demand, a rationale, based on empirical studies [13–15], coupling it to conventional or revisionist behaviors is the following: Developing countries and or net importing exporters exhibit more elastic behavior on energy consumption, due to price changes, compared to developed or energy exporting countries. This, in turn, might create additional “dissatisfaction” in these countries societies, due to the missing energy quantities, leading their leaders potentially to non-conventional policies, in order to confront with the life quality abatement of their people. The general framework as well as the modus operanti of each energy market, are essential on the impact they have on each country. It is regarded as an exogenous factor producing domino effects, whether they spur from a single market or it is the end-result of a cross-(energy) markets reaction. Therefore, their features are studied from energy policy makers, while shaping, to a great extent, a country’s behavior in the international system. In more details, oil market is the first known global energy market, having a single price, given of course the existence of Ricardian rents. Crude oil transactions are conducted through three different mechanisms, that is barter deals, cargo transactions and long term contracts. Spot and forward contracts are based on cargo transactions, and while, as a mechanism, it runs since the 1980s, most of the transactions in volume today, are still under long-term contracts, providing refiners stable supply volumes and crude qualities, despite the lack of price transparency [16]. Also, with long term contracts OPEC took control of oil prices and the integrated system of the so-called Seven Sisters.1 The major change that has taken place in the last couple of years on the world oil market is the very sharp increase in US shale oil production, which puts the US at the forefront of oil-producing countries. It is

1

Standard Oil of New Jersey (Exxon), Royal Dutch Shell, Anglo-Persian Oil Company (British Petroleum), Gulf Oil, Socony Mobil Oil, Standard Oil of California (Chevron), and Texaco.

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3 The Economics of Energy: Restrictions Not to Be Overtaken

56.9%

Europe

Russia

31.4% United States

40.7%

43.8% 37.6% MENA region*

Asia

53.0%

9.6%

78.6%

Saudi Arabia

Fig. 3.1 Flows of Crude oil exports in percentages of total, in Billion dollars (Source: OEC, 2019. Crude Petroleum. Data retrieved from: https://oec.world/en/profile/hs92/crude-petroleum). *The Countries of the Arabian Peninsula are not included

estimated that the proven reserves of non-conventional oil will render this country an exporter, again since 1953, in a few years. Recall that the US is a purely exporting country in the coal sector for decades and has also been a net exporter of natural gas since 2017. The current state of play in crude oil production is the following. Saudi Arabia, Russia and USA traded 14.7%, 12.5% and 6.28% respectively of the global volume of crude oil in 2019, setting them, with Canada and Iraq, in the biggest five producers in the world, counting together more than half of the global supply. Regarding the politically unstable region of MENA Countries,2 all together they produce approximately 13% of global oil supply. On the other hand, Asia and Europe are the biggest consumers with upward trends for Asia and downward for Europe (Fig. 3.1). After 2004, oil prices have been on the rise, peaking at 147$ per barrel in 2008, driven by the economic growth of China and India. Prices fell to less than $ 40 after the financial crisis a barrel, before stabilizing at around $ 80. In 2015, oil prices fell again to $ 60 a barrel due to the slowdown in Chinese imports, the significant increase in non-conventional oil production in the US, and mainly due to the “price war” waged by Saudi Arabia to recover its market share globally. It was not until 2018 when 15 OPEC member countries and ten oil-producing non-OPEC (including Russia but not the USA) allowed prices to stop falling and ranging around 60$ a barrel. It is worth mentioning that the steady rise in global demand encompasses opposite trends: oil consumption decreased by 11% in Europe and by 4% in the US, while it increased by 59% in India and by 64% in China. The relative price stability lasted almost two years, until the coronavirus widely reported in media in January of 2021. Responding to this market dislocation and in the backdrop of a weak global economy, Saudi Arabia launched an oil price war, dropping oil prices even more

2

Countries in the Arabian Peninsula are excluded.

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reaching an all-time historic negative price of 37$ in 20th of April. This continuous plummet, has further stressed the financial conditions experienced by U.S. oil producers in the US, as they need to operate within or, even better, above the range of 46–58$ per barrel, for adequate profitability in new wells [17]. Saudi Arabia and Russia is thought to be able to produce oil at prices as low as 10$ and 20$ per barrel. Furthermore, if a low-cost producer participates in a coordinated production cut, that producer assigns market shares to less competitive producers and effectively subsidizes those higher-cost producers. Thus, prolonged oil price wars with increased supply cannot last for long time, even in the case of the state owned firms of Saudi Arabia and Russia, as there are limits in their hard currency reserves and it increases, if not creates, government’s fiscal deficits, and on the other hand cuts in productions have a rebound effect on the participant agents as it cuts their market share. On that note, after the unprecedented negative prices of oil on April 2021, there was an upward trend, reaching the level of 60$ per barrel again. It could be argued, that at this level Saudi Arabia and Russia, are not losing their market shares against the US, and on the other hand it is not a strong sign for significant capital entries in the US shale oil industry, putting a limit in this activity. In this framework, the oil exporting countries in the MENA region are seen as a third party, that needs to be controlled from any of the three aforementioned countries. Though it is a difficult task, due to the heterogeneity prevailing in the MENA countries, e.g. Iraq and Libya, these countries remain, always, on the big ones’ energy screens. Depending on a country’s overall stability as well as the strategic value that crude oil has in its exporting opportunities, they may be the suitable agent having them act in revisionism. To that end, relatedness and economic complexity [18] might be used as proxies that quantify a country’s risk but also the significance a product has in its overall economy. The higher the relatedness the larger the strategic values of this product in its economy, also the lower the Economic Complexity Index (ECI), the higher the country’s risk. Hence, oil-exporting countries with low ECI values and high relatedness of crude oil could be more favorable “targets” for non-conventional behaviors. The gas industry has more differences than similarities with the Oil industry. First and foremost, it is not a real global market, it may be argued that for a long period, where the majority of natural gas was transported through pipelines, market models referred to a continent or continents closely neighboring by land. Thus Europe and Russia were the first regional market, North America the second, and Asia the third one, whose large distances and physical mountain barriers averted her from a direct coupling with Russia, at least for the past years. There is extensive literature, concerning gas market modeling. A mainstream methodology in these studies uses modified models of Cournot Duopolies [19]. It is a game of secured supply streams, cost-effective investments, and profit-generating firms. This framework is strongly affected by geopolitical uncertainty [20], coming from either regional imbalances beneath or global decisions from top to bottom. In both cases, it does not advance the integration of gas markets into a global one, as with oil, leaving the margin for revisionism from different agents, national or private, when their interests are at stake or not served. As with oil, Europe and Asia-Pacific countries are the global

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consumers (without significant gas supply capabilities as in the US), while Russia, the USA, Qatar, Norway, Azerbaijan, Turkmenistan, and some Middle East countries account for most of the natural gas exports in 2020. North American gas is expected to account for a quarter of global supply growth to 2024, driven by US LNG exports. Eurasian gas is set to expand by 17% until 2024 boosted mainly by Russian new and recent gas projects (Power of Siberia, Yamal, Arctic LNG 2) and the European recovered exports. Azerbaijan follows in exports, with the ramping up of capacity of TANAP and TAP pipelines, while Turkmenistan leads the growth in Central Asia. The Middle East is another contributor to gas production growth, based on the fields of North Field and South Pars, which meet Qatar’s expansion in LNG exports and covering Iran’s domestic rising needs in natural gas. Production in North Africa is, in general terms, stable. Roughly speaking, the gas industry is a game of who will respond best in Europe’s and Asia-Pacific’s needs, that is which of the producing countries will provide the most secured, uninterrupted, and at the lowest cost cubic feet of natural gas. The EU's natural gas is expected to cover almost one-third of its primary energy mix by 2030 [21], most imported through pipelines by Russia, Norway, Algeria, and Qatar. Given the negative outlook of the North Sea gas production, which already reports many and significant divestments, it is in the hands of Russia whether it will increase its market share or keep the same high prices of natural gas as in the past. This becomes more obvious after the completion of the south corridor (with the commercial launch of TAP in 2021, the connection with TANAP, and the operation of the upgraded South Caucasus Pipeline from 2018), and at the same time, the increase of LNG imports from Qatar and the USA and the consistent supply (with increasing capabilities) of North Africa. Natural gas supply diversification is a priority issue in the EU’s future energy policy. The “Third Energy Package”, was adopted in an effort to further liberalize and increase competition in the energy sector, promote a barrier-free internal market, energy efficiency, and eventually energy security with higher energy imports diversification. In essence, it implemented the rule of non-discriminatory access to energy networks [22], a principle that was unsuccessfully opposed by Russia before the World Trade Organization. Unless new deals are signed, the Russian contract volumes for the EU and Turkey are expected to decrease more than half from 2015 to 2035 [23]. In response to the EU’s new rules and diversification target Russia’s policy is, either to keep its share in the EU by receiving lower selling prices and accepting a weakened status in its energy position, or to expand its exports towards the East, as it already does with the Power of Siberia Pipeline and plans to increase with the Power of Siberia 2, or do both of them at the same time. In this framework, increased LNG exports towards the Asian countries from the US, as well as the newly discovered exploitable reserves in the Eastern Mediterranean, are not so welcome. Furthermore, Russia will seek to create a cartel with the rest major producers. Doing so will maximize its profits with lower exporting quantities and higher prices, as it usually happens in a typical monopoly. This, of course, assumes no free-riding from all the participants within the cartel. An example here is the Gas Exporting Countries Forum (GECF), created in 2001 in Teheran, which controls around three-quarters of global gas reserves, half of the total natural gas transfers with pipelines, and approximately 85% of the global

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LNG exports. On the opposite, the EU and other consuming regions in the AsiaPacific will prefer a Bertrand model competition. Bertrand competition benefits more the consuming countries instead of the exporting ones, who will cover their costs, and some may enjoy a differential rent by dint of their production cost function, but their profits will be reduced compared to a monopolistic state or even compared to a Cournot duopoly. In such a duopoly, where two clusters of producers exist, i.e. the one including the USA and the other with Russia, it is accepted that both know each other total produced quantity. Producing countries want to avoid Bertrand competition; in the case of two clusters of producing countries, competition may be under a Cournot duopoly, and in the case of a single group of countries, possessing the majority of global production, market conditions will resemble a monopolistic model [24]. Regarding the production capabilities of the countries in North Africa (Algeria, Egypt, Libya), each of these countries has LNG infrastructures, and Libya and Algeria can also access to EU by pipeline. Depending on the historical relationships, the proximity, the price, and import capacities, their exports to the EU vary in volume and destination, but security concerns, including production disruptions and government interventions, hinder these countries from becoming a significant supplier of natural gas to the EU, despite having the resources for it. The continuous increase in LNG Exports [25], driven by a country not belonging in the GECF group, as well as the recent gas discoveries in the Eastern Mediterranean, might turn the Gas industry to match better with a Cournot Duopoly rather than a monopolistic market by this Group. To that note, the recent developments in the Afghanistan, with the Taliban succeeding again the democratic government, which was supported by the USA politicians, injects further instability in the region with a potentially negative fallout in the Central Asian counties3 long-term plans for further gas exports to the East and Russia as well. In a nutshell, the EU energy policy for higher diversification of natural gas imports, supported by the increase of North American LNG gas exports, the capacity of future supply of natural gas from the Eastern Mediterranean, the Trans-Caspian pipeline and its connection with the so-called south corridor, and the north African gas production are key factors for changing the status quo of natural gas. All the above must be considered in a solid framework including dedicated sources of gas, favorable economics, and political support. For instance, the Turkmenistan government prohibits foreign investments in onshore natural gas production, as there is a tight state control of the economy, lack of transparency in new investments, a restrictive visa regime, and limits on currency conversion making it difficult to repatriate profits [26]. Furthermore, even if political and financial risks were mitigated, a detailed assessment of the economics of Turkmenistan’s gas [27] reached the conclusion that it would not be price competitive in Europe, given the high cost of developing and the expensive delivery chain, let alone the political opposition from Russia in the threat of much larger volumes entering Europe.

3

Kazakhstan, Turkmenistan and Uzbekistan.

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References 1. Eurostatb. (2019). Energy Balance sheets – Statistical books [online]. Available at: https://ec. europa.eu/eurostat/documents/3217494/10077623/KS-EN-19-001-EN-N.pdf [cited 6August 2021] 2. Eurostatc. (2021). Energy statistics – an overview [online]. Available at: https://ec.europa.eu/ eurostat/statisticsexplained/index.php?title¼Energy_statistics_-_an_overview#Imports_and_ exports [cited 11 August 2021] 3. Belzer, D. B. (2014). A Comprehensive System of Energy Intensity Indicators for the U.S.: Methods, Data and Key Trends – Pacific Northwest National Laboratory [online]. Available at: https://www.pnnl.gov/main/publications/external/technical_reports/PNNL-22267.pdf [cited 9 Aug 2021] 4. Zhu, X., Li, L., et al. (2018). A meta-analysis on the price elasticity and income elasticity of residential electricity demand. Journal of cleaner Production, 201, 169–177. 5. Havranek, T., et al. (2012). Demand for gasoline is more price-inelastic than commonly thought. Energy Economics, 34, 201–207. 6. Dahl, C. (2012). Measuring global gasoline and diesel price and income elasticities. Energy Policy, 41, 2–13. 7. Wang, N., & Mogi, G. (2017). Industrial and residential electricity demand dynamics in Japan: How did price and income elasticities evolve from 1989 to 2014? Energy Policy, 106, 233–243. 8. Chang, Y., Kim, S. C., et al. (2014). Time-varying long-run income and output elasticities of electricity demand with an application to Korea. Energy Economics, 46, 334–347. 9. Liddle, B., Smyth, R., & Zhang, X. (2020). Time-varying income and price elasticities for energy demand: Evidence from a middle-income panel 10. Griffin, J. M., & Schulman, C. T. (2008). Price asymmetry in energy demand models: A proxy for energy-saving technical change? The Energy Journal, 26(2). 11. Dargay, J., Gately, D., & Huntington, H. G. (2007). Price and income responsiveness of world oil demand by product, energy modelling forum. Stanford University, [online]. Available at: https://web.stanford.edu/group/emf-research/docs/occasional_papers/op61.pdf [cited 14 August 2021) 12. Darmstadter, J., Dunkerley, J., & Alterman, J. (1977). How industrial societies use energy: a comparative analysis. Resources for the future. Johns Hopkins University Press. 13. Labandeiraa, X., Labeagac, J., & López-Oteroa, X. (2017). A meta-analysis on the price elasticity of energy demand. Energy Policy, 102, 549–568. 14. McRae, R. (1994). Gasoline demand in developing Asian countries. Energy Journal, 15, 143–155. 15. Van Benthem, A., & Romani, M. (2009). Fuelling growth: What drives energy demand in developing countries? The Energy Journal, 30(3), 91–114. 16. Energy Charter Secretariat, 2007. Putting a price on energy, international pricing mechanisms for oil and gas. 17. Federal Reserve Bank of Dallas. (2021). Energy Slideshow [online]. Available at: https://www. dallasfed.org/-/media/Documents/research/energy/energycharts.pdf/ [cited 19 August 2021]. 18. Simoes, A. J. G., & Hidalgo, C. A. (2011, August). The economic complexity observatory: An analytical tool for understanding the dynamics of economic development. In Workshops at the twenty-fifth AAAI conference on artificial intelligence. 19. Jansen, M. J. M., van Lier, A., van Witteloostuijn, A., & von Ochssée, T. (2012). A modified Cournot model of the natural gas market in the European union: Mixed motives delegation in a politicized environment. Energy Policy, 41, 280–285. https://doi.org/10.1016/j.enpol.2011. 10.047 20. Liu, Y., et al. (2021). The impact of geopolitical uncertainty on energy volatility. International Review of Financial Analysis, 75, 101743.

References

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21. Eurogas, Long-Term Outlook for Gas to 2035, October 2013, p. 3 [online]. Available at https:// eurogas.org/website/wp-content/uploads/2018/03/Eurogas_Brochure_Long-Term_Outlook_ for_gas_to_2035.pdf 22. Official Journal of the European Union. (2009). REGULATION (EC) No 715/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 [online]. Available at: https://eur-lex.europa.eu/legal content/EN/TXT/HTML/? uri¼CELEX:32009R0715&from¼EN [cited 26 August 2021] 23. Cedigaz. (2018). Pipeline Supply Contracts Database [online]. Availableat: https://demo. cedigaz.org/pipelinecontract/dataset [updated 12/2018] 24. Dahl, C. A. (2015). International energy markets: Understanding pricing, policies, and profits (2nd ed.). Penwell Corporation. 25. Bloomberg NEF, Snam, IGU. (2020). Global Gas Report [online]. Available at: https://www. igu.org/wp-content/uploads/2020/08/GGR_2020.pdf [cited 27 August 2021]. 26. US Department of State. (2020). 2020 Investment climate statements: Turkmenistan [online]. Available at: https://www.state.gov/reports/2020-investment-climate-statements/turkmenistan/ [Cited 30 August 2021] 27. Pirani, S. (2018). Lets not exaggerate: Southern Gas Corridor prospects to 2030. The Oxford Institute for Energy Studies [online]. Available at: https://www.oxfordenergy.org/wpcms/wpcontent/uploads/2018/07/Lets-not-exaggerate-Southern-Gas-Corridor-prospects-to-2030NG-135.pdf [cited 30 August 2021]

Chapter 4

The Eastern Mediterranean and MENA Regions: Revisionist Areas in the International System?

Several countries located in the Middle East and the North Africa region, are among the most important oil and gas producers in the world. Historically, a place high in natural resources was always the apple of discord among the global powers. Energy resources is not an exception. There were so many conflicts in these regions, related or not with energy sources, that it wouldn’t be wrong to say that war is normal in these territories. Fossil fuels are triggering global conflicts all over the world. In Iraq, Syria, Ukraine, South Sudan, the east and south seas of China, Libya, wherever you look, the world undergoes several new or intensifying conflicts. Although at first glance, these upheavals appear to be driven by their own idiosyncratic circumstances, related to ethnic, religious, and national antagonisms, a closer look may reveal common underlying energy issues. In Syria, the devastating civil war, including the exploitation of the country’s oil production from ISIS to finance their operation, in Ukraine the 2013 crisis and the annexation of the Crimea Peninsula from the Russian Federation, was related, among others, with the transit role the country had for the Russian gas and the opposing powers who would like to pay this role. Similar is the case for the control of the Libyan oil and gas sources as well as the South China sea. To that note, a country might select or be forced to play a revisionist role in the international system, altering the current power status, depending on the produced potential benefits or costs its stance will create. As mentioned above, a country’s energy profile is important in this dilemma, with National Energy Balance Sheets providing all the information needed. Usually, they are depicted in Sankey diagrams as the one in Figure X.X, presenting Algeria’s energy power flows. At first glance, one can understand its role as an oil and gas producing country, with the majority of its production directed to exports. The higher the exporting volumes the more important its role in the international system, on the opposite, higher imports (not for transit use) suggest higher dependency on exogenous factors or agents and subsequently lower degrees of freedom for revisionism policy. In Algeria’s case, the percentage of imports on © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_4

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4 The Eastern Mediterranean and MENA Regions: Revisionist Areas in the. . .

Fig. 4.1 Algeria’s energy flows in 2017 (Source: The Authors)

total primary energy production is only 3%, while the ratio of exports to total energy production reaches 66%. In addition, the Figure presents the country’s Total Final Consumption (TFC) allocation to the End-users, of Industry, Transportation, Residential, Tertiary, and agricultural sectors. It’s clear that Algeria is far from being called a heavily industrialized country nor has significant tertiary services (Fig. 4.1). Table 4.1 shows the energy role of the MENA countries, based on specific ratios of energy flows, that is imports per total primary energy supply and production, Exports per production, and Net Exports per Production. Table 4.2 reports their TFC allocations per End-user. Each country’s role has been inferred from its respective energy ratios, as shown in Table x. It could be argued, that an energy importing country has fewer degrees of freedom to implement a revisionist policy compared to a net exporting country with significant indigenous production. Egypt’s energy profile suggests that it has no engagements in terms of energy security as, it produces almost all of its TPES, and on the other hand, its economy is not structured on energy products as with other countries, e.g. Iraq, Libya, and so on, leaving room for less conservatism and more balanced and gradual revisionism. Turkey’s additional role as a significant transit country of oil and gas from and to several destinations, enables a more active role compared to the past, notwithstanding it covers its energy needs almost on imports. Similar is the case with Ukraine, which resulted in Crimea’s crisis. Nevertheless, Turkey has a number of other comparative advantages, starting from its location, its economic magnitude, and the close ties it has to more than one

4 The Eastern Mediterranean and MENA Regions: Revisionist Areas in the. . .

25

Table 4.1 Energy Flows in percentages of the MENA countries (Source: The Authors calculations)

Countries Algeria

Imports/ TPES (%) 7%

Imports/ production (%) 3%

Exports/ Production (%) 66%

Net Exports/ Production (%) 63%

TPES/ Production (%) 36%

Cyprus Egypt

121% 31%

2029% 36%

0% 17%

2029% 19%

1680% 119%

Iran

4%

2%

41%

38%

62%

Iraq

29%

7%

82%

74%

26%

Israel Jordan Kuwait

98% 110% 13%

251% 2582% 3%

71% 233% 82%

179% 2349% 79%

257% 2347% 21%

Lebanon Libya

101% 45%

4448% 11%

0% 86%

4448% 75%

4407% 25%

Morocco Oman

95% 9%

1045% 3%

1% 67%

1044% 64%

1097% 34%

Qatar

0%

0%

80%

80%

19%

Saudi Arabia Syria

12%

4%

70%

66%

33%

63%

137%

17%

120%

216%

Tunisia

72%

147%

39%

108%

205%

Turkey

84%

336%

21%

315%

398%

UAE

47%

14%

74%

60%

29%

Yemen

50%

92%

0%

92%

186%

Country’s Role Producer & Exporter Importer No Distinctive Energy Role Producer & Exporter Producer & Exporter Importer Importer Producer & Exporter Importer Producer & Exporter Importer Producer & Exporter Producer & Exporter Producer & Exporter Producer & Importer Producer & Importer Importer & Transit Producer & Exporter Producer & Importer

leading power (Europe, Russia, and the US), allowing her to have its own active revisionist plan. This was not the case for Ukraine. Table 4.3 reports the Economic Complexity and Relatedness indexes, as well as the long-run elasticities of oil demand. According to its creators, higher positive values indicate a robust economy, having higher growth rates, less inequality, and in general lower risk levels. The opposite is true for negative values. The Relatedness

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4 The Eastern Mediterranean and MENA Regions: Revisionist Areas in the. . .

Table 4.2 TFC allocation per End-User (Source: The Authors calculations) Countries Algeria Cyprus Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Morocco Oman Qatar Saudi Arabia Syria Tunisia Turkey UAE Yemen

Industry/ TFC (%) 17% 15% 25% 24% 19% 18% 15% 39% 13% 7% 21% 34% 35% 34%

Transport/ TFC (%) 39% 43% 32% 24% 48% 38% 46% 23% 58% 66% 36% 19% 24% 30%

Residential/ TFC (%) 28% 21% 22% 27% 24% 14% 23% 16% 18% 12% 25% 7% 9% 10%

Comm. & Publ. Services/TFC(%) 2% 15% 6% 6% 1% 11% 7% 7% 5% 1% 8% 22% 3% 6%

Agriculture/ TFC (%) 1% 3% 3% 4% 0% 2% 4% 0% 0% 1% 8% 0% 0% 0%

22% 26% 31% 50% 14%

32% 31% 26% 26% 39%

22% 26% 21% 8% 36%

5% 8% 13% 7% 5%

0% 6% 4% 0% 2%

index is a proxy for the strategic value the examined product has for the country’s economy. Higher values mean a higher probability for increased exports in the future. Hence, given crude oil or natural gas is a cornerstone in a country’s economy, i.e. high values in their relatedness index, high positive values in the ECI index could be regarded as room for “active revisionism” against the current status quo, and for further promotion of its national energy policy. In the case of negative, high in absolute terms, values, it might be interpreted as a condition for “passive revisionism”, potentially instigated by a third party, e.g. a leading global or regional power. Egypt and Turkey again, differ from the rest of the group, as they exhibit the highest relatedness indexes for oil and natural gas. Based on the ECI index though, Turkey reports higher values than Egypt whose value is near zero. A rational thought here is the solid background of Turkey’s economy. Regardless of the turmoil it has entered in the last couple of years, it manages through a heavy industrial base, not only not to shut-off in the predicaments, but on the contrary to grow by 5.7% in 2021. By contrast, Egypt’s economy is not at the moment on the same strong recovery path as Turkey is, a fact demonstrated in the ECI index. Another noteworthy fact is Algeria’s and Libya’s negative ECI values. Combined with potentially higher future values in these product Relatedness indexes, might create new unrests in the area, as part of an exogenously directed or as we call it a “passive revisionism” policy.

4 The Eastern Mediterranean and MENA Regions: Revisionist Areas in the. . .

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Table 4.3 Composite indexes and energy related elasticities per countrya

Countries Algeria Cyprus Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Morocco Oman Qatar Saudi Arabia Syria Tunisia Turkey UAE Yemen

ECI index 1.002 0.546 0.030 0.009 0.468 1,232 0.050 0.131 0.291 1.300 0.436 0.229 0.013 0.944

Crude oil Relatedness index 0.061 0.174 0.393 0.231 0.022 0.155 0.204 0.056 0.197 0.030 0.195 0.158 0.076 0.147

Natural Gas Relatedness index 0.025 0.103 0.279 0.131 0.006 0.131 0.135 0.028 0.117 0.010 0.124 0.057 0.021 0.079

Liquefied Natural Gas Relatedness index 0.040 0.113 0.329 0.115 0.009 0.130 0.142 0.036 0.123 0.017 0.157 0.090 0.032 0.087

Long Run Oil Elasticities of demand Income Price Elasticity Elasticity 0.91 0.01 0.75 0.25 0.95 0.12 0.91 0.01 0.91 0.01 0.95 0.12 0.86 0.05 0.91 0.01 0.76 0.06 0.37 0.06 0.86 0.05 0.91 0.01 0.91 0.01 0.91 0.01

NA 0.180 0.654 0.277 1.267

NA 0.239 0.376 0.236 0.111

NA 0.166 0.343 0.131 0.027

NA 0.202 0.342 0.165 0.043

0.95 0.86 0.61 0.91 0.24

0.12 0.05 0.18 0.01 0.25

a

Sources: Country Rankings (ECI) [1], Crude Petroleum Relatedness [2], Natural Gas Relatedness [3], Gately et al. [4]; Liddle et al. [5], Altinay [6]

Another point is the long-term income and price demand elasticities of oil. Roughly speaking, we observe the expected values and sings, that is positive income elasticity close to unit and price elasticity close to zero for the producing countries and less inelastic for non-producers (in the negatives field). Turkey has a stronger inelastic behavior on income changes, compared to the other countries. This suggests better alternatives/substitutes energy products, or even an economic structure less dependent on oil demand. Since the end-user Industry in Turkey, captures the biggest part of TFC compared to the other end-users (31%, see Table 4.2), a rational though would be that the alternative of natural gas already seems to work for Turkey. Egypt’s elasticities indicate that natural gas has not at the moment significant substitution effects, as in Turkey, a state that Egyptian policy makers would like to revert with its proven natural gas reserves.

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4 The Eastern Mediterranean and MENA Regions: Revisionist Areas in the. . .

References 1. Country Rankings (ECI). (2021). Retrieved from https://oec.world/en/rankings/eci/hs6/hs96 2. Crude Petroleum Relatedness. (2021). Retrieved from https://oec.world/en/profile/hs92/crudepetroleum 3. Natural Gas Relatedness. (2021). Retrieved from https://oec.world/en/profile/hs92/natural-gasin-gaseous-state 4. Gately, D., & Huntington, H. G. (2002). The asymmetric effects of changes in price and income on energy and oil demand. The Energy Journal, 23(1). https://doi.org/10.5547/ISSN0195-6574EJ-Vol23-No1-2 5. Liddle, B., & Huntington, H. (2020). Revisiting the income elasticity of energy consumption: A heterogeneous, common factor, dynamic OECD & non-OECD country panel analysis. The Energy Journal, 41(3). https://doi.org/10.5547/01956574.41.3.blid 6. Altinay, G. (2007). Short-run and long-run elasticities of import demand for crude oil in Turkey. Energy Policy, 35(2007), 5829–5835. https://doi.org/10.1016/j.enpol.2007.07.015

Chapter 5

The Aftermath of the New Energy Mandate

The current energy mandatum in the areas of Eastern Mediterranean and MENA, inject further liquidity in the international status quo. The discoveries of new oil and gas reserves in the Eastern part of the Mediterranean emerge further capabilities and have the potential of altering the current status quo in the region, given climate concerns [1] and low carbon policies [2, 3]. Furthermore, the newly elected US government has abandoned the doctrine of “America First” and follows a more multilateral approach, putting more importance on international organizations and alliances. Biden’s administration has focused on reinforcing relations with the EU and developing an effective strategy to control China’s growth and standing up against Russia. These will likely crowd out the MENA region for the attention of the US government, shifting the past century security paradigm of global powers intervention to internal transformations. In this framework, energy flows and profiles are critical for a deeper understanding of these changes. Turkey and Egypt are recognized to have an upgraded role in this arena, enabling them to implement an “active revisionism” favoring firstly their interests. These two countries have fewer commons than differences in energy terms. Turkey is at the moment a strong transit country of oil and gas, while Egypt has not have a distinctive energy role but aims to be a producer and potentially an exporter. Their total final consumption allocations stress the industrialized role of Turley compared to Egypt, while their ECI values again reveal Turkey’s more robust economy. Besides these, Turkey has more degrees of freedom to implement its expanding agenda, as it does not belong to a union, to an alliance, or an energy group. It’s not an OPEC member, not a member in the gas exporting forum countries (GECF), not in a union like the EU, and is the only G-20 country yet to ratify the Paris Agreement. In Addition, it has an expressed opinion against signed treaties and recently withdrew from the Istanbul convention. At the moment, Turkey transfers the competing gases from Russia and the South corridor to Europe, and oil from the Caspian Sea to the Mediterranean. Last, it controls all the immigrants flows towards Europe from Syria and potentially from Afghanistan, where it looks to expand its footprint, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_5

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essentially by replacing the US role. Given these, Turkey will stay in its “active revisionism” path, as it is well served from its energy, and not only, current engagements. On the other hand, Egypt lags in degrees of freedom, but its size, location, and historical bilateral affairs with the leading countries enable her to implement its future energy plans and gain as much influence as possible in this new power status in the region. Regarding the fossil producing countries of Algeria and Libya, their engagement in the energy groups of OPEC and GECF, their strong negative values in the ECI index, the lack of transparency, and their low democratic performances, which classify them in the Authoritarian regimes [4], renders them potential countries for “passive revisionism”. That is a non-conservative policy serving a third party’s (another country) interests first and not of their people. It would be delinquency not to refer to Oman, a country with the potentials to stand in the region. Oman, also regarded the Switzerland of the Middle East grace to the policy of neutrality and mediation it implements for several years, has managed to keep and in some cases increase its trading bonds with most of the countries in the region, but as well with Asian and Pacific countries. Its simultaneous diplomatic and economic ties with Iran and Saudi Arabia, the majority of its oils and gas exports to China on one hand, and the framework agreement with the United States to use its ports and airports on the other are indicative cases of its neutrality policy. Should Oman keep diversifying its economy within the next two decades, its position as an entry point in the Gulf of Aden and the Persian Gulf, and its proximity with India and Asia in general, could establish it as a secure global trading hub, and hence a new regional power in the area.

References 1. Agliardi, E., Alexopoulos, T., & Cech, C. (2019). On the relationship between GHGs and global temperature anomalies: Multi-level rolling analysis and copula calibration. Environmental and Resource Economics, 72(1), 109–133. 2. Thomakos, D., & Alexopoulos, T. (2016). Carbon intensity as a proxy for environmental performance and the informational content of the EPI. Energy Policy, 94, 179–190. 3. Alexopoulos, T., Thomakos, D., & Tzavara, D. (2012). A decomposition of the effect of renewable energy sources regulation on CO2 emissions in the EU-15. Environmental Economics, 52–64. 4. The Economist Intelligence Unit. (2020). Democracy Index 2020 In sickness and in health? [online]. Available at: https://pages.eiu.com/rs/753-RIQ-438/images/democracy-index-2020. pdf?mkt_tok¼NzUzLVJJUS00MzgAAAF_Vbf0a7mBvAMbLU9CaHowy50MpMa_ PkXpUC1V47Dr88foIu22yoVUb3cFsZkbkhj5soiKEjtrMa2UnckHVnm7oqMYUKjCHD4UC_ V0S9EXLhBp1g [cited 30 August]

Part II

Energy Dynamics and Transitions in MENA and Eastern Mediterranean: From Hydrocarbons to Electricity Nicolas Mazzucchi

Chapter 6

Energy Resources in Eastern Mediterranean and MENA

MENA has been considered one of the major regions for energy production for a century now. The Gulf region, alongside the Maghreb have participated the global oil and gas production development from the 1920s to the end of the twentieth century. Gulf region was considered so important for Western countries energy supplies that it became a core issue in US and European foreign policies for the whole Cold War [1]. In Europe, with national specific orientations, Maghreb was also considered by some countries such as France, Italy or Spain, to be a major contributor to their energy security in providing oil and gas. This MENA region has also been at the centerfold of the OPEC, especially with the independence of some major oil producing countries such as Algeria, Kuwait or United Arab Emirates during the 1960s. This situation of MENA region as a major producing area remains a key issue in international relations in the twenty-first century. Yet some recent evolutions tend to modify the perception of the MENA and Eastern Mediterranean regions as oil and gas producers.

6.1 6.1.1

The Situation at the Eve of 21st Century MENA as a Major Producing Area

Even if the first major discoveries of oil occurred in the United States and Russia, it is the Gulf region that symbolizes the first oil rush of the twentieth century. From Persia to Arabia, the Gulf region has been the core of US, British and French oil exploitation to fuel their economies after the dismantlement of the Ottoman Empire and the British seizure of Persia after the end of WW1. Oil was at the center of international negotiations regarding the borders of newly independent states. The Sykes-Picot agreement of 1916 and the following San Remo resolution of 1920, were updated in 1925 to grant the British Empire the control of Mosul Vilayet, an oil © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_6

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rich territory in Northern Iraq. Looking at the San Remo resolution of 1920, it was immediately followed by an oil agreement between France and Great Britain. This agreement intended to foster cooperation on oil exploitation between the two colonial empires that were granted influence zones and mandates in former Ottoman Iraq, Lebanon, Syria and Palestine. The oil agreement of San Remo allowed France 25% of British oil production, as Great Britain was granted the richest territories in terms of oil resources. During these post-war years, oil became increasingly important as the growing energy source for the whole countries, fueling their economies and societies. In 1928, the Iraq Petroleum Company shareholders were major companies from the United Kingdom, France and the United States—through the Near East Development Corporation—leading to a global agreement between these countries, known as the Red Line Agreement, to “sanctuarize” their cartel. Therefore, Middle East was a strategic asset for major European countries from the 1920s and there is no surprise in the will of German forces to seize the oil fields of Iraq and Persia during WW2. Defending Middle East, notably with the El-Alamein campaign, was a major issue for the Allies. For the British and the French, the Northern Gulf region was their major playground as Persia and Iraq were at the time, the major regional oil resources. Yet during the interwar period, another major player entered the field: the United States, mostly in Southern Gulf area: Bahrein and Saudi Arabia. After the end of WW2, with the defeat of Axis forces, the Gulf region remained at the core of international issues. The major event of this period regarding energy, was the Quincy agreement of February 1945. The meeting between the US President Franklin Roosevelt and the king of Saudi Arabia, Ibn Saud, led to an agreement still considered to have shaped the whole international landscape in the post-WW2 era. The United States and Saudi Arabia agreed on a special relationship where Saudi Arabia grants the United States oil companies an access to oil resources in exchange of US military protection. United States and Saudi Arabia had, at this time, an already flourishing relationship that started with the creation of the CaliforniaArabian Standard Oil in 1933, renamed Aramco in 1944. In 1948, nearly all the US majors participated to Aramco: Standard Oil of California, Texaco, Standard Oil of New Jersey and Socony. The regional oil situation finally changed in favor of Saudi Arabia with the discovery of Ghawar oil field in 1948, the largest onshore oil field of the world, still in operation nowadays. With Ghawar—estimated having more than 100 billion barrels of proved reserves -, Saudi Arabia became the most important oil reserves holder and producer, leading to its specific position inside the OPEC. During the 1950s and 1960s, the remaining Middle East countries became independent or freed themselves from the supervision of their tutelar power, most of the time the United Kingdom. Oil discoveries in newly independent states in Middle East offered them an immediate wealth, as they continued to supply Western countries. These economic relations were also reinforced by international agreements on defense, military alliances or diplomatic cooperation. In 1955, the Baghdad Pact created an international mutual assistance and cooperation framework between Iraq, Iran, Turkey, the United Kingdom and—from 1958—the United States. The support from Western powers was at the time a major issue for most regimes, notably

6.1 The Situation at the Eve of 21st Century

35

Iran and the whole region remained mostly Western oriented with the exception of Syria and People’s Democratic Republic of Yemen, until 1979. Looking at the Maghreb region, the situation is slightly different. The region also experienced a decolonization period during the 1950s and 1960s, culminating with the Suez Crisis in 1956 and the War of Algeria (1945–1962). The conflictual situation in the whole Maghreb countries led to a different diplomatic situation compared to Middle East. The post-conflict situation with Western countries and the mutual defiance, helped the USSR to create strong ties with most of Maghreb newly independent countries, creating a paradoxical situation. For most of the twentieth century second part, the Maghreb countries were aligned on the Eastern bloc and yet supplying Western countries with oil. Contrarily to the Middle East situation until 1979, there was no military or diplomatic alliance between oil producing countries and their customers. The relationship there remained mostly based on mutual economic interest, sometimes with deep political resentment as between France and Algeria. Nevertheless, these territories of Maghreb and Middle East constituted a major area of oil and gas discoveries and the core of the Organization of Petroleum Exporting Countries (OPEC) since 1960. Even if the OPEC was originally centered mostly on the Persian Gulf, Libya and Algeria joined the organization during the 1960s, integrating North African oil issues with Middle Eastern ones. The production quotas initiated by the OPEC allowed these countries to create a rent-based economy that is still nowadays the basis of their political-economic system. Even with major oil and subsequently gas discoveries during the 1960s–1990s, the MENA region and the OPEC as an organization had their share of global oil production decreasing due to the will of international oil companies to develop non-OPEC oil and gas resources, in order to avoid a 1973-similar situation. The decision from OPEC to freeze the exports to the countries considered to support Israel during the Kippur War, created a global oil shock and an economic crisis in all the Western economies. Therefore, international oil companies, if still engaged—for economic reason considering the very profitable cost of MENA oil extraction—in the MENA region and in OPEC countries, slowly turned to other countries to develop their fields. This strategy resulted in a decrease of investment in upstream oil sector, and a subsequent decrease in new oil field discoveries. Concerning gas, the absence of an OPEC-like organization helped MENA countries to remain an important investment playground for major companies. Yet their investment rules, with the need to work closely with their national oil company (NOC) such as Sonatrach in Algeria or Qatargas in Qatar, may have sometimes induced other investment strategies from international oil companies (IOC). Moreover, the political risk played a major role in limiting the flow of investments towards certain countries. Iran, Libya, Yemen or even Algeria were—and most of the time are still—considered to be high-risk countries for investment, due to their political regime, the potential unrests or the international sanctions on them. This vision of MENA countries as high-political risk and therefore as less interesting for IOC, starts with the Libyan aggression on Chad during the late 1970s and 1980s and is increasing since the 1991 Gulf War. Civil war

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6 Energy Resources in Eastern Mediterranean and MENA

in Algeria during the 1990s, Iraq engulfed in the sanctions and from 2003 with the Iraq War, “Arab Springs” in Libya, Algeria, Yemen, Egypt, Syria and Iraq, ISIS in Iraq, US and EU sanctions on Iran since the late 2000s, etc. show the growing worries over the whole region with only a few countries out of this turmoil, mostly in the Arab peninsula (Saudi Arabia, United Arab Emirates, Oman, etc.). The result of these uncertainties and crisis was a global decrease in the oil and gas discoveries, especially onshore, resulting in a fall of the resources/production ratio (R/P) for the MENA region. While the oil R/P in MENA was around 110 in 1990 and declined to nearly 85 in 2020; in gas it felt from nearly 400 in 1996 to 110 nowadays, still remaining the world’s most important. On the contrary, the R/P ratio of other regions rose importantly during the same period: Latin America, Africa and Eastern Mediterranean. With the need to find other hydrocarbons sources, IOC started to reach for new regions to explore, among them the Eastern Mediterranean, almost forgotten for a century, started to attract major players at the end of the 2000s.

6.1.2

The Eastern Mediterranean, a Forgotten Region

During the whole twentieth century, Eastern Mediterranean was—in respect of oil and gas issues—a forgotten region, with very low resources. Except from Egypt, the whole region was considered only from a consumption point of view, having very few onshore resources discovered during the grand era of exploration in the interwar period. Jordan, Syria, Lebanon had some resources, yet not important enough to transform these countries in oil rent-based economies. On the contrary, they were considered consuming and importing countries, leading to the development of a whole network of pipelines to supply them from resources-rich countries such as Egypt. Moreover, the Near Eastern countries were also a gate to Europe and the United States for the exportation of oil and gas. In 1947, the Trans-Arab Pipeline was built to bring the Saudi oil to Sidon in Lebanon. Even if the pipeline stopped working during the Lebanon civil war, it was the symbol of Near East as a transit and consumption region. With the normalization of diplomatic relations between Israel and Egypt in the late 1970s, the latter started to supply the earlier with natural gas in the 1980s before the completion of the Arish-Ashqelon underwater pipeline. When Egypt started to export gas in 1999, the negotiations for an export infrastructure all along the Mediterranean coast of Asia started. Soon after the governments of Egypt and Jordan, followed thereafter by Syria, Lebanon, Israel, Turkey and Iraq, agreed on the construction of a natural gas pipeline to supply them from Egypt: the Arab Gas pipeline. Unfortunately, the pipeline, as the major artery to fuel Levantine economies, was repeatedly targeted since 2011 by terrorists and insurgents, as a symbol of transnational cooperation. On the Northern and Western sides of the Eastern Mediterranean, resources were also considered very limited with barely no national oil or gas production in Turkey or Greece. National deposits were identified onshore, yet prove to be of very little

6.1 The Situation at the Eve of 21st Century

37

economic interest, compared to major production areas. Moreover, the proximity of Eastern Mediterranean to MENA producers, also played an important role in the little consideration for their national resources. The exploitation and transportation from North Africa or the Gulf region remained far cheaper than the development of national fields in Greece or Turkey. Yet some national oil production industry remained active, with a symbolic production: 773,000 tons of crude oil in Greece in 1990—with a decline to nearly 100,000 tons in 2020 –, 3,700,000 tons in Turkey in 1990 with a nearly stable perspective. These figures could only cover 9% of Greek needs in 1990 and 8% of Turkish needs nowadays, depending on the refining capacities. The major change occurred with the development of new technologies for the exploration and production of oil and gas during the twentieth century last quarter, when IOC sought to find new fields out of OPEC countries. The investments in offshore technologies allowed to progressively unlock new resources that were before considered economically irrelevant and offered a new hope for some regions to find interesting deposits.

6.1.3

The Geography of International Oil Companies

Beyond the location of resources, another element was crucial in the development of MENA and latter Eastern Mediterranean oil and gas production: the oil companies, especially the Western IOCs. The very first oil companies were created by France and Great Britain to start the oil production of newly acquired territories after WW1. The British were already present in Persia and were the very first to develop at an industrial level the oil production in Iraq. France also, with the Compagnie Française des Pétroles, engaged in oil production with some kind of condominium with the British Anglo-Persian and later the US-based majors. The oil extracted started to fuel the recovery and the transformation of European economies on the interwar period, creating a major dependency from European countries to MENA oil resources. In 1928, the Achnacarry Agreement inaugurated the “Seven sisters” era, with a global domination of Anglo-American oil companies. MENA was mostly given to the Anglo-Persian—latter becoming BP—as the oldest company engaging in Middle Eastern oil production. After the WW2, US companies became more involved in the development of Middle Eastern oil, focusing on the Gulf region, following the Quincy Pact. Therefore, the geography of international oil companies showed a situation of geographical quasi-monopolies: the British companies—and the French—focusing mostly on Egypt, Iran, Iraq and Near Eastern countries, US companies on the Gulf region. This geography mostly followed the geopolitical agreements and influence zones, with the legacy of the San Remo treaty. The major change occurred after WW2 with the independence of MENA oil producing countries. Starting with former British dominions and colonies, followed by colonial and post-colonial conflicts: in Egypt in 1956 after the nationalization of Suez Canal, in Algeria from 1954 to 1962. These violent or non-violent

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6 Energy Resources in Eastern Mediterranean and MENA

independences mostly resulted in the creation of NOCs in the newly independent countries. Some, like the Saudi Aramco were the nationalization of previous local Western subsidiaries, others like the Algerian Sonatrach or the Iraq National Oil Company. Nationalization of assets was mostly made on a geopolitical basis, sometimes following the different conflicts in MENA: Algeria decided to nationalize the Sonatrach after the Six days war, Saudi Arabia progressively acquired stakes in the Aramco after the Kippur War, resulting in the nationalization and the change in name from Aramco to Saudi Aramco in 1988. The first oil shock, after the OPEC decision to freeze the exports to Western countries during the Kippur War, acted as a trigger to accelerate the pace of nationalizations, MENA countries wanting to have a direct control over oil and gas and, subsequently, the ability to use it as a leverage in international relations. Nevertheless, the newly nationalized NOCs still needed the technical expertise of IOCs for the oil production and, especially, the midstream and downstream parts of the oil and gas value chain. The Western oil majors remained the specialists in refining, transportation and distribution over consuming markets in America, Europe and Asia. Therefore, a situation of forced cooperation installed during the 1970s-1990s between NOCs and IOCs, the former possessing the resources and benefiting from the extraction rent, the latter making the transformation process and earning money from the end of the value chain. Regarding oil and gas value chain in MENA, the NOCs were—and are still—mostly engaged in crude production, while the refineries and terminals are mostly owned—or co-owned—by Western IOCs. Moreover, a large part of the refining industry, during the 1960s– 2000s era was installed in Western countries, to limit the potential influence of OPEC countries. This specialization regarding the different phases of the oil and gas value chain, installed a mutual dependence between NOCs and IOCs. Moreover, the IOCs were also supported by the Western governments’ national strategies. In 1980, the Carter Doctrine [2] stated that the United States could engage in a military action if their strategic interests in the Gulf were to be threatened. Earlier, following the Mahan vision of Sea Power [3], the United States starting from the 1900s to largely invest in the navy, with the broader perspective of securing the sea lines, especially for oil. This Sea Power doctrine was at the core of US military developments during the Cold War, resulting in the creation of US Navy Sixth and latter Fifth Fleets for permanent presence in the Mediterranean and the Gulf. The military intervention of Western countries – supported by Saudi Arabia and Gulf Western allies—during the Gulf War in 1991, following the invasion of Kuwait by Saddam Hussein’s Iraq, also demonstrated the political will to engage in securing the oil and gas production and exportation system in MENA. However, MENA countries and IOCs developed strategies to gain the upper hand in this relationship, resulting in major changes at the end of the century. Regarding the last quarter of the twentieth century, IOCs changed slightly their strategy regarding MENA countries. With the diplomatic pressure during the Kippur War and the subsequent oil shock, IOCs started during the 1970s to diversify their geographical presence, in encouraging oil and gas exploration-production campaigns in non-OPEC countries. With the increase of oil prices, they started to invest vast amounts of money to develop new techniques and technologies for oil and gas

6.1 The Situation at the Eve of 21st Century

39

Evoluon of gas demand (bcm) 4500 4000 3500 3000 2500 2000 1500 1000 500 0 1973

1980

1990 OECD

2000

2010

2019

non-OECD

Fig. 6.1 Evolution of gas demand worldwide in bcm; source: IEA

recovery, resulting in unlocking offshore resources. The continuous increase in depths and distance from the shore since the late 1970s is a legacy of this period. Moreover, the demand in Europe and the US started also to evolve, with a growing focus on gas for electricity production, with a specific will of diversification in suppliers to increase energy security. The gas demand increased by nearly 4 since 1973 (Fig. 6.1). Thus, the share of OPEC countries in terms of global oil production started to decrease during the late 1970s and 1980s, to achieve a nearly 40% of global production nowadays. The rise of non-OPEC countries and new gas producing countries had an immediate consequence on MENA countries in limiting their geopolitical pressure ability as shown during the 2013–2014 oil prices crisis, that resulted in a political defeat for oil producing countries. At the end of twentieth century, the geography of international oil companies started to change again with the foresighted decline of North African oil production and the progressive switch to gas in Western countries consumption. The decrease of oil demand in Europe and Japan—with also a negative perspective in the United States—resulted in a change in favor of gas, regarding the lower greenhouse gases emissions of natural gas, compared to oil and coal. Therefore, the Western IOCs, especially the European ones such as Shell, Total, BP or ENI, started to decrease their participation in oil projects to switch to gas and, subsequently, to renewable energy sources alongside gas projects. This resulted in new investments and geographical polarization over gas rich regions, such as Eastern Mediterranean from the late 2000s. Therefore, when Cyprus launched several bid campaigns for gas exploration blocks during the 2010s, major Western IOCs—namely ExxonMobil, Total and ENI—decided to participate in order to develop LNG in the country.

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6 Energy Resources in Eastern Mediterranean and MENA

Another major change that occurred during the 2000s, was the rise of Asian international NOCs, especially the Chinese NOCs. Chinese NOCs started to internationalize during the 2000s, in order to enhance the country’s security of supplies in participating directly to foreign oil and gas production and transformation. For MENA countries, these new players in the oil and gas international landscape were an opportunity to challenge the IOCs in the midstream and downstream phases of oil and gas value chains. Chinese companies (CNPC, Sinopec and CNOOC) started to create joint-ventures with MENA NOCs for the creation of new infrastructures, especially oil refineries and terminals, entering to a direct competition—and most of the time in coopetition [4] in participating to common projects—with Western IOCs. The Chinese growing presence during the 2000s and the 2010s also resulting in growing relations between China and MENA countries, including in military cooperation and sales. As for MENA countries the link between hydrocarbons exploitation and exportations, and geopolitical issues remains tight, the change in major oil and gas partners could also be the start of a change in international orientation. As China slowly became the first destination for oil and gas from Gulf countries, with the intense growth of Chinese oil and gas demand, the partnership with China on political issues, especially the stability in the Gulf, increased as well. Nowadays, the harsh competition between Chinese NOCs and Western IOCs in most of MENA countries, is turning in favor of China, as the Chinese NOCs are among the richest companies in the world.1 As a consequence, MENA countries, especially the Gulf ones, are turning eastward to supply the growing economies of Northern Asia and also emerging South Asia countries. This situation of MENA— with the exception of North Africa for the moment—turning from West to East, also paved the way for Western IOCs to start developing new fields in gas, to satisfy European demand.

6.2

EM Resources Discoveries: A Major Shift?

The development of Eastern Mediterranean gas resources is therefore quite recent, compared to the long history of MENA oil and gas exploitation. A country could be considered the cornerstone of this change: Israel. The will of Israeli government to develop its national gas production, following the first offshore discoveries in late 1990s, opened a new era for Eastern Mediterranean as a gas production region.

1

As demonstrated by their position in the Fortune Global 500 ranking.

6.2 EM Resources Discoveries: A Major Shift?

6.2.1

41

Israel: Looking for Leviathan

After the first major reorganization of IOCs during the 1980s and the second one at the end of the 1990s, the era of the supermajors seemed to open new perspectives for East Mediterranean. Israel was the first country to support massive exploration campaigns with the aim to enhance its energy security in the context of global political uncertainty in the MENA region. Israel that was at the core of the first oil shock, thrives for the discovery of hydrocarbons that could allow the country to remove its dependence from neighboring countries. Even if the normalization of relations with Egypt allows Tel Aviv to access oil and gas supplies in a much secure way, the access to national resources has been a major issue for the country since its creation. The oil and gas exploration and production campaigns onshore had poor results, with only a few fields discovered. Yet the country benefited from the development of offshore exploration techniques during the 1980s and 1990s that unlocked the Eastern Mediterranean as a new profitable hydrocarbons-producing area. Junior IOCs therefore started to look at the region as a new potential revenue zone. In terms of geology, the Levantine basin—offshore covering Israel, Lebanon, Syria and Cyprus—rapidly appears to be far more interesting in terms of resources than the Western Arabian Province basin onshore where the first discoveries were made during the 1960s-1980s. In 1999–2000, the discoveries of offshore gas fields of Noa, Mari-B and Gaza Marine—each around 10–30 bcm at a few kilometers offshore—were an important change for Israel, allowing the country to limit its dependence to external suppliers. At the time, the discoveries were made by Israelis and Junior Western IOCs, such as the Delek-Noble tandem, as the Eastern Mediterranean was still a secondary region that did not attract major Western IOCs. Subsequently, Israel started to promote gas exploration campaigns each time more far from the shore, to assess the potential of the Israeli Exclusive Economic Zone (EEZ). Following Noa, Mari-B and Gaza Marine, exploration campaigns made by British Gas and, after British Gas chose to abandon the operations, the US-based Noble Energy, led to a first major discovery: the Tamar gas field in 2006 with 300 bcm estimated capacities. The Delek-Noble tandem continued its operations, leading to the major discovery in the region: the Leviathan gas field in 2009, that changed the perspective for Israel, turning the country into a prospective exporter of natural gas. Leviathan supposed 630 bcm recoverable reserves, also made the Eastern Mediterranean the center of a new race for resources. Looking at the geography of Israel gas discoveries, they increased when going farther from the seashore, towards the Northern limit of the country’s EEZ.

42

6.2.2

6 Energy Resources in Eastern Mediterranean and MENA

Cyprus: Aphrodite and the Maritime Border Dispute

Leviathan discovery was close enough to the Cyprus EEZ to raise the interest of the Republic of Cyprus in engaging also into gas exploration campaigns at the end of the 2000s. The US-based Noble and the Israeli company Delek were also in charge of exploring from 2008 the region near the Southern limit of Cyprus EEZ. In December 2010, Israel and Cyprus agreed at last on the delimitation of their EEZ limits. In 2011, they discovered a new gas field named Aphrodite in Cyprus’ block 12. Aphrodite, still smaller than Leviathan, is a large field with more than 200 bcm recoverable resources, enough to change the economic perspective of the country regarding hydrocarbons. With barely no gas consumption at all, Cyprus found some kind of undersea treasure chest that would allow the country to become a natural gas exporter as soon as the appropriate infrastructure would have been built. This discovery fueled Cyprus interest over gas exploration and the country issued several tenders for new gas exploration blocks, all over the country’s EEZ during the 2010s. These blocks were defined in 2007. Following the Eastern Mediterranean major discoveries, the companies that participated these bids were no more Junior IOCs but major IOCs, most of the time in consortium, also with non-Western companies such as Kogas or Qatargas. This situation resulted in restarting the frozen dispute between the Republic of Cyprus and the Turkey-supported Turkish Republic of Northern Cyprus (TRNC). Since the invasion of Northern Cyprus by Turkish forces in 1974, the situation seems to be some sort of frozen conflict, with a UN peace-keeping mission (UNFICYP) separating the two communities since 1964. Northern Cyprus is considered in international law as an occupied territory and thus TRCN is not an internationallyrecognized state. Moreover, the tutelar power of TRCN, Turkey, has also a specific position regarding international law of the Sea, as Turkey didn’t sign the United Nations Convention on the Law of Sea (UNCLOS). This position of both TRCN and Turkey regarding the international maritime law, prevent them to claim for any EEZ, as this specific feature is a creation of the 1982 UNCLOS. Yet with the tenders rounds in Cyprus, awarded to major IOCs, Turkey started to consider that TRCN had to obtain a part of the resources discovered. Therefore, from 2007 on with the definition of exploration blocks from the Republic of Cyprus, Turkey meddled in the exploration campaigns ashore the island. The Turkish national oil and gas company TPAO was at the forefront of political and economic disturbance, sending drilling ships into the Cyprus blocks. In 2018 the situation escalated when the Turkish navy intercepted an ENI sponsored drilling ship coming to the block 3. This block is located at the Northern East coast of Cyprus island, near the TRNC border. Turkish navy also acted as an escort for TPAO recently acquired drill ships during their exploration campaigns on contested waters. If no major was made in the region since Aphrodite, the situation remained tense over 2018 to late 2020, leading to an important delay in exploration around Cyprus.

6.3 The Balance Change: EM vs. North Africa

6.2.3

43

Other Regional Players

These discoveries in the Levantine Basin fueled the interest for other Eastern Mediterranean countries to start exploration campaigns. Egypt, at the time already an oil-rich country, mandated the Italian major ENI to explore for gas resources near the country’s North-East EEZ limit, close to the Leviathan gas field. In 2015, the Zohr gas field was discovered with an estimated capacity of 850 bcm, making Zohr the most important gas discovery in the Eastern Mediterranean for now. Yet due to Egypt gas consumption—nearly 60 bcm/year—Zohr field is not intended for exports—contrarily to Leviathan and Aphrodite—and is more considered in a national energy security perspective. Nevertheless, the discovery of Zohr confirmed once more the potential of Eastern Mediterranean, making the region the first in terms of new gas discovered resources during the 2010s. The lest country to join the race for gas resources in the Eastern Mediterranean was Lebanon, that initiated tenders for exploration-production blocks in 2017 and 2019. Yet alongside the Cyprus-Turkey dispute over maritime borders, Lebanon could face a similar issue with Israel, depending on the outcome of tenders and preliminary exploration campaigns. The 2017 Lebanon tender resulted in two blocks awarded to an international consortium consisting of the majors ENI and Total and the Russian private company Novatek. Yet block 9 is on a contested area between Israel and Lebanon as the two countries doesn’t agree on the location of their border [5]. Moreover, Lebanon issued a second round of tenders in 2019–2020 where two other blocks (8 and 10) are within the contested area. In response, Israel decided to launch a tender for Block 72 in Spring 2020, close to the Lebanese block 9. As for Summer 2021, no drilling campaign has started in either contested blocks and the political situation in Lebanon doesn’t allow to have a clearer picture on what could happen in case of discoveries.

6.3

The Balance Change: EM vs. North Africa

The recent years, starting with the “Arab Spring” witnessed a major change in the energy geography in the Mediterranean. The turmoil created by the unrest—or even revolution in some countries—had a major impact on the oil and gas production and transportation systems all over MENA countries, with a specific focus on North Africa. This turmoil also proved to be a chance for Eastern Mediterranean, in changing the political risk balance in the favor of the region. The situation of Algeria is the epitome of such a change. Since the independence of the country in 1962, Algeria relied on its natural resources wealth to develop the national economy, with a very important polarization of investments on oil and latter gas production and exportation. The country aimed to become the major gas supplier for Mediterranean Western European countries, namely France, Italy and Spain. The relationship with France—with the burden of post-war resentment—remained

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6 Energy Resources in Eastern Mediterranean and MENA

economically flourishing, yet politically uneven. From 1967, Algeria signed 20 years supplies agreements for LNG with France, the latest being signed on 2007. French companies also helped the development of oil and gas fields during the 1960s in partnership with the Algerian public company Sonatrach. Later on, Algeria also entered in agreements with the Italian company ENI for gas supplies, leading to the construction (between 1972 and 1977) of the Trans-Mediterranean Pipeline, known as the “Enrico Mattei”, starting in Central Algeria to Southern Italy through Tunisia. During the 2000s, Algeria also signed a deal with Spain to build another gasoduct, the Medgaz, running from Central Algeria to the region of Almeria through Morocco. This pipeline network positioned Algeria as the major economic actor of Maghreb, supplying its immediate neighbors, as well as major European countries. Nevertheless, the oil and gas resources of Algeria appears to be less important than supposed by the Algerian authorities and the resources-oriented economy prove to be the path for Dutch disease, especially with the late 2000s global economic crisis. This crisis played an important role in the “Arab Spring” in Algeria as nearly all the everyday-life was subsidized due to the oil and gas rent. Moreover, the political situation in Algeria revealed a weak institutional environment with a high level of corruption associated with hydrocarbons production and exports [6] that paved the way for the eruption of a quasi-revolution. In addition, oil and gas new discoveries were less important than expected, leading to a decrease in the evaluation of the country’s global wealth and, subsequently of a decrease in production ( 13.5% for oil and 13% for gas over the 2017–2020 period). Thus, Algeria is becoming increasingly less important for European importers that also fear the potential political unrest fueled by low hydrocarbon prices. In Libya, the situation proved to be worse with the chaos following the “Arab Spring”, the UN-supported intervention and the fall of M. Ghedaffi. The unrelenting failure of the Libyan state and the continuous civil war since 2011, induced a sharp decrease in oil ( 78% in 2020 compared to 2010) and gas ( 17% over the same period) production. Whereas Libya was a major oil and gas supplier for France and Italy—through the Green Stream gasoduct—before the “Arab Spring”, the local situation forced these countries to turn towards new suppliers such as Russia, Kazakhstan or Azerbaijan. No foreseeable issue appears in Libya, as the country also became for a few years the indirect battleground of Eastern Mediterranean regional powers. The Turkish-supported Tripoli government opposes the forces of Marshall K. Haftar, himself supported by Egypt and Russia. The control over oil and gas deposits and exportation infrastructure is a major challenge in this unrelenting civil war, explaining the sharp decrease in Libyan exports on certain years. Moreover, this situation in North Africa with notable impacts for Italy and France, created a new interest for Eastern Mediterranean gas resources. These European countries that were originally deeply involved with their former North African colonies—Algeria for France and Libya for Italy—needed to find other reliable sources of gas supplies. The situation in terms of recoverable resources in Eastern Mediterranean, with the 2000–2010s discoveries could make Israel and Cyprus two new gas exporting countries. As they are not engulfed in major internal political issues and as they have—except from the Turkey-Cyprus dispute—a stable

6.4 Conclusion

45

Gas Reserve/Consumpon rao for Eastern Mediterranean countries in 2020 (years)

Cyprus

Egypt

Israel

0

10

20

30

40

50

60

70

80

90

100

Fig. 6.2 Gas Reserve/Consumption ratio for selected Eastern Mediterranean countries; sources: IEA, BP, author’s calculations (nota: Cyprus with no gas consumption has fare more than 100 years on R/C)

geopolitical situation, they could become the perfect substitutes for North African countries (Fig. 6.2).

6.4

Conclusion

The resources situation between MENA and Eastern Mediterranean changed dramatically over the last 10 years. When MENA was at the core of oil and gas first developments during most of the twentieth century, Eastern Mediterranean is a newcomer in terms of gas resources, with major discoveries being made only during the last 15 years. Yet it is not only a matter of recoverable sources that leads to the change in European focus from MENA—at least from North Africa—to Eastern Mediterranean. The geopolitical situation also plays a major role as the “Arab Springs” resulted in major turmoil (Algeria, Bahrain, etc.), if not revolution (Libya, Egypt, etc.). Moreover, the way has been paved for decades, as the IOCs decided after the first oil shock to diversify their territories and to escape the political pressure OPEC could at the time put on Western countries. This leaded to the development of offshore shallow and deep-sea exploration, that was compulsory for the Eastern Mediterranean 2000s and 2010s discoveries due to their distance to the shores. As ever energy is not only an economic or a political issue, but a combined sector where economics, technology and geopolitics play major roles. Yet, this issue has

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6 Energy Resources in Eastern Mediterranean and MENA

not only to be considered from a resources point of view, as the exploration of gas in Eastern Mediterranean is not made for local consumption—except from Egypt—but for exportation to Europe and beyond. Therefore, the issue of resources has to be analyzed in combination with the transportation issue as gas transportation is a key element of the value chain.

References 1. Yergin, D. (1991). The prize, the epic quest for oil, money and power. Simon and Schuster. 2. Kuniholm, B. (1986). The Carter Doctrine, the Reagan Corollary, and prospects for United States Policy in Southwest Asia. International Journal 41(2), Southwest Asia, 342–361. 3. Mahan, A. (1897). The interest of America in sea power, present and future. Sampson, Low & Marston. 4. Brandenburger, A., & Nalebuff, B. (1996). Co-opetition: A revolution mindset that combines competition and cooperation. Crown Business. 5. United Nations Development Programme. (2014). The Maritime Boundaries and Natural Resources of Lebanon. UN. 6. Chekouri, S-M., Benbouziane, M., & Chibi, A. (2017). “Oil rents and institutional quality: empirical evidence from Algeria”, Topics in Middle Eastern and African Economies. Proceedings of Middle East Economic Association, 19(2).

Chapter 7

From Resources to Final Customers, the Transportation Issue

In the oil and gas industry, transportation has ever been a key position in the value chain, whether through pipelines or maritime transportation. In gas, the specific physical features of natural gas make transportation the most important issue in the industry as a lot of investments had to be made for developing gasoducts or liquified natural gas (LNG) infrastructure. These investments, alongside the spot price volatility of gas, explain the need to couple these investments with middle to long time supplies take-or-pay contract—often 20–30 years for gasoducts -, LNG market evolving in the same way for a decade. Moreover, the LNG market evolution with the development of liquefaction and regasification terminals all over the world tend to create a unified market, whereas it was historically divided in three regional areas: Asia, America and Europe. LNG market unification, with a global price decrease, tends to create a competition between consumption areas, the LNG transportation companies—often the oil and gas supermajors—being able to change the destination of LNG carriers during their trip. Therefore, there is a deep change in gas relations between producers and consumers, with an increasing competition for the most profitable sources of supplies on the one hand, and the wealthiest consumers on the other hand.

7.1

The European Markets as the Final Destination

On a historical perspective, Europe has been the first major gas consumption market following the first oil shock. The development of gas for domestic use as well as for electricity production, made Europe the major destination for gas exports and European energy companies, the first to be involved in gas production and transportation. Yet another country developed at the same time an appetite for gas, also considering the consequences of the first oil shock: Japan. Contrarily to Europe that mostly relied on pipelines from USSR/Russia and North Africa, Japan had to © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_7

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7 From Resources to Final Customers, the Transportation Issue

consider LNG from the beginning due to the distance to major gas producers. LNG technologies that were developed in Europe, especially for the construction of LNG carriers, therefore were mostly used in Asia. As a consequence, when South Korea and China entered the market as important gas consumers, they also turned to LNG as the major transportation system. The global development of LNG use during the 2000s, provoking a progressive unification of LNG market, tends to position Asia as the major region for LNG, also because of the quasi-monopoly of Japan, China and South Korea on the construction of LNG carriers.

7.1.1

From Europe to Asia?

Europe had for more than a century now a specific situation looking at oil and gas consumption. As a continent where oil and gas resources were quite scarce, except from specific situations, Europe had to deal with the issue of energy security quite early in the twentieth century. The development of MENA oil fields was therefore mostly made by European companies, especially British ones during the interwar period. The rise of MENA countries as major oil producers was thus the result of a collaboration between European and local actors. Until WW2, the United States were mostly focused on their own resources and Latin American issues on energy, with a deep change in 1945 and later in 1971. Even when M. Hubbert’s “peak oil theory” prove to be right, leading to a deep involvement of the United States in the MENA region for oil and gas reasons [1], Europe remained a major market for MENA countries, their first destination in terms of exports. In 1973, the First Oil Shock created a deep crisis economic crisis situation in Europe, due to the reliance of European economies to the OPEC oil producers. Two consequences can be analyzed: the global race for non-OPEC oil resources at a company level and the progressive rise of gas as an alternative for oil in the electricity production and domestic uses. The European markets were since 1973, the first major gas importation markets for MENA producers. The aftermath of the First Oil Shock induced a progressive change in national energy strategies in Europe, to switch from oil to gas in the electricity production. It also strengthened when available, the national coal production, with an objective of energy security. Only France made a different choice, to accelerate on the deployment of nuclear powerplants to have an electric mix mostly made of nuclear instead of hydrocarbons (75% of the national mix at the eve of the 2010s). The increase in European gas production and imports also benefited the gas-rich countries that developed their national production to fuel this new demand (Fig. 7.1). Traditional oil producers in MENA such as Algeria or Qatar soon oriented towards gas production to answer this new demand and a competition slowly emerged between MENA producers and USSR during the 1970s and 1980s to satisfy the European demand. New discoveries on gas and the development of exportation infrastructures in MENA countries allowed a slow diversification in gas supplies, benefiting to MENA countries, especially in the Gulf region.

7.1 The European Markets as the Final Destination

49

EU Natural gas imports (million cm) 600000 500000 400000 300000 200000 100000 0 1990

1995

2000 EU 28 total

2005 Russia

2010

2015

2019

MENA

Fig. 7.1 EU Natural gas imports by region; source: Eurostat

Nevertheless, the situation is also changing fast with the rise of new energy major importers in Asia since 2003. The emergence of China and subsequently India, South Korea and other Asian countries had a major impact on oil and gas markets, especially in the Gulf region, reshaping the oil and gas geoeconomics and major transit routes. In Asia, Japan was the major oil and gas importer since the 1960s. The rise of Japan economy alongside its lack of hydrocarbon resources forced Tokyo to develop its own oil and gas relations with exporting countries. As for Europe, Japan suffered from the First Oil Shock in 1973 and decided to diversify its supplies from oil to gas, in order to limit the impact of a new disruption in oil supplies. Therefore, Asia was at the forefront of LNG markets development, first with Japan, then with China and South Korea. These three countries are nowadays major LNG importers and market-makers, especially with their experience in LNG carriers’ development and construction. Asia-Pacific is the fastest growing gas market in the world with a 5.2% annual average growth rate on the last decade, creating a shift in gas exporters geographic orientations. With forecast trends positioning AsiaPacific as the first gas market for the twenty-first century, MENA countries and especially Gulf ones are developing new partnerships and cooperation with Asian energy companies, starting with the Chinese NOCs. They developed their presence in MENA countries not only for exploration and production but also for midstream activities such as refining for oil and transportation for gas, as the IOCs did a few decades ago. This position of Chinese NOCs as new competitors for IOCs is mostly made with a specific energy security orientation for China [2]. The Chinese gas demand is rising at a very fast pace, with an annual average of 6.9% over the last decade. Therefore, Chinese companies have to secure the resources and the whole

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transformation and transportation value chain from gas producers to China, in order to offer Beijing a secure perspective over the supplies. Gas has become the new core of energy policy for China as the country is struggling with the dilemma of fueling its economic growth while limiting its greenhouse gases emissions increase. CNPC, CNOOC and Sinopec developed major positions in MENA oil and gas producing countries since 2003, sometimes achieving a dominant position in exporting countries. In Saudi Arabia, Sinopec has become a major partner in the oil midstream industry, with the construction of YASREF refinery in 2014. Sinopec also developed important relations with LNG exporters, specifically Qatargas, with a 10-years contract for one million LNG tons yearly delivered to China signed in 2020. China is expanding its presence in gas and LNG activities in MENA after its 2000–2010s offensive on oil assets in the Gulf and North Africa (Algeria, Libya). Same issue applies for South Korea and Japan, with the increasing internationalization of oil and gas companies to enhance the country’s energy security. Yet, South Korea and Japan are slightly different than China, with an economic orientation more liberal, even if strong ties exist between major companies and national administrations. South Korea’s gas public company Kogas unrelenting internationalization saw the company develop its presence first in Indian Ocean (Australia, Indonesia, Mozambique) and more recently in Eastern Mediterranean, with a participation in Cyprus’ blocks 2, 3 and 9 (in partnership with Total and ENI). Prior to this participation in exploration-production, Kogas already developed its presence in MENA through its technical know-how on LNG terminals, acting as a major consulting firm for projects in Kuwait, Oman and UAE. Looking at Japan, Japanese private oil and gas companies also participated in technical support for years in the development of LNG plants and gas projects in the Gulf region (Qatar, Saudi Arabia, UAE) to strengthen these countries’ exportation capabilities with a view on Japan’s energy security. Japanese companies were most of the time present in the MENA region since the 1990s in the oil refining business, also for the development of oil exportation to Japan. North Asian countries also developed a specific oil-and-gas-oriented diplomacy towards MENA countries, with a view on the need to maintain cordial relations with all regional partners. China, Japan and South Korea therefore had specific diplomatic positions over Saudi Arabia, Iran or even global MENA issues to ensure they could manage to achieve a stable diplomatic position. The three countries continued to deal with Iran after the Western sanctions were enacted over the country’s nuclear program. They were also part of the 8 countries allowed to continue business with Iran for 6 months when D. Trump decided to reimpose new sanctions in 2018. As a consequence, nearly all MENA countries are turning to Asian markets that prove to be more reliant on the long run, and with diplomatic orientations considered to be less assertive than Europe and the United States [3].

7.1 The European Markets as the Final Destination

7.1.2

51

Energy Transitions and the Impact for Europe

One of the major shifts in the MENA energy landscape is the rise of Asian demand from nearly 15 years now. Until the emergence of China as one of the major importers of oil and gas, followed a few years later by India and other Asian countries, the Gulf region was mostly oriented towards the supply of Western countries, especially the United States and Europe, following the traditional geo-economics trends inaugurated at the conclusion of WW2. Yet the economic growth in Asia, in particular after the US-led invasion of Iraq in 2003, changed progressively the orientation of oil and gas exporters in the Gulf region. Alongside this progressive shift in demand from Western countries to Asian countries, two major events accelerated the pace for MENA oil and gas producers from 2008–2009: the fast development of non-conventional oil and gas production in the United States and the energy transitions in Europe. The rise of unconventional oil and gas production in the United States from 2008 on created a major turmoil in the sector, with the United States rising to the position of first oil and gas producer in 2011 for gas and 2014 for oil. This major change, supported by federal government incentives [4], was an indirect consequence of the US decision to withdraw from Iraq and to start relying on North American and national resources to fuel the economy on the post-economic crisis years. Therefore, the US withdrew, at least temporarily from the import markets, leading to a global overproduction of oil and gas, with a major crisis in prices from 2013 to 2018. The return of the United States as the world’s first oil and gas producer had not only economic consequences, but also strategic ones. First of all, on a geographic level, the US also made the choice to limit their oil imports from Gulf countries, especially in oil, to focus on Canada and Latin American countries; broadly on non-OPEC countries. Therefore, their oil geography matched their gas one, with a specific reliance on American suppliers, creating a new America-centered energy security orientation. If G.W. Bush renewed the Quincy Pact and the special relationship between the United States and Saudi Arabia, B. Obama made the choice to limit the US implication in the MENA region, with strategic consequences regarding the involvement on the United States in the 2010s regional crisis (Syria, ISIS, Yemen, etc.) (Fig. 7.2). In Europe, the energy transition that started in Germany and the United Kingdom at the end of the 2000s modified in deep the trends of energy consumption for the whole continent. Following the 2008 EU Commission drafted Third Energy Package, creation obligations for EU member-states to reduce their greenhouse gases emissions by 20%, to raise the share of renewable energies in their national mix to 20% and to achieve a 20% rate of energy efficiency in 2020, some countries decided to engage into deep modifications of their national energy strategy and mix [5]. The very first was the United Kingdom, one of the major consumers of coal and gas in Europe with the Climate Change Act of 2008 and the subsequent UK Low Carbon Transition Plan of 2009 [6]. The same year, Germany decided also to engage its Energiewende with a major update following the 2011 Fukushima catastrophe [7]. These two transition plans, emphasized the need to accelerate the pace on the

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US Crude oil and products imports (thousands barels) 60000 50000 40000 30000

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Fig. 7.2 US Crude oil and products imports by country (thousand barrels); source: US Energy Information Administration

deployment of renewable energy sources, limiting the consumption of fossil fuels, especially oil and coal, to achieve their climate goals. The German strategy especially was very focused on renewable sources as the solution to decarbonize the energy sector, with an acceleration after the decision to phase-out from nuclear power in 2019 after assessing the consequences of Fukushima. Yet some European countries are considering gas as an intermediate energy source in their transition. A large part of Central and Eastern European countries is still mostly relying on coal for their electricity production—sometimes with an energy security perspective as the coal is produced nationally—and are struggling to achieve their greenhouse gases emissions reductions goals. For these countries, especially Poland, Czech Republic or even Germany, the renewable energy sources cannot replace immediately coal, because of the price and the intermittence of such energy sources. They thus have to go through an intermediate source that could be less harmful that coal for the climate and, in the same time, that could be cheap enough to avoid economic and competitiveness issues. For a few years now, gas was selected as the transition energy, waiting for renewables to achieve an economic situation that could allow them as the major electricity producing source in Europe. The debates in the European institutions, opposing the Commission and the Parliament in 2020 over the “energy taxonomy” mostly focused on the possibility to include gas as eligible to funding by green European funds, when switching out of coal. If natural gas could not be considered a “green energy” for European policymakers, it is however part of the solution for countries and regions still mostly relying on national coal, to help them achieve their transition plans. The result of this situation is a stable gas profile for the whole Europe, with international demand forecasts [8] estimating roughly a continuous 450 bcm yearly

7.1 The European Markets as the Final Destination

53

Europe Gas Dependence (bcm/year) 700 600 500 400 300 200 100 0 2000

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Fig. 7.3 Europe Gas Dependence According to IEA Stated Policies Scenario [8]

to at least 2035–2040. Yet this apparent global stability has to be considered also from the dependence point of view. During the last 50 years, Europe was relying on regional gas sources for an important part. EU and non-EU European producers, namely the Netherlands, Norway and United Kingdom, played a major role in the supply of the continent, notably for Western European countries. For a few years now, these traditional gas producers are experiencing a situation of decrease in their national production, for economic or political reasons. The result is a growing dependence to non-European producers. Among them Russia intends to remain at the first place with the construction of new exports capabilities to Europe from 2009 on: Nord Stream, TurkStream, Nord Stream 2, and several LNG exportations projects such as Yamal LNG. In the same time other gas exporters, including the United States, started to look at European markets with the transformation of gas terminals to export LNG, the very first being Sabine Pass LNG, inaugurated in 2016 (Fig. 7.3). Yet this situation appears for European countries to be some kind of “Russian dilemma”, with also the possibility to develop their supplies from the United States. Therefore, there is a geopolitical risk to increase dramatically a dependence to a major power that may obtain some kind of influence through energy supplies. If Russia already demonstrated its capability to use the “gas weapon” in its relations with EU countries, the possibility that the United States may sought to have such a capability is also kind an issue for some European states and the EU.

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7 From Resources to Final Customers, the Transportation Issue

Western Balkans New Appetite for Gas

At a regional level, the gas situation in Europe has also to be considered from the transition of specific areas such as the Western Balkans. Non-EU Balkan countries are, contrarily to EU countries, going to have a global increase in their gas consumption. All of those countries are member of the Energy community through the Energy Community of South-East Europe (ECSEE) treaty signed in 2005. Regarding this treaty, Albania, Bosnia and Herzegovina, Kosovo, Montenegro, Northern Macedonia and Serbia agreed to implement regulations similar to the EU ClimateEnergy packages, in order to achieve a community in their national energy sector and the EU regulations. Considering the obligations in the 2014 package (40% reduction in greenhouse gases emissions on the 1990 basis, 27% renewable energies in the mix, 27% level of energy efficiency), the Western Balkan countries are forced to operate an immediate switch from their coal-based electric mix towards a lesspolluting basis.1 So, for them gas is, naturally, the most interesting source of energy due to its affordability, availability and ability to be used in large power plants. As a result, nearly all the Western Balkans countries experienced an increase in their natural gas consumption; except for Kosovo and Montenegro [9].

7.2

Towards New Gasoducts

The need to create new gasoducts to facilitate the transit from the Eastern Mediterranean and the MENA region arose as a consequence of growing tensions between the EU and Russia, forcing the EU Commission to sought for new gas sources and transit routes. As a consequence, the EU started to support new gas routes at the end of the 2000s and during the 2010s, first of all to avoid the Russian territory and subsequently in the Eastern Mediterranean. As most of these projects are now complete or nearly achieved, the new geography of gas networks partly redefines gas geography and geo-economics in Europe.

1 Not all the Western Balkan countries are having coal as their electric mix basis—Albania is 94% hydro-power—but all of them make an extensive use of coal or at least of diesel, with an important impact on their GHG emissions and, most important, a large part of them made a domestic use of gas (heating, cooking, etc.).

7.2 Towards New Gasoducts

7.2.1

The Importance of EM for the EU: Avoiding the Russian Territory

7.2.1.1

Southern Gas Corridor

55

Traditionally, gas routes to Europe were from Russia—in supplying Eastern and Central Europe—and from North Africa and the North Sea to supply Western Europe. However, changes in geopolitics and gas production, created the need to rebalance this geography, in favor of Eastern Mediterranean. The major change regarding gas transit routes occurred at the end of the 2000s with the so-called “gas wars” between Russia and Ukraine. The dispute between Moscow and Kiev over the supposed hijacking of gas from the Ukrainian authorities during the transit to Europe, created a high-tension situation with several acmes between 2006 and 2009. This gas disputes started in Spring 2005, following the “Orange revolution” with Viktor Yushchenko becoming the new President of Ukraine. Yushchenko pro-EU and pro-NATO orientation was considered in Moscow as a major threat for the cohesion of the Russian inner-cercle aligned countries. The decision from Moscow to interrupt the gas transit to put the pressure on Kiev resulted in gas shortages in Eastern Europe, for countries directly supplies through the Ukrainian network. Slovakia, Hungary, Austria, Poland, etc. This Moscow-Kiev struggle showed Europe that its dependence to Russia could become a major challenge, especially with a growing nationalist stance from Vladimir Putin, after its 2007 discourse at the Munich Peace Conference.2 At this time, there was both a geographic and an historical legacy in gas supplies. The countries that were part of the Eastern bloc during the Cold War, as well as the geographically closest countries to Russia, were the more dependent to Russian gas supplies. This resulted in several countries having a 100% dependence over Russia: Bulgaria, Estonia, Finland, Latvia, Lithuania, Slovakia. Other countries were also having a very high level of dependence over Gazprom’s supplies: Poland, Czech Republic, Romania, Germany, Austria, Hungary, etc. This situation proved to be a major challenge for the continent security of supplies. At the same time arose the idea of a European Energy Community to strengthen the EU global security and solidarity between memberstates [10].3 In 2007 the EU Council agreed a new strategy for energy that became a few months after the Third Energy Package. This package mostly intended to give the EU the capacity to face, as a community, the challenges posed by climate changes, in creating obligations for member-states to both lower their greenhouse 2

The transcription of the speech could be found on the website of the Russian Presidency: http://en. kremlin.ru/events/president/transcripts/24034. 3 At the time an Energy Community already existed as a community of countries outside the EU that decided to align their national regulations on the EU ones to participate a common energy market that could help some of them to integrate the EU later. The 2005 Energy Community Treaty consisted in Albania, Bulgaria, Bosnia and Herzegovina, Croatia, Georgia, Kosovo, Macedonia, Montenegro Romania, Serbia and Ukraine. Bulgaria, Romania and Croatia joined the EU a few years after, most of the others are still in the integration process.

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gases emissions and to develop the share of renewable energy sources in their national energy mix. Yet it also underlined the need to enhance the cross-border interconnexions in Europe for energy networks, the aim there was to initiate a true solidarity between member-states in case of supplies shortage, as experienced since 2006 in the Eastern part of the continent. As a consequence, the EU Commission decided to propose in 2008—alongside the Third Energy Package—an integrated strategy to reach for new gas sources out of Russia: The Southern Gas Corridor [11]. As energy is a shared competence between the EU and the member-states, the EU itself has not the possibility to decide on the continent’s supplies, yet it could support the supplies with the aim of solidarity, in helping to create infrastructures that could serve this purpose. Thus, the EU Commission proposed in 2008 through this “Southern Gas Corridor” a series of new infrastructures that could strengthen the EU territory gas supplies. The Corridor consisted in several pipelines that could reach to Middle East and Caspian areas sources, specifically Azerbaijan, Iran, Turkmenistan and Uzbekistan. The first iteration of the “Southern Gas Corridor” put an emphasize on the Black Sea as the main transit area from Caspian/Middle East to Eastern Europe. The major gasoduct was the Nabucco project (31 billion cubic meter (bcm) annual capacity) involving several major European gas companies (RWE, MOL, OMV, etc.) and the Turkish gas transmission company Botaş. Nabucco route supposedly linked Central Europa and Eastern Balkans to the Caspian region and Iran through the Turkish territory. Unfortunately, the global geopolitical situation doomed this pipeline. First of all, the original supply source was never clearly defined and the situation between the EU and Iran over the Iranian nuclear program forced to abandon this option. The Caspian option also revealed to be impossible to complete as the Caspian Seas undefined status forbid to build an undersea pipeline to reach Turkmenistan or Uzbekistan. As a consequence, the only resources available were the Azerbaijan ones, which raised some concerns over the economic profitability of such a pipeline. Nabucco whose initial agreement was signed in 2009, was put on hold indefinitely in 2013. Even with this project failure, Nabucco underlined the importance of Turkey as the new transit country for this Corridor and sanctuarized the influence of Ankara regarding the alternate gas routes to avoid the Russian territory. Even with Nabucco failure, the “Southern Gas Corridor” evolved to include another project as the major infrastructure to reach for Caspian resources. The Trans-Anatolian Pipeline (TANAP) designed to allow the gas from Azerbaijan to flow all over the territory of Turkey was integrated into the “Southern Gas Corridor” as a surrogate for Nabucco. The international agreement signed in 2012 between Turkey and Azerbaijan planned to build an 8 bcm gasoduct for supplying the Turkish territory from the Caucasus to Thrace. The final project, once included by the EU Commission into the list of Project of Common Interest, was a 16 bcm gasoduct, the supplementary 8 bcm intended to be supplied to EU markets through an interconnexion at the Turkish-EU border. The major difference between TANAP and Nabucco—alongside the annual maximum gas volume—is the route in Europe beyond the Turkish territory. Nabucco intended to supply directly Central and Eastern Europa through the Eastern Balkans. On the contrary TANAP has to be

7.2 Towards New Gasoducts

57

complemented by another pipeline: the Trans-Adriatic Pipeline (TAP) to reach Greece, the Western Balkans and Italy, giving a Mediterranean orientation to the Eastern gas route. The TAP project—discussed since 2003—was integrated into the agreements with the Azerbaijani company SOCAR to provide natural gas from the Shah Deniz field to European markets. The TANAP-TAP complex became in 2012–2013, after the end of the Nabucco project, the core of the “Southern Gas Corridor” alongside a few other short pipelines, especially the IGB (Interconnector Greece Bulgaria), strengthening the interconnexion in the Eastern Balkans to allow multiple routes from Turkey to Eastern Europe or Southern Europe. TANAP and especially TAP proved to be major industrial and political challenges, the latter facing an unrelenting opposition in South Italy, with environmental concerns. Nevertheless, the two pipelines were completed in 2018 (TANAP) and 2020 (TAP). TAP which is mostly intended to supply the Western Balkans, was the very first new gas route to involve the Mediterranean as a major way and was the starting point of new projects that contributed to position the region as a new strategic territory for energy supplies. Regarding the EU position towards Western Balkans and ECSEE Treaty, the EU Commission established a Western Balkan Investment Framework (WBIF) to promote the infrastructure development in the Balkans, strengthening these countries’ economies to support them in their path towards integration in the EU. The WBIF supports projects to enhance gas connectivity in the Western Balkans and especially the idea of a “Western Balkans Ring” consisting in a series of interconnected pipelines to provide gas to all countries [12]. The “West Balkans Ring” would both allow to support the development of gas consumption in the Western Balkans, being connected to TAP or other infrastructure providing natural gas from the Eastern Mediterranean and MENA—notably LNG terminals in the Balkans (Krk), Greece or Turkey—and also create an interconnection from these sources to Central Europe.

7.2.1.2

Eastern Mediterranean Projects

Alongside the TANAP-TAP twin gasoducts, other projects are emerging in the Eastern Mediterranean region, especially to avoid the Turkish territory, Ankara’s international position being of growing concerns in several European countries. The Turkish ambitions over both gas resources in Eastern Mediterranean and also the regional domination, created a strong concern in most the region’s countries. At first the LNG option to provide Eastern Mediterranean gas to Western European markets seemed to be the most interesting looking at a purely economic side. The distance of gas fields from the coastline and the geological situation of Eastern Mediterranean, make the cost of a submarine pipeline especially high, regarding the potential export volumes. Yet the construction of a pipeline is also more than just an issue of costrevenue balance, as these networks also have a major geopolitical value, especially with the issue of take-or-pay contracts. Therefore, even with LNG exportation terminal projects, the need for several Eastern Mediterranean countries, especially Greece and Cyprus at the beginning, to engage into the feasibility study of a pipeline

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was also a geopolitical message to Turkey. EastMed gasoduct, increasingly became the focus point of Europe support to Greece and Cyprus in this gas dispute with Turkey. Moreover, Ankara’s recent behavior against Israel also deteriorated the relation between the two Western oriented countries with consequences over gas projects. The issue of Palestine created a strong distrust between Turkey and Israel in the recent years. In 2010, during the Israeli military forces intervention in Gaza, a Palestine-supporting flotilla assembled in Turkey to provide support to Gaza. The flotilla, under direction of the Turkish-based “Free Gaza” movement, decided to force the Israeli blockade, this resulting in an assault of these ships from Israeli military forces. The intervention of Israeli military led to 9 deaths among the flotilla and started a dispute between Israel and Turkey as some ships in the flotilla were under Turkish flag, Ankara considering the intervention as a direct aggression towards Turkish protected assets. As a consequence, Turkey decided to prosecute Israel at the International Court of Justice. Israel therefore agreed to pay 20 million USD to Turkey in 2016 to normalize their relations. The United States played a major role in this normalization as for Washington a dispute between major regional allies could have been a strategic issue, especially when Russia was strengthening its position in Syria in support of B. Al-Assad’s regime. The United States also supported the possibility of building a subsea pipeline from Israel’s gas fields to Turkey, in order to supply Europe using the Turkish network. Yet the 2016 normalization didn’t last as R. T. Erdogan reacted to the US decision to recognize Jerusalem as Israel’s capital city in accusing the country of “genocide” and “apartheid” in 2018. As a consequence, a new diplomatic crisis arose between Turkey and Israel, freezing the potential pipeline project and engaging Israel further into the EastMed project, transformed into a multilateral forum in 2019. Thus, the main project in the EM region is nowadays the EastMed gasoduct. Originally designed in 2013, The EastMed pipeline intended to link Cyprus gas fields to Creta, Greece mainland and thereafter South Italy to provide Greek and Italian markets with gas. EastMed consists in the Cyprus-Creta-Greece subsea pipeline section and will be supplemented by a Greece-Italy subsea pipeline, named Poseidon. The two pipelines are supposed to be built by the IGI Poseidon company, a joint-venture between Italy’s Edison (France’s EDF subsidiary) and Greece’s DEPA. EastMed gas pipeline is a 1900 km long pipeline, with a 10 bcm initial capacity. The subsea section of more than 1400 km would make EastMed the longest subsea pipeline in Europe, far beyond TurkStream (900 km subsea) or Nord Stream 1–2 (759 km subsea). This would result in very high construction and operation costs for a small initial capacity and the competition from LNG from Israel or even Cyprus. Therefore, as the project is as an economic infrastructure as a demonstration of geopolitical will, it may be funded, even with those concerns. The EU considers EastMed as a major connectivity issue and allowed funding for the feasibility studies. This infrastructure could therefore enhance Cyprus links with other EU countries and contributes, even with modest volumes, to EU security of supplies.

7.2 Towards New Gasoducts

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The situation is slightly different for Poseidon gasoduct as it appears to be less important for the EU—that didn’t allow any funding up to 2021—and especially for Italy where it enters in direct competition with TAP and LNG regasification infrastructure (LNG terminals in Liguria, Toscana and Veneto). Political opposition to new pipeline projects remains important after the completion of TAP and there is an important risk that Poseidon remains at a project level. Nevertheless, EastMed being linked to Greek mainland gas network, the possibility of not having Poseidon built does not hamper the EastMed project, as Greece is already connected to the Balkans, Bulgaria, Italy and Turkey. Thus, the EastMed pipeline also integrates the issue of interconnection with other Eastern Mediterranean gas networks, including Turkey. The situation is paradoxical as EastMed has be designed to limit Turkish influence and to counter Ankara’s ambitions over the whole region. Yet this coopetition framework on energy networks appears to be the major feature of the region, especially with the Turkish strategy towards both the EU and Russia.

7.2.2

The Turkish Gambit: Between Russia and the EU

Turkey therefore appears to be the cornerstone of the “Southern Gas Corridor”, being granted a special position in the EU strategy to avoid the Russian territory. This specific situation should have reinforced the links between Turkey and the EU. Their partnership in economic issues is as old as 1959 and Turkey was the very first country to sign an association agreement with the EU in 1963. Yet, the Turkish government, from the late 2000s sook to diversify its relations in order to position Turkey as a major growing power between Europe, Asia and the Middle East. In the energy sector, this specific policy led to a diversification of partners, first of all in terms of oil and gas supplies. Turkey’s economic development during the 2000s deeply increased the energy consumption in a country that was mostly relying on its national coal reserves for electricity production. The need to strengthen the national energy security and the growing concerns over climate issues, led to the development of oil and especially gas supplies agreements. Russia soon proved to be the major supplier for Turkey, being able to supply the country in both crude oil, refined oil products and natural gas. For gas, the Russia-Turkey supply partnership led to the construction of a dedicated pipeline under the Black Sea during the first part of the 2000s: Blue Stream. This submarine pipeline inaugurated in 2005 has a 16 bcm annual capacity linking the Russian Kuban to Central coast of Anatolia. Blue Stream was the very first infrastructure to create such ties between Turkey and Russia. It positioned Russia as a major energy partner for Turkey, alongside Iran—the Tabriz-Ankara pipeline being constructed in the late 1990s—and, a few years later, Azerbaijan (with the South Caucasus Pipeline). Yet, contrarily to Azerbaijan and Iran, Russia was also an increasing partner in oil, especially for refined products. The Turkish refining sector has not been able for years to cope with the fast growth of oil demand in the country, forcing Ankara to

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140000 120000 100000 80000 60000 40000 20000 0 1990

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Fig. 7.4 Fossil Fuels Consumption in Turkey (ktoe); sources: IEA, BP (author’s calculations)

search for a dedicated supplier. At the end of the 2000s, Russia had become the first energy partner of Turkey, the latter being heavily dependent of the earlier. Even if Turkey managed to sign agreements with the Azerbaijani public company SOCAR for the construction of an oil refinery in Turkey, it only entered in production in 2018, not being sufficient to cover the national demand (Fig. 7.4).4 Russia used its new energy influence over Turkey to propose Ankara a participation in its pipeline projects for the Southern flank. After the South Stream dispute between EU and Russia, Moscow decided to withdraw its project for a 63 bcm pipeline under the Black Sea from Russia to Bulgaria. Considering that the main issue was the compliance to EU regulations in terms of bids and competition, Russia proposed Turkey a new pipeline, intending—as TANAP did—to supply both Turkey and the European markets. The share for Turkey in the 31.5 bcm pipeline was quite low, as it was mainly for Russia an alternative way to supply Europe, without entering the EU territory and, therefore, having to cope with EU regulations. The Turkish Stream pipeline (renamed later TurkStream) was presented in 2014, just after the withdrawal of South Stream project. Yet the pipeline seemed to be doomed, when strategic tensions arose between Turkey and Russia over the situation in Syria, after the shooting-down of a Russian reconnaissance airplane by Turkish jet fighters. The two-years tension ended at the World Energy Congress of 2016, held in Istanbul, where the two countries normalized their relation and signed officially the agreement to build TurkStream. For Russia, this pipeline serves to diversify the supply routes to European customer, avoiding the European territory and could be considered the Southern

4

The STAR Refinery added a 214,000 barrels/day of refining capacity, giving Turkey a total of 822,000 barrels/day theoretical capacity. Yet the oil consumption in 2020 was 903,000 barrels/day (with a real national refinery throughput of 675,000 barrels day).

7.3 The LNG Issue: A Major Gamechanger?

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branch of a “gas trident” with Nord Stream in the North and the terrestrial network through Belarus and Ukraine in the middle. Thus, Turkey is a major partner for Russia, allowing to bypass the “Southern Gas Corridor” in creating also a way to reach directly the Eastern Balkans and Southern European markets. Moreover, the TurkStream route has been designed to interconnect in Thrace with other pipelines— especially the Transbalkan—and could in the future be connected to the TAP. Russia intends there to benefit from EU legislation that allow third-party access to gasoducts running through the Union’s territory. EU Commission decision 2010/685 created a possibility for EU gas providers to have an access to any EU gasoduct in order to transport their gas as long as it serves the purpose of strengthening EU security of supply. Thus, Russian owned gas pipelines running through EU territory should allow other gas suppliers to use their infrastructure and, as a consequence, other gas transporters should also allow Gazprom to put gas in their pipelines. Ironically, TAP being part of the “Southern Gas Corridor” was designed to avoid gas supplies from Russia and could in the future be partially used to transport Russian gas to Italy and the Balkans. For Turkey, the perspective is slightly different. Being partner with Russia and the EU—in the “Southern Gas Corridor” project—Ankara positions itself at the core of energy security for the whole Southern flank of Europe. Navigating from Moscow to Brussels, is also a way for Ankara to achieve a kingmaker position in energy, as the energy relations between Russia and the EU continues to grow tense, on the Nord Stream 2 issue especially. Energy is there only one of the multiple faces of an EUTurkey-Russia nexus, from the situation in Syria, the rule of law, the enforcement of human rights or the allegations of disinformation and elections manipulations. Yet for Turkey being only a nexus of pipelines—even with such important partners as Russian or Iran—isn’t sufficient to achieve a position of equal with Russia in European energy supplies, considering the importance of Russia in the Turkish energy sector. Nevertheless, the global change in the gas sector, with the rise of LNG helps Turkey to position itself at the center of the game.

7.3

The LNG Issue: A Major Gamechanger?

Consistently with the creation of new gasoducts in Eastern Mediterranean, the region was also at the core of LNG infrastructures development. LNG terminals are fundamental for energy security as they allow to buy gas from multiple different producers in avoiding—when necessary—the long-term contracts that could be considered too much binding. Also, the evolution of LNG market globally, with the construction of both liquefaction and regasification terminals, alongside the development of a fast-growing fleet of LNG carriers, helped a sharp decline in LNG prices during the last decade [13]. Yet, LNG prices remain higher than gas through gasoducts and there is the need, in a purely economic perspective, to limit as possible the maritime part of the transit. Having an LNG regasification hub interconnected to an important pipelines network serves to lower the final price

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and tends to position such hubs as cornerstones of major gas companies. Sea-land gas interconnections therefore developed for the last 20 years in Europe, China or the United States to offer the better gas-LNG integration in terms of energy security and profitability. Multiple LNG providers are also close to Eastern Mediterranean with the development of both gas production in traditional oil producing countries such as Nigeria or Saudi Arabia or the investment in new LNG liquefaction terminal in MENA and Sub-Saharan Africa. MENA is the second LNG export region with nearly 125 bcm yearly. Combined with Sub-Saharan Africa, MENA equals the figure of Asia-Pacific as an export region. An important part of liquefaction capacity is under-used in MENA, most of the time due to political or economic turmoil. Egypt is using only 10% of terminals capacity, Algeria nearly 40% and Yemen 0% [13]. Moreover, there are in-development capabilities for liquefaction, such as Qatar North Field East project whose final investment decision occurred in February 2021. Other than Qatar, Mauritania, Nigeria and Mozambique are also developing liquefaction capabilities and there are other projects proposed in MENA, Sub-Saharan African and Eastern Mediterranean countries to support the LNG demand. Cyprus therefore, positioned itself as a future LNG exporter with the Vassilikos LNG project (nearly 3 bcm liquefaction capacity) to start supplying Western markets as soon as possible. For Cyprus LNG is an interesting issue, at least in a mid-term perspective, waiting for the final investment decision for EastMed pipeline. Therefore, Cyprus could start exporting LNG to Greece or Italy, both already having regasification terminals. The same issue applies for Israel with proposed facilities for 7–8 bcm capacity, the country also potentially relying on Egypt’s existing LNG liquefaction terminals— or even EastMed if linked to Israel—for a more stable exportation route. With the option to have Floating Liquefaction (FLNG) vessels loaned, Israel and Cyprus could start exporting soon, FLNG option being also very relevant due to the position of Leviathan and Aphrodite fields, far from the shore. At the other end of the LNG value chain, European countries and Eastern Mediterranean countries also invested massively in LNG regasification terminals to avoid dependency to a unique supplier. As LNG firstly developed in Europe, most of Western European countries invested in regasification terminals during the 1990s and the 2000s. Atlantic and Western Mediterranean countries (United Kingdom, France, Belgium, Spain, etc.) were at the forefront of this first wave of LNG terminals construction. At the end of the 2000s emerged the need to limit Eastern European countries dependence to Russia and a second wave of LNG terminal projects appeared, centered on the Baltic and Central/Eastern Mediterranean (Lithuania, Poland, Estonia, Finland, Greece, Turkey, etc.). Nowadays, most of EU countries are having at least one LNG terminal, creating an over-capacity in LNG regasification on the whole continent. The average level of use—under 40% depending on the countries (Spain being near 10% whereas Poland is close to 80%)—means that each European country chose to invest in these terminals for matters of energy security and flexibility rather than on a purely profitability orientation. Therefore, the decision to build such facilities should mostly be considered with a geo-economic perspective. The example of Swinoujscie LNG terminal in

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Poland is representative as the decision of building the terminal—owned by a subsidiary of public-owned PGNiG national gas company—was made with the view to withdraw from the gas contract with Russia’s Gazprom. As the terminal started to run, PGNiG announced that in 2022, the supply contract with the Russian company would not be renewed, the country being now able to rely on its own LNG terminal. In Central and Eastern Mediterranean, Italy, Greece and Turkey were already having LNG terminals to allow imports from MENA and Sub-Saharan Africa, yet their LNG sector was far less developed than Spain’s or even France’s. Regarding Turkey and Greece, they started to develop LNG infrastructure to import from Algeria, Nigeria and Egypt limited volumes of natural gas to enhance their energy security by flexibility in suppliers. This policy started during the 1990s with the construction of Marmara Ereglisi terminal near Istanbul in 1994 and Revithoussa terminal near Athens in 2000. These terminals were also used as a storage system for capital cities of both countries. Yet the major developments in LNG infrastructure occurred during the late part of the 2000s with the discovery of gas sources in Eastern Mediterranean and the will from EU to build the “Southern Gas Corridor”. Thus, Turkey launched new projects to strengthen its own energy security at first with Aliaga LNG in the Aegean in 2006. Aliaga combined with Marmara Ereglisi offered Turkey a 12 bcm yearly LNG capacity, the latter being a Floating Storage and Regasification Unit (FSRU). Turkey continued its LNG development with new onshore (Saros) and FSRU (Etki) facilities to offer the country another 12 bcm yearly capacity. With these 4 LNG terminals, Turkey became one of the first countries in Europe in terms of regasification capacity.5 The nearly 24 bcm LNG combined with TANAP 16 bcm and TurkStream 31.5 bcm represent more than 70 bcm of new gas supply capabilities, the annual gas consumption of Turkey being roughly 45 bcm. Therefore, most of these new capabilities are oriented to re-export towards Europe, through TransBalkan, IGB and ITG gas pipelines.6 Greece also developed a similar strategy with Aegean LNG and Alexandroupolis projects. Yet only the Alexandroupolis project seems to be ongoing with the EU Commission support. It would give Greece a total LNG capacity of nearly 13 bcm yearly; far beyond from the country’s annual gas consumption, around 6 bcm. To supply these LNG terminals, both Greece and Turkey, through public or private companies, secured contracts with gas suppliers, creating a new Eastern Mediterranean LNG geography, alongside the Eastern Mediterranean pipeline geography. Globally, the EU supported the development of LNG infrastructures since the end of the 2000s, mostly as a way to diversify gas supplies from Russia. LNG infrastructure increasingly became major issues in the PCI lists and benefited for 5

The Dortyol FSRU is being built in 2021, giving in the years to come another 7.5 bcm capacity to Turkey. 6 TransBalkan was originally built to supply gas from Russia to Eastern Balkan countries through Ukraine. Yet after the 2006–2009 “gas wars” between Ukraine and Russia, the EU Commission started to support the installation of reverse flow in EU gas pipelines to strengthen the solidarity between EU member-states [14].

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important economic funding of the EU Commission. Moreover, the EU Commission also tended to be flexible regarding competition policy for LNG terminals, even with a low rate of use. The geo-economic nature of LNG regasification terminals seems to be very well understood by the EU Commission, in the perspective of creating a global network of gas suppliers. Therefore, even with the EU support, Greece is still engaged in a harsh competition with Turkey to decide which country will be the center of this network for the Eastern Mediterranean.

7.4

Turkey and Greece: Becoming the New Gas Hub for Southern Europe

This situation resulted in the struggle between Athens and Ankara to become not only a major transit country, but the new gas hub for Southern Europe. Looking at the different projects involving the two countries, there are mirror strategies to develop both gasoducts, LNG terminals and storage facilities to regulate the gas transit. The major point in being a hub lies in this regulation ability, allowing to have a major action on gas market prices for a whole region. Moreover, the importance of gas storage facilities has also to be underlined in this competition between Greece and Turkey for the regional hub role. Alongside LNG storage in LNG terminals, Greece and Turkey financed the development of new underground storage facilities; for Greece in South Kavala (1 bcm) and for Turkey at TuzGolu (5.4 bcm), the latter with the support of Azerbaijan (SOCAR) and China (CAMC). Storage capacity is also central in the definition of a hub, as it is intended to be a regulation place, for prices as well as for volumes transiting. The major difference between the actual situation in Greece and Turkey, compared to the Ukrainian situation, is their capacity to rely on multiple sources. The development of LNG terminals helped them to access MENA—and farther— sources to diversify Europe gas supplies. Turkey was originally positioned by the EU as the central country regarding the “Southern Gas Corridor”, allowing an easy access to Middle East and Caucasus gas resources. The will to build a network of pipelines to Central Asia under the Caspian—linking Turkmenistan to Azerbaijan and then to Turkey—is still considered in the EU strategic documents. Such a gasoduct—named Transcaspian—if not legally or technically impossible to build, is nevertheless very unlikely to happen due to the influence of Russia and China over Turkmenistan energy policy and the possibility for Caspian countries to block any subsea project that could harm the environment.7 Yet, even without this Transcaspian pipeline outlook, Turkey remains at the centerfold of a large gas network with potential supplies from Azerbaijan, Russia and Iran through pipelines and LNG contracts with Algeria, Nigeria, Qatar and other countries. Thus, Turkey

7

Art. 15, August 2018 Convention on the Legal Status of the Caspian Sea.

7.4 Turkey and Greece: Becoming the New Gas Hub for Southern Europe

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Table 7.1 Comparison of Greece and Turkey gas infrastructures Pipelines cooperation

Pipeline competition from Cyprus/Israel Pipeline competition towards Eastern Balkans Other pipelines to Europe LNG

Storage

Greece Turkey TANAP-TAP (16 bcm from Azerbaijan to Turkey (TANAP) with 8 bcm to Italy through Greece and Albania (TAP) Interconnector Turkey-Greece (11 bcm) EastMed (10 bcm) from Israel-Turkey talks delayed since 2018 Cyprus/Israel Interconnector TurkStream connection to TransBalkan Greece-Bulgaria (3 bcm) pipeline Poseidon (8–20 bcm) Revithoussa (operational), Alexandroupolis (in construction) South Kavala (1 bcm)

Marmara Ereglisi (op.), Aliaga LNG (op.), Etki LNG (op.), Saros (op.), Dortyol LNG Kuzey Marmara (2.5 + 1.7 project), TuzGolu (5.4 project), Tarsus

achieved the position of bridge between Europe and MENA, especially looking at traditional gas exporting countries. Greece is having a different position, being not directly connected to any major gas producer, except from the Revithoussa LNG terminal from Algeria and Nigeria. Greece gas supplies comes from Russia through Bulgaria and, for a few years now, also from Azerbaijan through Turkey using the TAP. Therefore, Greece could at a first look be considered as the losers in this Greece-Turkey struggle, in terms of geographic and economic advantages. However, the bitter relations between Turkey and Eastern Mediterranean countries opened a door for Greece to position itself as the competitor for the regional gas hub position. The close relation between Greece and Cyprus allowed a bilateral agreement for the development of common infrastructure, the basis for the EastMed gas pipeline. Greece became the centerfold of EastMed forum due to its position and the flourishing relations with both Italy, Egypt and Israel. From 2018 on and the latest dispute between Israel and Turkey, Greece has been at the forefront of the EastMed forum to push for the creation of energy infrastructures that could be a major economic issue for the country in creating a new source of revenues. As Greece is still struggling to re-emerge to a pre-2007 crisis level, achieving a central position in the transit of Eastern Mediterranean gas to Western Europe and the Balkans, could be a new way for growth. However, the situation is not binary, as Greece and Turkey are forced to cooperate on the TANAP-TAP project. This major infrastructure of the “Southern Gas Corridor” is creating a dependency from one to the other. Without cooperation, both Greece and Turkey would be in a delicate situation regarding gas exports to Western markets. Both are yet linked to Bulgaria and the TransBalkan gas pipeline, yet it would reinforce the Russian influence on their energy strategy if forced to rely on this one. Moreover, the interconnection between TransBalkan and Western Balkans and Central European countries being very limited (Table 7.1).

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The EU in the Middle

The European Union is having a major role to play in regard of this Greece-Turkey competition. For the moment Brussels made the choice not to adopt a clear position and remains in-between, with a support to both countries. Turkey proved to be a key-territory at the end of the 2000s for the EU strategy of gas resources diversification. With the cancelation of Nabucco, Ankara soon held a major influence leverage through the TANAP-TAP project. The participation of Turkish national oil and gas company Botaş, Botaş is the oil and gas transportation company of Turkey, responsible for the pipelines management and operation, and a wholly stateowned asset, even with the announced will of Turkish authorities to privatize it. The Turkish company held 30% of the TANAP pipeline, making it the second most important shareholder after SOCAR (58%), and giving the national company a key-role in gas transit to Europe. Moreover, the other Turkish national oil and gas company, TPAO—also a state-owned company—also participated to major gas projects to Europe, such as the South Caucasus Pipeline (Baku-Tbilisi-Erzerum). The EU also decided to fund the Greek projects regarding energy security through the Project of Common Interest mechanism, namely from 2013—First PCI list—the Interconnector Greece-Bulgaria (IGB), the Aegean LNG terminal, the South Kavala storage facility, the Interconnector Italy-Greece-Turkey (ITGI) and a gasoduct from Cyprus to Greece through Creta. The latter was thereafter named EastMed in the Second PCI list of 2015. In the 2017 Third PCI list the Poseidon gasoduct from Greece to Italy was added. The PCI mechanism also means an accelerated permit granting system and, more importantly, an eligibility to EU funding for the project— the Connecting Europe Facility—that proved to be fundamental for Greece due the country’s economic situation since 2008. The EU contributes largely to the EastMed Pipeline—more than 35 bn EUR—and to the feasibility studies of Aegean LNG and South Kavala facility. Yet the Turkish behavior towards Cyprus and the energy companies acting in Cyprus EEZ, pose a major security issue for the EU. The 2018–2020 diplomatic crisis between Turkey and Cyprus, the latter being joined by Greece, Israel and Egypt, over the right to drill offshore the Cyprus island, raised concerns over the EU position and capabilities over a potential conflict situation. On the legal side, EU member-states have an “obligation of aid and assistance by all means” for a memberstate “victim of an armed aggression on its territory” according to art. 42-7 of the Treaty on European Union. Yet the very same article also indicates that “Commitments and cooperation in this area shall be consistent with commitments under the North Atlantic Treaty Organisation, which, for those States which are members of it, remains the foundation of their collective defence and the forum for its implementation” [15], whose Turkey is also a member. Beyond the possibility of an open conflict, that faded with the decrease in the tension in 2020, the EU chose to enact sanctions over Turkey regarding the drilling from TPAO’s ships in Cypris EEZ. The first batch of sanctions was declared in late 2019, specifically on TPAO executives. The sanctions were thereafter extended in

References

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2020, with the continuation of TPAO drilling. Yet the discovery of major gas resources in the Turkish Black Sea EEZ in 2020 and 2021, resulted in a progressive withdrawal from the Cyprus EEZ. Therefore, as R. T. Erdogan announced that the new gas fields of Tuna-1 and Amasra-1 had to be open to production in 2023 for the 100th anniversary of the Turkish republic, TPAO is now focused on the development of these fields that are—fortunately?—in a non-contested area.

7.5

Conclusion

The transportation issue appears, alongside the resources’ discoveries of the 2000s, to be a major element in the change of Eastern Mediterranean geopolitics. The need to draw new routes in South-East Europe to supply the EU with gas, in avoiding the Russian territory, opened the Pandora’s box of regional competition. As the European gas market remains very attractive, the possibility for Turkey and Greece to become the regional gas hub fueled the competition between the two countries. Relying on EU funding and political support, Ankara and Athens proposed the development of both pipelines, LNG terminals and storage facilities to gather gas resources from Caucasus, Middle East and Eastern Mediterranean before their distribution to the European markets. Yet the competition also evolved in a political confrontation between Turkey and the other regional actors that gathered in 2017 around Greece and Cyprus on the EastMed forum. If the situation seems to de-escalate in 2020 with the will of Turkey to focus on the development of Black Sea gas resources, the regional ambitions of Ankara and the global distrust of European countries and partners over Turkey, could play a major role for the development of new gas infrastructures. Oil and, especially, gas are still the main topic in regional geopolitics with this double issue of resources and transportation, yet another element arises for a few years: the need to plan and enact an energy transition to face climate change. In the MENA and Eastern Mediterranean region this issue turns to be critical regarding both economic impacts, geographical situation and also the need to ask for foreign expertise. This latter point could be, alongside the oil and gas situation, a major element in the evolution of regional geo-economics.

References 1. Yergin, D. (1991). The prize, the epic quest for oil, money and power. Simon and Schuster. 2. Fulton, J. (2016). China’s changing role in the middle east. Atlantic Council. 3. Lamont, C. (2021). Japan-MENA Relations Understanding Japan’s Strategic Priorities in the Region, Med Dialogue Series n 37. Konrad Adenauer Stiftung. 4. Erickson, P., & Achakulwisut, P. (2021). How subsidies aided the US shale oil and gas boom. Stockholm.

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5. Alexopoulos, T., Thomakos, D., & Tzavara, D. (2012) CO2 emissions, fuel mix, final energy consumption and regulation of renewable energy sources in the EU-15. In 2012 9th International Conference on the European Energy Market, 1–8. 6. United Kingdom Government. (2009). The UK low carbon transition plan, national strategy for climate and energy. UK Government. 7. Dickel, R. (2014). The New German energy policy: What role for gas in a de-carbonization policy? Oxford Institute for Energy Studies. 8. International Energy Agency. (2019a). World Energy Outlook 2019. OECD. 9. Kovacevic, A. (2017). Towards a Balkan gas hub: The interplay between pipeline gas, LNG and renewable energy in South East Europe. Oxford Institute for Energy Studies. 10. Derdevet, M. (2009). L’Europe en panne d’énergie. Descartes & Cie. 11. EU Commission. (2008). Second strategic energy review – An EU energy security and solidarity action plan (COM 2008/781). EU. 12. World Bank. (2018). Western Balkans, Directions for the Energy Sector. World Bank. 13. International Gas Union. (2021). 2021 World LNG Report. IGU. 14. EU Commission. (2010). Energy 2020, A strategy for competitive, sustainable and secure energy (COM 2010/638). EU. 15. European Union. (2012). Consolidated version of the treaty on European Union. EU.

Chapter 8

Energy Transitions in EM and MENA Regions, Towards New Alliances?

Energy transitions started in Western countries at the end of the 2000s to both strengthen national energy security policies and tackle climate change in switching from fossil fuels to carbon neutral energy sources. This movement engaged in a large number of European countries and starting in Asia and the United States for a few years, would have major impacts on oil and gas exporting countries. These traditional oil and gas producers have, most of the time, an energy sector running on their own resources to limit the expenses on electricity production. Moreover, in most oil and gas exporting countries, especially in OPEC memberstates, the everyday life is deeply subsidized due to the oil and gas rent. For them, entering an energy transition, out of economic issues, is above all a major energy security paradox as they will increase their dependence to external suppliers, whether for nuclear power plants or renewable energy sources infrastructure. These suppliers, most of the time also engaged in their own energy transition are on the way to rebalance their economic relation with oil and gas exporting countries, creating a deep change in energy geoeconomics. The EU will to achieve carbon neutrality in 2050, following the 2019 “Green Deal” orientations [1], has major impacts not only on the energy sector itself, but also on neighboring sectors such as transportation or housing. Regarding transportation and specifically automobile, the will to switch out of traditional fuels to turn to electric or hydrogen-based mobility would have major impacts on MENA countries that structured their economies around exploitation, transformation and exportation of oil and gas. Deep changes in all sectors are creating a global turmoil with an oil consumption decline in Europe and—depending on US and China energy strategies—a potential future global decrease. Therefore, MENA and Eastern Mediterranean countries are confronted to a double change, internal and external, that could lead to deep evolutions in their energy strategy and international stance.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_8

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8.1 8.1.1

8 Energy Transitions in EM and MENA Regions, Towards New Alliances?

Energy Transitions in Resources Rich Areas The Threat of Dutch Disease

Dutch disease phenomenon is one of the major features that emerges when discussing the economic evolution of resources-based economies [2, 3]. Empirical analysis shows also that MENA resources rich countries tended to polarize their economies towards oil and gas exploitation and exportation. Alongside the revenues given to their national economies, they also gained an important international influence from this position, especially after the creation of OPEC in 1960 and the 1973 first oil shock. Even if the threat of Dutch disease is ever present in resources-rich countries, the energy transition could be the Firestarter to a long-run crisis in MENA countries, looking at the perspective for oil and gas exports. As their traditional clients are slowly yet deeply turning away from hydrocarbons, they have to reach new markets that, one day, could also make the choice to phase-out of hydrocarbons. The 2007 economic crisis and the subsequent ‘Arab Springs”—some of them directly linked to the loss of revenue and employment rate for the population of oil-and-gas-rich countries [4]—already acted as an alarm-clock for some countries. Later, the importance of 2013–2017 oil prices crisis also led to a major economic and political stress in MENA countries, leading to some evolutions in oil and gas production and exportation system, the most important being the 2015 agreement to create the “OPEC+” alliance of oil exporters. The OPEC+ agreement let Russia enter the global system to regulate the prices on international markets, creating another position of swing producer alongside Saudi Arabia and, thus, lowering the influence of MENA countries in the cartel. There is also an unrelenting threat to oil and gas exporters due to the energy transition in Western countries: the relative limitation of funding for new upstream oil projects. Major Western banks and investment funds decided—mostly for imagerelated reasons—to phase out from investments in new coal, oil and gas field development projects, leading to freeze some greenfield projects. In 2018 the International Energy Agency [5] highlighted this situation and the potential consequences on the global oil and gas flows on the international market in the years to come.

8.1.2

Adaptation of National Energy Mixes

MENA and Eastern Mediterranean countries, a few years after Western countries, also entered the energy transition, to adapt their own energy mix to economic and political constraints. The 2015 Paris Agreement was, for most of them, the turning point to engage into such a transition, that could also help—through electrification— their economic and social development and economic diversification. The need

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especially for oil and gas producers to start new businesses in electricity arose also with the potential depletion of old fields. Most of MENA and Eastern Mediterranean countries, except from Greece, Israel and Turkey, are traditionally relying on exportation of primary goods, whether energy products or agricultural goods. Such economic systems don’t need an important electrification as they can run using oil, gas and coal resources for energy production. Yet, the will to engage into an energy transition has also to be understood as a way to create a more inclusive economy in strengthening the services sector, to foster the development of a national middle class. Such an economic evolution, as demonstrated by the emergence of Asian countries, need a strong electric basis to power this evolution. Therefore, the energy transition in MENA and Eastern Mediterranean, alongside a transition from hydrocarbons to renewable energy sources, is above all a transition to fossil fuels to electricity. Also, the region is considered a “climate hotspot” [6], with a rise in temperatures 20% faster than the world’s average. Therefore, the reduction of greenhouse gases emissions is a major issue for most MENA and Eastern Mediterranean countries to avoid major climatic issues and to develop a better management of scarce resources such as water. Regarding the water issue, an important part of energy transitions is thus oriented towards the production of drinkable water and the desalination of sea water for agricultural use. This electricity-water nexus is a core issue in MENA and Eastern Mediterranean and the combination of decarbonized electricity production and enhanced of water production efficiency has to be considered a key element in the development of foreign companies in MENA and Eastern Mediterranean countries. As a consequence, MENA and Eastern Mediterranean countries mostly decided to invest all along the electricity value chain to decarbonize the production and also to strengthen transmission and distribution on the grid. The evolution of national electricity generation in MENA and Eastern Mediterranean countries highlights this situation of growing reliance to electricity as a major energy source. Over the last 10 years, BP [7] considers that electricity generation in Middle East was 4.5% annual average and 3.2% annual average in Africa, including Maghreb countries (Fig. 8.1). Yet MENA and Eastern Mediterranean countries, even with this global trend of electrification, made different national choices in terms of energy sources, not only relying on renewable energy sources for their transition. In oil and gas rich countries, natural gas plays the major role, often with Combined Cycles Generating Turbines power plants that allow a better efficiency in electricity production. Some countries also decided to turn their eyes towards nuclear technology to have large concentrated power plants. United Arab Emirates and Turkey were the first countries to choose nuclear power plants as a decarbonized solution for electricity production in the region. Turkey’s Akkuyu NPP (4200 MW)—built by the Russian State Corporation Rosatom—and UAE’s Barakah NPP (5600 MW)—built by the South Korean company KEPCO using US-technology—are the two first power plants of the MENA region. Other countries (Saudi Arabia, Jordan, Egypt) are also considering the possibility of issuing tenders for power plants, with a specific orientation towards

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350

300

250

200

150

100

50

0 2010

2012

2014

2016

2018

Turkey

Greece

Morocco

Algeria

Egypt

Israel

Saudi Arabia

Qatar

2020

Fig. 8.1 MENA and EM Electricity Generation (TWh); Source: BP

the electricity-water nexus in connecting directly desalinizing station to the power plant as for the Barakah NPP. The analysis of national energy strategies also underlines these contrasted situations. In the UAE, the 2017 strategy focuses on the nuclear-renewable energy sources nexus to 2050 with a target of 50% clean electricity generation. On the contrary, Morocco enhances the importance of renewables—and gas—to switch out of coal for electricity generation with a special emphasis on energy efficiency (IEA; 2019b). The use of gas as a transition energy, the choice of renewables (wind, solar, etc.), the nuclear issue and the importance of the energy transition in the global development of the country are the main criteria in terms of national differences in MENA and Eastern Mediterranean region.

8.1.3

Towards New Business?

Beyond the importance of energy transition in MENA and Eastern Mediterranean countries for national energy mixes, there are also opportunities open for these countries to develop new business. As Western countries are trying to phase-out

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from hydrocarbons—especially coal and sometimes oil—there is an opportunity for gas exportations growth. As the foresight on Europe’s gas dependence shows, the depletion of European gas fields and the will of most European countries to end the exploitation of natural resources, the continent share of imports will grow in the years to come. For MENA and Eastern Mediterranean gas countries, this situation could be a major opportunity. For traditional oil exporters such as EAU and Saudi Arabia, a partial switch from oil to gas exportation—with the development of LNG terminals—could be a way to stabilize their economic relations with Europe, even with the oil consumption decline. The end of gas flaring and the development of associated natural gas exports is also for these countries some kind of diversification in their export structure. Yet, they will have to face the competition of other prospective major gas exporters to Europe: The United States, Sub-Saharan African countries, Latin American countries and also maybe Canada. More than this oil-to-gas switch, the development of new energy technologies in MENA and Eastern Mediterranean could also lead to new paths in the economic interrelations with Europe. In July 2020, the EU released a Hydrogen Strategy [8] for the whole continent encompassing parts of EU member-states national hydrogen strategies. If the development of a European hydrogen economy—including the production of green hydrogen in Europe—is the focus point of the strategy, the document also highlights the potential cooperation with non-EU countries. Part 7 of EU Hydrogen Strategy is therefore about the international dimension and the possibility to create an EU-MENA-Eastern Europe hydrogen community. Coming from the German strategy [9], this possibility to connect EU with Eastern and Southern neighbors’ hydrogen networks could foster the development of a hydrogen-based economy at a continental level, allowing a production sufficient to reach a critical economic dimension. Gas rich countries such as Algeria and Eastern Mediterranean countries could benefit from this interconnexion to dedicate part of their gas production for the transformation into blue hydrogen.1 Moreover, these MENA and Eastern Mediterranean countries could also—depending on their situation—use the overproduced electricity from renewable energy sources to produce green hydrogen and supply Europe in both green and blue hydrogen. The idea to connect EU networks to MENA ones appears to be quite old. At the end of the 2000s, the German Desertec Initiative intended to develop solar energy in MENA and to propose an electric ring all along the Mediterranean shore to connect North Africa, Europe and Eastern Mediterranean countries into a unique grid. The idea was to benefit from the very high solar potential of desert regions in Eastern Mediterranean and North Africa to access a cheap green electricity. Yet, the “Arab Springs” prevented the Desertec Initiative from coming to reality, the development

1

Hydrogen production is considered through a color-based system: brown hydrogen is made from hydrocarbon, blue hydrogen is made from hydrocarbons with carbon capture and storage, green hydrogen is made from electricity originating from renewable sources, yellow hydrogen is made from electricity from nuclear power plants.

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of solar power plants being halted in a large part of North Africa and Near Eastern countries. The Desertec industry initiative also launched in 2020, following EU Hydrogen Strategy, a new cooperation framework to develop hydrogen production in MENA countries: the MENA hydrogen alliance. Centered around German companies and institutions (Roland Berger, E.On, GIZ, Siemens, ThyssenKrupp, etc.), the MENA hydrogen alliance aims to propose a new industrial cooperation framework with the support of international financing organizations (IFC, EBRD, EIB, etc.). The initiative also links German companies with major electric utilities in the region, starting from the dominant ACWA Power of Saudi Arabia which is having assets in the whole region (Morocco, Jordan, Egypt, UAE, Saudi Arabia, Bahrein, etc.). This opportunity for a new hydrogen-centered business is a major prospect for some MENA countries such as Saudi Arabia. On the one hand it allows these countries to remain deeply linked to European companies and European energy sector and, on the other hand, it also serves to accelerate their own transition towards a greener economy. The Saudi project The Line supported by the company NEOM, to create a whole new urban network in the desert, only supplied with decarbonized energy, would greatly benefit from cooperation in the hydrogen technology, especially for transportation. NEOM is directly chaired by the Saudi crown prince M. bin Salman, who considers the Saudi energy transition as the cornerstone of his policy for the country. Any major cooperation to The Line would therefore be considered as strategic by the Saudi authorities and create the framework for international influence through this project.

8.2 8.2.1

Renewable Energy Sources in Major Oil and Gas Producing Countries: Contrasted Situations MENA: Algeria vs. Morocco

The comparison of North Africa neighboring countries Algeria and Morocco highlights the dramatic differences that could be experienced in MENA regarding the energy transition. Their different geographies and resources also position Morocco and Algeria at two opposites poles of the energy spectrum in MENA and Eastern Mediterranean. First of all, Algeria is a traditional oil and gas producer and exporter, being member of OPEC since 1969, two years before complete nationalization of its oil and gas sector. Nowadays, Sonatrach and its subsidiaries are the main economic assets of the country, with major contribution to national GDP—nearly 20%—and, through heavy subsidies for the population, the core of national economy [10]. Algeria is therefore particularly dependent of oil and gas prices and suffered heavily from the “Arab Springs” and the 2013–2017 oil price crisis. This situation of resourcesdependent country positions Algeria as a potential example of Dutch diseases in the

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years to come, with also a negative forecast on new gas discoveries and global oil and gas resources. Therefore, energy transitions increasingly become a necessity to change the orientation of the country, especially with a harsh social situation and political unrest. Thus, there is no real political will to engage into the energy transition but an internal and external push. In 2012, Algeria initiated a strategy to develop renewable energy sources to 2030, in order to limit the consumption of its own oil and gas resources, therefore strengthening both energy security and exportation revenues. This strategy intended to reach a 22 GW installed capacity, mostly solar. In 2015 at the Paris Agreement, the country also proposed a nationally determined contribution with a 30% renewable energy sources share in the energy mix [11]. Yet, even with such an ambitious strategy, the realization is far under the goals. In 2020, Algeria has less than 2% electricity generated from renewable energy sources. Natural gas remains by far the major source for electricity generation. The problem is both institutional and economic as the country has a state-controlled economy, with the public company Sonelgaz having a quasi-monopoly on electricity production, transportation and distribution and gas distribution. Sonelgaz is therefore naturally oriented towards gas, with also important political pressures to keep the prices as low as possible. The low efficiency of Algerian industrial sector and the low services sector don’t push for a major development of renewable energy sources, in a difficult economic context. The unrelenting social and political unrest, with accusations of bribery and corruption towards national elites, Algeria being ranked 104th country in the Transparency International Corruption Perception Index. Moreover, due to the political and security situation, the flow of investments from Western and International organizations remains very tight, with the Chinese companies and funds as the only major investors, despite the perspectives in terms of solar potential. On the contrary, Morocco has a totally different landscape and political orientation towards energy transition for years. Having barely no hydrocarbons resources that could be exported, Morocco historically relied on imports from Algeria, also positioning itself as a transit country from Algeria to Europe through the Medgaz pipeline. Therefore, energy security has ever been a major political issue for Morocco, especially with the growth of population and economy; 4% annual average since 2000 on GDP. The country has to secure its energy production, with a development of services sector and, as a consequence, electrification. Whereas the country historically relied on coal for electric production, it needed to engage an energy transition for both climatic and security of supplies reasons. Alongside with the growth of coal use—following the growth of electric use, from 23.7 TWh generated in 2010 to 38.2 TWh in 2020—Morocco also invested vast amount of money in the development of renewable energy sources. In Morocco the 2009 “Noor” plan to install 2 GW of CSP and photovoltaic is the cornerstone of the kingdom’s energy transition. This plan created a whole new administrative framework to support the development of renewable energy sources, namely the Moroccan Agency for Sustainable Energy, itself enabling international cooperation with Western and Asian countries to attract major utilities and companies in Morocco. The interactions with foreign public authorities, international

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companies and international financing bodies allowed a flow of investments—from green bonds also—to finance the implementation of these new plants. The result is a 30% growth of renewable energy sources production on average on the last 10 years. The renewable energy sources installed capacity is therefore very important for an emerging country with more than 40% in 2020 and a 52% target for 2030. Morocco is therefore one of the most engaged countries in the world for the development of renewable energy sources, especially wind and solar [12]. Thus, Morocco is in the position to become the node of a transregional electric integration, with potential “green electricity” exports to neighboring countries (Spain, Algeria, etc.). This Algeria-Morocco comparison highlights the importance of the rule of law and political will to engage in an energy transition. The need to attract foreign investors and companies to install these new facilities could only be achieved through stability and economic independence. The weight of oil and gas lobbies in resources rich countries, with heavily subsidized everyday life is also a major barrier to deal with. Algeria, with also a specific security situation since the independence of the country, is a very illustrative example of the resources curse. Other MENA countries, traditional oil and gas exporters, are nevertheless having very different positions.

8.2.2

Gulf Countries and the Need to Diversify

Gulf countries understood the need to modify their own energy mix, as the concerns over global warming are increasing. The 2015 Paris Agreement opened the way for a decrease in oil and gas consumption growth, and for these hydrocarbons-rich countries it was the signal for starting electrification and diversification. Facing the risk of Dutch disease for years and having lower influence capability over oil prices—OPEC share in the global production is decreasing since the 1970s—the Gulf countries needed to operate deep changes in the structure of their economies. The diversification made towards services sector—whether finance, tourism, military technology—needs an increase in energy efficiency and in electrification to attract and develop new businesses. Moreover, even if MENA remains the first region in the world in terms of oil and gas resources, the depletion of onshore fields and the increasing costs for exploration and production also tend to limit their profits. Thus, part of the solution is to limit the national consumed share of oil and gas extracted to add more volumes to the market, depending of course on the global oil prices. The OPEC, though the “OPEC+” agreement managed to retain an important bargaining power, yet the national leaders of Gulf countries, starting with M. bin Salman in Saudi Arabia, decided to invest vast amounts of money in new energy technology and sources, to keep an important role in the energy sector in the future. The investments in new technologies are oriented towards carbon neutral technologies, especially nuclear, renewable energy sources, carbon capture and storage,

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energy storage for mobility. Regarding nuclear, UAE opened the way for other countries and Saudi Arabia intends to become the major nuclear player in the years to come with a 17 GW potential capacity in 2040, also for desalination. The potential use of nuclear for non-electric uses, namely desalination and hydrogen production, creates a major interest for this technology, whether traditional power plants or small modular reactors, in the Gulf region. The integration of nuclear power plants and the need to develop education for dedicated engineers and technicians are a major hurdle to cope with, yet the Gulf country is a very interesting market for major nuclear providers, such as China, Russia, France or the United States. China and Russia already signed agreements with Saudi Arabia for potential reactors. Moreover, the Saudi authorities are not only looking at traditional power plant technologies— pressurized water reactors—but are also interested in Generation IV nuclear technologies, as demonstrated by the 2017 agreement between China and Saudi Arabia for the evaluation of the HTR-PM reactor. This specific model, being a very-high temperature reactor, could therefore be used for hydrogen-electricity cogeneration, using the 900 C temperature to achieve thermolysis of water to produce hydrogen. This kind of technology could perfectly fit into the Saudi ambition to position the kingdom as a technology leader in the Middle East, with projects like The Line or King Abdullah Economic City. As most of Gulf countries are orienting themselves towards new businesses and technologies, there is a fast increase in renewable energy sources installed in the whole region. As the IRENA statistics demonstrates [13], MENA—and especially the Gulf—is the fastest growing region in the world for installed capacity, especially in solar due to the potential of most countries. Yet the issue remains both the integration into national and regional grids, as they were not designed for mass integration of renewable energy power plants in such a short time, and also the energy efficiency issue. Most of electricity consumption being related to households and air-conditioning, Therefore the major issue for national energy authorities is to combine this increase in terms of electricity consumption with the need to maintain a strong energy security and the reduction of climate footprint.

8.2.3

Eastern Mediterranean Countries

Eastern Mediterranean countries were not historically resources rich countries. Their gas resources are a new wealth, that most of the times is not yet actually in production. For these countries energy transition has been a necessity to increase their energy security alongside fulfilling their climate goals. For EU countries especially, the EU legislation, from 2008 onwards with the Third Energy Package, creates obligation to reduce greenhouse gases emissions, as well as to develop energy efficiency and renewable energy sources. For Israel and Cyprus, the situation is barely the same, with an increasing development of renewable energy sources, mostly for energy security purposes. The need for these countries to import a major—or all for Cyprus—part of its oil and

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gas, oriented their energy strategy towards both renewables and energy efficiency enhancement. Solar and wind potential in Eastern Mediterranean allow these countries to turn towards these energies to limit both their imports and environmental footprint. Yet, looking at Israel, it is interesting to note that the development of natural gas production in the country has an impact on the gas consumption since the md-2000s. There is therefore a risk for these countries that the new national resources could hamper the development of new renewable energy sources. Greece is in the very same situation, having to cope with EU regulations and to deal with the economic situation of the country, that limits the possibility of major investments in the energy sector. With the increasing gas supplies flowing to Greece, gas consumption tended also to increase and to replace coal in the national energy mix. Moreover, the lasting effects of the 2007 economic crisis had a major impact on energy consumption, leading to a decrease from 30 million tons oil equivalent in 2007 to roughly 22 million toe nowadays. The combination of gas supplies and energy consumption decrease also had an effect on the development of renewable energy sources. Thus, new hydrocarbon supplies are having a paradoxical effect on Eastern Mediterranean countries, looking at both energy security and energy transition. Turkey is having a specific position. For the country, energy security has ever been at the core of national energy policy [14]. Having important coal resources, the country originally turned to coal exploitation and use. The economic development of Turkey, needing also a relatively cheap electricity oriented the energy policy towards the use of local coal. Therefore, Turkey also decided to turn to nuclear energy, for energy security as well as international influence purposes. The Turkey-Russia cooperation on the Akkuyu Power Plant [15], initiated the development of Turkish nuclear sector in 2010. Whereas Turkey planned to install at least three nuclear powerplants, only the Akkuyu project seems for the moment to reach the operational stage as the winner for the second tender at Sinop, a Mitsubishi Heavy IndustriesEngie consortium, decided to withdraw in 2018. The third nuclear power plant project at Igneada is for the moment at a very early stage and no contractor has been selected. However, Turkey also developed a framework to develop renewable energy sources since 2005. A new law in 2016 on the Resources Zones for Renewable Energy Sources, accelerated the installation of new capacities. Turkey having an important hydroelectricity potential, the country chose to focus on the development of new dams, to achieve a 34GW hydro capacity. In 2019, hydropower represented nearly 30% of total electricity generation in the country and the other renewable sources for 14% more, leading to nearly half of decarbonized electricity production. Contrarily to MENA countries, Turkey isn’t having a major solar potential and is focusing on hydro and wind technologies. The goal of Turkey is to achieve a 60% electric installed capacity from renewables, still with a major part of hydroelectricity. Also, for Turkey, the development of new electric capacities, whether nuclear or renewable, could also serve to increase electricity exports and interconnexions, Turkey having a strategic position to link Europe and MENA grids.

8.3 International Cooperation in Energy Transition: A Specific Geo-Economic Issue

8.3 8.3.1

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Alongside the German-supported Desertec initiative, France also launched at the end of the 2000s an important framework of cooperation in solar: the Mediterranean Solar Plan (MSP). MSP intended to be the energy counterpart of the Union for the Mediterranean (UFM), a 2008 French-led initiative to gather Mediterranean countries around major political issues. The UFM was also designed to balance the EU orientations towards its Southern flank neighbors. At the time, the EU neighboring policy was—under German influence—mostly oriented towards the Eastern flank, with the integration of Eastern European countries in 2004 and 2007. The French UFM initiative and the subsequent MSP [16], intended to develop a transnational cooperation in solar PV and solar CSP technologies, mostly for Maghreb countries. After 2011, the MSP also integrated the Desertec initiative in its project portfolio, yet with little success. However, these founding stones, helped both France and Germany to develop their presence in MENA and Eastern Mediterranean countries in support of local energy transitions. France—that supported strongly in 2016 the launch of Indiabased International Solar Alliance2—promoted the development of renewable energy sources in North Africa through both its energy companies and development agencies. The French Development Agency (AFD), financed several projects in Morocco, Algeria, Tunisia, Egypt, Lebanon and the West Bank to support energy transition in helping to build national capacities for electrification or in financing the installation of renewable energy sources power plants, such as the Ouarzazate solar power plant (150 million EUR loan for 570 MW of CSP). French energy companies also selected MENA and especially North Africa as a major international development area for new renewable energy sources projects. Engie, Total and EDF Energies Nouvelles, therefore are present in most of North African countries, sometimes being direct competitors to other French companies for the development of both renewable energy power plants or the redesign of national and regional electric system. The European know-how in terms of grid integration, energy efficiency, reduction of transmission losses is a major asset for their development overseas in MENA countries. Moreover, alongside French and German initiatives, Italian and Spanish energy companies also developed their presence in MENA and Eastern Mediterranean countries in support of the energy transition. Italy’s ENEL and its Spanish subsidiary Endesa, are engaged in Morocco through wind power projects. Enel Green Power is 2

The International Solar Alliance is an international framework hosted by India to gather emerging countries for the development of solar technologies and the energy transition. The Alliance was launched just after the Paris Agreement with a strong French support and nowadays includes Algeria, Egypt Saudi Arabian, Oman and UAE as members.

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also deeply involved in the energy sector in Greece with nearly 500 MW renewable energy capacities in the country. Yet Italian and Spanish presence cannot compare to the French and German ones. This European presence, being most of the time based on national orientations rather than on a coordinated EU strategy, is facing for a few years now the rapid growth of Chinese companies and institutions in MENA and Eastern Mediterranean. As for the development of Chinese NOCs presence in these countries, major Chinese utilities—state-owned for the major part—are also engaged into an international expansion, to support also the Chinese Belt and Road Initiative development.

8.3.2

Chinese Companies in Regional Energy Transitions

Chinese companies started to develop their presence in the MENA region through a harsh competition with IOCs in the oil and gas sector. As the MENA region progressively turned to Asian markets as the new main destination for their oil and gas exports, there was a move also from Asian energy companies to enhance their position in acquiring assets or developing new fields and infrastructures in MENA countries. Chinese NOCs were at the forefront of this new Asia-MENA relation, in proposing the MENA NOCs new partnerships, notably for oil refining and LNG exports. As IOCs traditionally remained dominant actors overt the midstream and downstream parts of oil and gas value chain, Chinese NOCs major leverage in terms of competition was to propose a local development of midstream and downstream to MENA resources rich countries. Moreover, the growing oil and especially gas consumption of China is for MENA countries a major opportunity as Western countries are turning ever more towards clean energy technologies. Chinese NOCs are not only traditional oil and gas companies, but also a political tool in the box of the Chinese authorities to initiate or strengthen bilateral relations. Thus, the development of CNPC, CNOOC and Sinopec in Saudi Arabia, Iraq, Oman, Qatar, Kuwait or Algeria could be considered as both an opportunity for these companies to have a global orientation and for the Chinese authorities to strengthen the country’s energy security in having a direct participation in major oil and gas operations in the MENA region. Moreover, China is not considering the energy sector as separated from the others and the development of Chinese oil and gas companies is often the first step for more global partnerships, including geo-economic and geopolitical aspects. For Gulf countries, as they are trying to develop new businesses to diversify their economies, they need R&D support and technological alliance, that Chinese companies are willing to offer. 5G is a good example of this new kind of partnership as Chinese digital companies, starting with Huawei, are offering to develop 5G infrastructure in MENA countries—and beyond—to foster the emergence of data-driven businesses and economies. The 5G development alongside the implementation of other Chinese giant tech companies in MENA could also open new doors for other Chinese companies.

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As a consequence, Chinese electric utilities are also deeply involved in fostering energy transitions in MENA and Eastern Mediterranean countries. State Grid Corp, the major electricity transporter of China, is most of the time the spearhead of China’s involvement in national transitions. State Grid Corp. alongside the other major electric utility, China Southern Power Grid, are working hand-to-hand with digital Chinese companies to propose integrated offers for the digitalization of the energy sector. Allowing a data-driven piloting of power plants and grid—with the use of Industrial Internet of Things protocols—could help to resolve the dilemma of fast renewable energy sources integration and enhancement of energy efficiency. Chinese companies are also in position to propose integrated offers all along the electricity value chain for MENA and Eastern Mediterranean countries, as China is also the world’s first producer of solar panels and wind turbines. Alongside State Grid—the state-owned company having the rank of “strategic partner”-, Chinese companies and organizations are deeply involved in the MENA hydrogen alliance, also on the financing side. Notably Global Energy Interconnection Development and Cooperation Organization (GEIDCO) is also part of this initiative and the MENA hydrogen alliance could be for China another way to strengthen the ties with the MENA region, out of oil and gas production. This multi-directional Chinese strategy has also to be considered with the Chinese authorities will to achieve a trans-continental electric integration, based on Chinese technologies, to increase the country’s influence and to obtain an influence through new energy or digital norms and standards. China is acting at multiple levels, using both companies or technologies and multilateral organizations. The most important being GEIDCO that sought to become some kind of international cooperation framework to gather all partners of the China-supported global electric integration. Some major MENA and Eastern Mediterranean energy companies and public authorities are members of GEIDCO (ADMIE in Greece, Ministry of Electricity and Renewable Energy in Egypt, Al Gihaz holding in Saudi Arabia, Kuwait Water Association in Kuwait, etc.) underlining the support this Chinese initiative managed to achieve in the region. In creating a direct electric integration all along the Belt and Road routes, MENA and Eastern Mediterranean countries could possibility become direct electricity suppliers for European and Asian countries, accelerating their economic evolution.

8.3.3

Regional Interconnection: Still a Dream?

Alongside the issue of dependence to foreign technologies, one of the main regional challenges is the potential interconnection of regional electric network into a wide area asynchronous grid. This challenge that was already present when the MSP and Desertec were launched, remains a major issue in fostering MENA and Eastern Mediterranean energy transitions. Contrarily to continental Europe that relies on a single super-grid, MENA and Eastern Mediterranean are split in regional zones with barely no interconnection. From West to East, the first one is the South Western

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Mediterranean Block with Morocco, Algeria and Tunisia, creating a former-French Maghreb system. The second regional grid unites Libya, Egypt, Jordan, Israel, Lebanon, Syria and Iraq. The last major regional grid is the Gulf Cooperation Council grid centered on Saudi Arabia, interconnected with Kuwait, Bahrein, Qatar, UAE and Oman. Turkey is having a specific position as an observer member of EU continental grid ENTSO-E with a connection to EU mainland grid. Except from the South Western Mediterranean Block that has a small connection to ENTSO-E through Spain, there is no direct connection between these four regional grids, limiting for the moment the potential of global cooperation between Europe, MENA and Eastern Mediterranean [17]. The issue of regional interconnection with Europe also raises the issue of Chinese state companies’ presence in the European electric networks [18]. The growing importance of State Grid Corp., China Southern Power Grid or even Three Gorges Corp. in the European transmission and distribution networks since 2013, underlines the will of China to position itself for the realization of a global electric interconnection from Asia to Europe and Africa. The progressive penetration of Chinese state-owned utilities in European electric networks, allowed China to achieve a major influence position inside European associations such as ENTSO-E. Chinese companies brought European transmission and distribution operators facing financial issues, mostly in Greece, Italy and Portugal, making the Mediterranean a Chinese gateway to Europe. Moreover, China is also benefiting from the EU strategy to strengthen the electric integration inside and to Europe—through the Connecting European Facility—with some projects in the Eastern Mediterranean such as the EuroAsia Interconnector between Israel, Cyprus and Greece; EuroAsia Interconnector being also part of GEIDCO.

8.4

Conclusion

Energy transitions are increasingly becoming a major political and economic topic in MENA and Eastern Mediterranean countries. Whereas most of them historically relied on their national oil and gas production to fuel their economies, they have to switch out of the most polluting electricity production systems. Whether planning a carbon neutral economy or just hoping to decrease their greenhouse gases emissions, MENA and Eastern Mediterranean countries are now engaged in an energy transition that is transforming their economic landscape. Alongside with the deep change and the potential increase of energy dependence, also come new business opportunities as their geography allows them to position as potential green electricity— through solar—or hydrogen net exporters. However, all of them lack the technology and the companies to engage in such a transition without any foreign support. European major energy companies, especially French and German, benefit from this situation to develop their presence, most of the time with the support of their state through development finding. Nevertheless, the competition is now engaged between European and Chinese utilities as the Asian

References

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companies also entered the MENA and Eastern Mediterranean electric sectors, with the aim to win them over the Belt and Road Initiative and the global electric interconnexion advocated by State Grid Corp. As for European utilities, Chinese state-owned companies receive a heavy support from public funds and administration, to supplement the influence they gained in developing oil and gas fields with a new feature: decarbonized electricity production and transmission. The major point in this Europe-China competition could be the development of wide area electric interconnexion, as MENA and Eastern European are still divided in three non-interconnected transnational grids. The international cooperation needed to achieve such a regional interconnection—with a direct link to Europe—could only be achieved by a major international player. Therefore, China and the European Union as an organization, could enter into a coopetition relationship over MENA and Eastern Europe, depending on both the will to EU to engage in such a dynamic, and the ability from Beijing to settle a long-term influence, deeper than just a business partnership.

References 1. EU Commission. (2019). The European Green Deal (COM 2019/640). EU. 2. Reisinezhad, A. (2020). The Dutch disease revisited: Theory and evidence (PSE Working Paper n 2020-74; halshs-0301264). 3. Rodrik, D. (2008). The real exchange rate and economic growth. Brookings Papers on Economic Activity, 2, 365–412. 4. Ianchovichina, E. (2015). Inequality, uprisings and conflicts in the Arab World, MENA economic monitor. World Bank Group. 5. International Energy Agency. (2018). World Energy Outlook 2018. OECD. 6. Agence Française de Développement. (2021). North Africa Regional Strategy 2021-2025. French government. 7. BP. (2021). Statistical Review of World Energy 2021. BP. 8. EU Commission. (2020). A hydrogen strategy for a climate neutral Europe (COM 2020/ 301). EU. 9. Mazzucchi, N., & Livet, A. (2020). La course à l’hydrogène décarboné : une nouvelle compétition économique globale. FRS. 10. Hadoum, S., Bennour, H., & Zaïd T. (2018). Algerian energy policy: Perspectives, barriers, and missed opportunities. Global Challenges n 2 vol. 8. 11. Hasni, T., Malek, R., & Zouuioueche, N. (2021). L’Algérie 100% énergiesrenouvelables. Friedrich Ebert Stiftung. 12. International Energy Agency. (2019b). Energy Policies Beyond IEA Countries: Morocco. OECD. 13. IRENA. (2021). Renewable Energy Statistics 2021. Abu Dhabi. 14. Ministry of Energy and Natural Resources. (2015). Strategic Plan 2015–2019. Ankara.

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15. Mazzucchi, N. (2019). Nucléaire civil : un enjeu stratégique pour la Russie. In De Tinguy, A. (dir) Regards sur l’Eurasie - L'année politique 2018 / Les Études du CERI, n 241-242, pp. 52–58. 16. EU MSP Experts Group. (2010). Mediterranean Solar Plan Strategy Paper. EU. 17. Moretti, A., Charalampos, P., Christofi, G., Bué, E., & Francescato, M. (2020). Grid integration as a strategy of med-TSO in the mediterranean area in the framework of climate change and energy transition. Energies, 13, 1–22. 18. Mazzucchi, N. (2018). China and European electric networks: strategy and issues. FRS.

Part III

Eastern Mediterranean Systemic International Regionalism in Process Thrassy Marketos

Introduction The Eastern Mediterranean (EM) region, an East and West, north and south converge area, birthing site of the three main monotheistic world religions, is, from a geopolitical point of view, a separate subsystem. At the crossroads of three continents, Europe, Asia and Africa, EM's geopolitics include not only regional actors but also ones located in competitive concentric circles: the United States, the Russian Federation and the European Union. The area is also at the top of two major geostrategic triangles, formed in the north and northeast with the Black Sea and the Caspian Sea, and to the south and southeast with the Middle East and the Persian Gulf. The Eastern Mediterranean region is in process of ‘delivering’ loose but formidable, geopolitical alliances that transcend stereotyped political and cultural prototypes throughout western Eurasia. These ones are the outcome of shifting regional power balances, but mostly reflect the United States ‘Pivot to Asia’ policy and resulting Middle East regional US policy low priority ranking ever since President Obama’s second term, as well as the emergence of China’s economic—for the time being—incursion in the wider region. This is a real change of paradigm for the EastMed area, which is characterized of its inflammable nature due to various reasons: First and foremost, the historical ambitions and conflicting assertions of sovereignty in the region. Then, competition over control of natural gas reserves and pipeline politics, civil wars and political chaos in certain littoral states. US retrenchment and Russia’s naval base expansion in Syria, as well as Turkish expansion in Libya, NATO allies divisions and, not to reckon with, waves of migration and refugees. Apart of examining EM as a distinctive geopolitical space, there is also need for a regional order that would benefit every participating actor. Need for a vision that

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would transcend non intentional, informal and de facto regional procedures (regionalization), to ones that emphasize intentional efforts in the domain of cooperation and security management (regionalism) [1].

Reference 1. Ellinas, C. (2017). The Eastern Mediterranean: An energy region in the making. In Ramin, D., & Westphal, K. (Eds.), The political and economic challenges of energy in the Middle East. Routledge.

Chapter 9

Eastern Mediterranean Geopolitical Conception

The Mediterranean region (its eastern part included) was for quite a long time a unified region, which led to a relatively high level of coordinated provision of maritime security by both local and global actors. Yet, by the mid-19th century, maritime security in the EM became fragmented, after the unifying hegemon—the Ottoman Empire—split into different (and at time competing) nation states. As A. Rubin and E. Eiran suggest, “with declining significance for maritime commerce and with separate national maritime security agendas, maritime governance and coordination all but disappeared. Instead, the newly born nation-states of the region adopted a terrestrial focus, concentrating their security concerns, interactions, and resources on their respective lands. Great power conflicts, wars between regional actors and domestic strife, all further eroded the potential for regional cooperation” [1]. However, “developments in the EM since the beginning of the 21st century, prompted scholars to challenge the priority assumed to land considerations and advanced a renewed interest in an ‘East Mediterranean region’, . . . as a distinct sphere of interaction and coordination. . .east of longitudinal line 20o” [1]. “Arab Spring” political upheavals, creating unprecedented flux of refugees, offshore natural gas (n.a.) findings and extraction, desalination of seawater, regional states appropriation of national exclusive economic zones (EEZ), and region’s ‘rediscovering’ by China and Russia, guided scholars and analysts to suggest that the EM is in process of (re) developing the distinct features of a region, considering that “many of the issues encompassed within maritime security are characterized by interdependency, liminality, transnational activity and cross jurisdiction, and therefore can hardly be dealt effectively by a single state, or by a limited interstate collaboration” [2]. Only a part of “maritime activities sought multiparty cooperation, but they resulted in limited scale power-based quasi alliances”. . . insufficient in promoting “the building of infrastructure for the delivery of natural resources, controlling environmental risks, effective regulation of migration and the resolution of border © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_9

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demarcation disputes. . .all call for a regional maritime security agenda”. . .“The inability to promote coordinated maritime policy for the region is routed in. . .the lack of shared set of values, culture and norms among the region’s societies. . ., old feuds. . .like the Turkish-Greek-Cypriot and Israel-Palestine protracted conflicts and the absence of effective sovereignty in. . . Libya, Syria, the Gaza Strip and parts of the Sinai Peninsula” [2].

References 1. Rubin, A., & Eiran, E. (2019, September). Regional maritime security in the eastern Mediterranean: expectations and reality. Forthcoming International Affairs, 95:5, University of Haifa: 1. 2. Bueger, C., & Edmunds, T. (2017). Beyond Sea blindness: A new Agenda for Maritime Security Studies. International Affairs, 93(6), 1293–1311.

Chapter 10

Turkey Extroventism

‘Arab Spring’ outbreak in the beginning of 2010s caused a completely new reality not just for Middle East but for Turkey too. Arab rioting reversed the Turkish regional planning to the level of disturbing the relationship kept with various regimes and its economic and political influence. Nevertheless, Ankara’s -post 2011—politically reinforced AKP government, successfully discovered ways of dealing with these geopolitical displacements, in supporting riots and providing economic, technical and other assistance to some of these countries, keeping a positive reasoning for the ascending Islamic conservatism in Egypt, Libya or Tunisia in relation to its vision of becoming sort of other countries’ “big brother” [1]. That suited to Prime Minister Erdogan vision of Turkey, revealing itself as political hegemon of Middle East (ME) and EM, a region perceived as natural extension of the country that inherited the Ottoman Empire, and part of its vital geopolitical space [2]. To that end, increasing discussion was under way on questioning Lausanne Treaty (1923) regarding certain states of the ME and EM, after huge parts of Iraq was captured by the so called Islamic State in June 2014. Erdogan in fact supported that boundaries established by that treaty—merely hundred years ago—were not satisfactory, and talked about irredentist Turkic and Muslim populations abroad. Statements and relevant policies alike are expressions of the “Lausanne Syndrome”, byproduct of the sentiment that continually traumatize the Turkish people via maps figuring the remains of the historic adventure of the Turks, horse-riding from Central Asia’s steppes to the heart of Europe [3]. That syndrome “produces a problematic, obsessive, and paranoid mentality in the governing elite order” [4], and has a strong imprint to the Turkish foreign policy since the foundation of the Republic of Turkey, reminiscent of Great Power’s (mainly Western) role in this. In this context, Erdogan -by pointing out that Turkey cannot ignore its brothers in Mosul, Thrace, Cyprus and Crimea-, in fact strengthened the Islamist wave powered by former PM Turgut Ozal, leading former foreign minister Ahmet Davutoglu into enticing a new “strategic orientation” responding to a historic testimony and Turkey’s sphere of influence © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_10

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[5]. In that, Davutoglu implies the redefinition of sociological, political, cultural and identity factors, needed for powering and expressing a different imperial-Ottoman strategic culture paradigm and a different mentality in terms of policy planning [6]. By virtue of the Lausanne Treaty, the new Turkish state ignored the supranational Islamic identity of the Ottoman Empire and the Caliphate, undermining its proper influence to the post-Ottoman space. The ‘Lausanne Syndrome’ is revisionist in nature, as it indices a change in the geopolitical order in favor of Turkey in the aftermath of the Arabic riots, the war in Syria and the Islamic State, which fired the traditional insecurities of the country. In particular those related to the interference of the Great Powers in the ME and territory loss threat—tightly intertwined to the revival of the Kurdish issue-, not only in Turkey, but in Syria and Iraq as well. These insecurities led Turkey in repeated incursions to Syria and Iraq, in a way of responding to threats as opportunities of diplomatic and military expansion, or, in other words, a means of revisioning of the geopolitical status quo in Turkey’s favor in political, economic and security terms [7]. Contemporary expression of Turkey’s revisionism in maritime strategic terms is the “Blue Homeland” (Mavi Vatan) dogma, positioning the country in wider context, an area from the Adriatic to the Alexandria gulf and the Suez straight. Under this concept, the actual status of the Aegean Sea and Cyprus—whose position influences directly the strategic linkages of Asia and Africa, Europe and Africa and Europe and Asia, and whose Western edge is the linchpin of EM, the Balkans and North Africa strategic balance-, confines the vital space of Turkey [8]. This dogma incorporates previous Turkish conceptions of national security threats, but manages national insecurities in a more extrovert, assertive and non-phobic way, and does not confine to defense matters but includes different aspects of power projection (military, economic, ideological etc). In other words, it deals with the importance and role of the security threats emanating from Turkey’s surroundings to the regional and global aspirations of the country [9]. The “Blue Homeland” dogma, formulated by the former Admiral Cem Gurdeniz in 2006 and put in maps by Admiral Cihat Yayci in 2011, points out the importance of Turkey’s increasing maritime force in dealing with Ankara’s twenty-first century basic geopolitical matters: a. sub-sea energy resources, b. Kurdish problem probable outreach to the Mediterranean, and c. northern Cyprus future. It is obvious that Turkey by means of this strategy claims a global role, affordable through maritime power increase and presence, in addition to other power parameters increase. A role focusing on Ankara’s geopolitical influence extension through maritime force projection, forwarded military basis building in the Horn of Africa and the Persian Gulf (Somalia, Qatar plus in Syria, Iraq and Cyprus) and political-economic activity. Maritime force projection used as a tool by Ankara’s foreign policy, contributes to the geopolitical and energy competition, maritime diplomacy and regulating role it wishes to play in EM and ME. The “Blue Homeland” dogma unequivocally heightens political tensions and conflicts over the unresolved demarcation of maritime borders between Cyprus and Turkey and between Greece and Turkey -arguably the most visible sensitive

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subject-, even though the core issue is the Cyprus conflict. This is arguably the most pressing uncertainty for a possible gas pipeline connection between Israel and Italy or between Israel and Turkey, if such pipelines could become economically feasible. In this context, Turkey does not acknowledge that Cyprus has an Exclusive Economic Zone (EEZ) beyond its twelve-mile territorial limit and has harassed exploration vessels beyond that distance. The Turks also claim that their own EEZ reaches as far south as a line with Egypt, though Cairo has agreed on an EEZ with Cyprus that includes much of this area. Further confusing, as Ahmed Kandil points out “Ankara allows the otherwise unrecognised “Turkish Republic of Northern Cyprus”—where Turkish forces are based—to claim a large EEZ south of the island, extensively overlapping the EEZ claimed by the internationally-recognised Cypriot government. Moreover, Turkey signed a deal with the United Nations (UN)-backed government in Tripoli, Libya on 27 November 2019 demarcating new maritime boundaries between the two countries. The new claimed maritime boundary transects an area claimed by Greece and Cyprus. It runs close to the Greek island of Crete and could jeopardise plans for a gas pipeline to deliver eastern Mediterranean gas to Europe. This deal has stoked tensions between Ankara and European capitals and raised the stakes in an escalating battle for gas resources under the Mediterranean Sea” [10]. These resources could play a significant role in the EU energy policy because natural gas is an intrinsic part of the European Commission (EC)’s Clean Energy for all Europeans Strategy. Specifically, natural gas is considered a bridge fuel that can help in the transition to renewable energy, as gas plants emit 50% less carbon dioxide than coal when burned (European Commission, 2016).

References 1. Tziarras, Z. (2013). Turkey-Egypt: Turkish model, political culture and regional power struggle (SI Research Paper 4/2013) 2. Ozkan, B. (2014). Turkey, Davutoglu and the Idea of Pan-Turkism. Survival, 56(4), 119–120. 3. Soysal, M. (2004). The future of Turkish foreign policy. In L. G. Martin & D. Keridis (Eds.), The future of Turkish foreign policy (p. 41). The MIT Press. 4. Candar, C. (2004). The Turkish Foreign Policy and the War in Iraq. In L. G. Martin & D. Keridis (Eds.), The Future of Turkish Foreign Policy (p. 57). The MIT Press. 5. Davutoglu, A. (2010). Strategic depth: Turkey’s international position, (N. Raptopoulos, Greek Trans) (p. 100). Poiotita Ed. 6. Tziarras, Z. (2020). International politics in the Eastern Mediterranean: Turkey, Cyprus and Cooperation Nets into a “New” Sub-Region (Greek: I diethnis politiki stin Anatoliki Mesogeio). Papazisis Ed., 95, 124–125. 7. Tziarras, Z. (2020). International Politics in the Eastern Mediterranean: Turkey, Cyprus and Cooperation Nets into a “New” Sub-Region (in Greek: I diethnis politiki stin Anatoliki Mesogeio). Papazisis Ed. 99, 101. 8. Davutoglu, A. (2010) Strategic Depth: Turkey’s International Position’, (N. Raptopoulos, Greek Trans). : Poiotita Ed.: 266-267-270, 275 9. Tziarras, Z. International Politics in the Eastern Mediterranean, 108–109

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10. Kandil, A. (2020, September). Geopolitics of gas in the Eastern Mediterranean Region: Is there Light in the End of the Tunnel?’ in S. Colombo, E. Soler i Lecha (Eds) Infrastructures and power in the Middle East and North Africa, EUROMESCO Joint Policy Study 17, European Institute of the Mediterranean, 36

Chapter 11

Eastern Mediterranean Geopolitical Sub-System

“From the imperial powers’ perspective (particularly Great Britain) or superpowers (US, Soviet Union), the EM –as Z. Tziarras argues- was seen as a strategic space, not so much because of its own geo-political or geo-economic importance as such but because of its role in allowing the pursuit of greater strategic interests in the ME and beyond. An area that needed to be secured and controlled in order for something more important to be achieved. By extension, EM has been a space of clashing spheres of influence among great powers, but never before was it seen as a space with its own geopolitical identity that stemmed from the relations and interaction among the countries that constitute it”. Today’s EM has its own importance and value, not anymore as a bridgehead to ME abundance in oil as in early twentieth century, but for its own gas resources [1]. In correlation to this fact, the United States, recognizing the security and economic threats that challenge EM’s own stability, has come to view the region through “a holistic and integrated strategy. . . that will stabilize Europe and shift the regional balance in the ME toward the United States” [2]. In line with this shifting perception, Aristotle Tziampiris views EM as “a regional sub-system with moderate cohesion and economic interdependence that shares a common historical background, high internal and probably lesser external recognition, operates as a kind of border between East and West and has substantial security significance for contemporary international politics” [3]. In EM and the whole MENA insecurity complex, so called ‘new wars’ are multiplying, and the State—this classical bedrock of international order—is declining amidst the interconnectedness of different elements of instability, geopolitical as well as domestic, entangling several international/regional powers and local actors into multi-layered conflicts and extreme fluidity and uncertainty where most issues tend to be securitized, i.e. to be conceived as threats [4]. Data over the last 20 years reveal a staggering decline in the number of inter-state wars and the rise of INTRAstate ones. These are even different from conventional civil wars because of multiplicity of their warring components: religious sects, tribal groups, identity factions, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_11

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different militias, all united against the state. In that sense, the present situation in Libya—which boasts the largest oil reserves in Africa-, concretizes this phenomenon of new wars. Even more, as foreign powers, especially regional ones such as Turkey, Egypt, Saudi Arabia or the UAE and Qatar involve, the multiplicity of actors and factors gets more chaotic, and state authority declines further or disappears. Another spillover of state fragility/failure is the flood of refugees/migrants, now securitized in Europe, i.e. seen as a threat. The same applies to the discovery of new natural gas [5]. “In 1987, the US Army College coined the acronym ‘VUCA’ to describe the context of Volatility, Uncertainty, Complexity and Ambiguity created with the end of the Cold War. Today, there is no more appropriate concept than that to describe the geopolitical situation of the Mediterranean region. The interests of EM’s bordering states cross with unusual activism from the Gulf countries—primarily United Arab Emirates, Saudi Arabia and Qatar—as well as Russia. Libya and the Mediterranean (central and eastern), are the primary theatres in which new alliances are formed in a tangle that has been further complicated by the intertwining of various dynamics taking place in the area” [6].

References 1. Tziarras, Z. The Eastern Mediterranean: Between power struggles and regional aspirations (PCC Report 2/2018). Friedrich Ebert Stiftung-PRIO Cyprus Centre, 14. 2. Alternaman, J. B., et al. (2018). Restoring the Eastern Mediterranean as a US strategic anchor (p. vii). CSIS, Rowman & Littlefield. 3. Tziampiris, A. (2019). The New Eastern Mediterranean as a regional subsystem. In S. N. Litsas & A. Tziampiris (Eds.), The New Eastern Mediterranean: Theory, politics and states in a Volatile Era (p. 24, 26). Springer. 4. In 2014 the MENA region accounted for 15,7% of global conflicts, three times its percentage of the world’s population of 5,2%. 5. Korany, B. (2020, July 17). The Eastern Mediterranean: Decoding the (In)security complex. In A geopolitical sea: The new scramble for the Mediterranean, Guiseppe Dentice, Valeria Talbot, ISPI Dossier, p 5. 6. Marketos, T. N. (2021). Energy Geopolitics Crossovers in Central & Eastern Mediterranean at the Prize of the Energy Union Policy. In Aspects of the Energy Union Application and Effects of European Energy Policies in SE Europe and Eastern Mediterranean, Michalis Mathioulakis Ed. Greek Energy Forum Athens, Greece, Palgrave MacMillan -Energy, Climate and the Environment, p. 48.

Chapter 12

Eastern Mediterranean Regionalism Quest

From 2008 onwards, the security and political order of the EM sub-system, as it was operating since the onset of the Cold War, collapsed due to worsening relations between the two most important regional allies of the US, Turkey and Israel, and continuing turmoil in the Arab world. That order was replaced by a proxy civil war in Syria and Libya, a geopolitical rivalry between Turkey, Israel, Cyprus and Greece, as well as between the West and international actors like Russia, Turkey and Iran, who enthusiastically aspire to review the regional status quo in Western Eurasia in order to increase their influence. In addition, EM is becoming an increasingly important area for the international security system because of its natural resources, as the interests of regional actors interact with major international actors such as the US, France, Germany, the European Union and the North Atlantic Treaty Organization (NATO). In the level of Greek-Turkish relations, and—following the failed opportunity of both countries to refer their disagreement on the delimitation of their respective maritime zones in the Mediterranean in December 2004—as stipulated in the 1999 Helsinki European Council decision granting Turkey the status of an EU candidate state-, the reasons that the focal points of the dispute are shifted from the Aegean Sea to the Lycian Sea (Eastern Mediterranean), according to Professor Ioannis Grigoriadis are as follows: a. the discovery of sizeable natural gas reserves under the seabed of the EM, b. the lack of resolution of the Cyprus Problem, c. Turkey’s increased engagement in Libya’s civil war, and d. domestic political developments in Turkey that led to the adoption of the ‘Blue Homeland’ (Mavi Vatan) doctrine [1]. Meanwhile, growing networks of regional cooperation, the so-called ‘diplomacy of trilateral partnerships’ (or “quasi-alliances”), with Greece and Cyprus as the main initiators, take place in the domain of economy broadly speaking, and that of security and beyond. They are historic significance strategic rapprochements grouping Israel, Greece, Cyprus, Egypt, United Arab Emirates and Bahrain, Lebanon, Jordan and Saudi Arabia (possibly soon followed by Oman). The whole picture is complemented by multiple fields’ geopolitical synergies among France, Greece, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_12

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Cyprus and the General Khalifa Haftar’s forces in eastern Libya. Recently, various acts of rapprochement were manifested by India as well. These are intentional efforts towards a deeper and more integrated cooperation, that could function ambitiously as the prelude to something more institutionalized and official—a form of regionalism—that will have a strong security dimension as well. In fact, one could argue that, collectively, the existing trilateral partnerships constitute a kind of security community as well; a community in which the actors’ “cannot imagine a war among each other” as their relations and interactions are completely de-securitized. The members of a security community often share at least some common threat perceptions [2], as in the case with Israel, Greece, Cyprus and Egypt vis-a-vis Turkey. The EastMed project is useful as a political and diplomatic instrument, although it is obvious that energy is not a primary driver but a means for multilevel cooperation to be enhanced. As a matter of fact, good relations among Eastern Mediterranean countries rely more on common regional challenges and common perceptions of problems with Turkish foreign policy. “As such, although Turkey’s reconciliation with one or more of these countries would not necessarily overturn their relations, it would likely change the character and degree of their cooperation” [3]. As for Turkey, its multi facet alignment with Qatar and its petroleum industry visions for EastMed hydrocarbon deposits exploitation, run parallel to Ankara’s military and sea zones agreements with Libya former Government of National Accord (GNA, Tripoli). Allying itself with GNA, permits Ankara to gamble essentially for the geopolitical control of the Mediterranean. Concretely, Turkish aggressive practices and machinations in Eastern and Central Mediterranean, -in blunt contradiction to International Law of the Sea norms and pretending to defend the rights of its Turkish-Cypriot affiliates in occupied territories of northern Cyprus to exploit under sea hydrocarbon deposits-, are indicative of Turkey policy. In reality, Turkey is instrumentalizing EastMed sub-sea deposits for hiding its nationalistic, imperialist and hegemonic visions labeled ‘Mavi Vatan’ (Blue Homeland), in direct violation of the Republic of Cyprus and Greece’s lawful rights.

References 1. Grigoriadis, I. (2020). The Eastern Mediterranean as an Emerging Crisis Zone: Greece and Cyprus in a volatile Regional Environment. In M. Tanchum (Ed.), Eastern Mediterranean in Unchartered Waters: Perspectives on Emerging Geopolitical Realities, Ankara Konrad Adenauer Stiftung (KAS4Security) (p. 1). Turkey. 2. Buzan, B., & Weaver, O. (2003). Regions and powers: The structure of international security (p. 57). Cambridge University Press. 3. Tziarras, Z. (2021). Energy and Sovereignty in the new geopolitics of the Eastern Mediterranean. The Oxford Institute for Energy Studies, 126, 61.

Chapter 13

Regional and Global Actors’ Involvement in the EM-MENA Region

In the aftermath of the Cold War period, power ordinance in world order was marked by historic dimension transfers. Within less than 20 years, global system has moved from bi-polarism to uni-polarism, and as it is often argued, it heads toward multipolism (S. P. Huntigton)—although uni-multipolism (R. N. Haas) is also discussed. One can argue that in the fluid and uncertain environment of nowadays international system, vacuums of power are permitting to peripheries and states of bigger or smaller caliber to become more important, more extrovert and more dynamic. Those power shifting dynamics in global scale are particularly felt, as far as the ME/EM region is concerned, since 2011 in the Syrian war. As US was in fact retreating military units from Iraq (suffering vulnerability in the aftermath of the ill-fated Iraq War which prompted a reconfiguration of US foreign policy), regional states, -already meshed in internal and ethno-religious shifts in Syria (Iran, Saudi Arabia, Turkey), filled the vacuum. Iran has even achieved to put Iraq in its orbit [1]. This was a major retreat for American strategic influence in the region, which Washington tried to mend through the war in Syria. But in vain, because the resilience of the Damascus regime, Iran and Hezbollah support, combined with Russia’s intervention in its favor, led to partial shrinking of US might in the ME. Russian overtures toward countries like Egypt, Israel, Saudi Arabia etc increase frictions between the American and the Russian spheres of influence. This emerging reality results into, a. rise of medium or less caliber powers to develop more independent foreign policy (Turkey, Iran), b. different states maneuvering between the two major powers, seeking to maximize their benefits—if possible—from both (Israel, Cyprus, Egypt, Turkey, Saudi Arabia), and c. new regional tensions or cooperation procedures to show out, on the basis of new security needs. In this context, regional power sharing through the 2010’s—except for US and Russia-, became disproportional and unstable, clear evidence of a multi-polar regional state of order. Throughout the 2010’s, we witnessed an overlapping of civil and proxy wars in Libya, Syria, Iraq and Yemen that have gradually turned the wider Mediterranean © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_13

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into a land of conflicts, asymmetric threats and geopolitical challenges, that undermined the stability and legitimacy of the old regional system built in the post-Cold War. This upheaval reigning since the Arab Spring is partially influenced by competition between various regional and external players, especially Russia, Turkey and Gulf monarchies. Lately, Turkey has increased its activism in the Mediterranean, becoming a key and assertive player in regional politics and crisis. Monitored by its ‘Lausanne Syndrome’, Ankara has been performing since 2015 a more and more securitized foreign policy, in land [2] as in the sea. Turkey is in fact leveraging its various institutional, economic, and security ties with the West to climb the power ladder of the regional system while embracing illiberalism at home. It aims at extending its geopolitical influence in the ME and its surrounding regions through military power projection, including a significant maritime component. The Turkish navy activates in national defense, as well as in energy geopolitics competition, relying also on the development of an indigenous defense industry. Turkish President Erdogan was at odds with MHP ultranationalist party manned by many secularist army officers, but when the clerical leader Fetullah Gulen followers supposedly tried to depose him in 2016, he made a coalition with it. That move, along with the discovery of energy resources in EM, have given shape to the ‘Blue Homeland’ (Mavi Vatan) doctrine, which combined with the endeavor to establish Turkish naval supremacy in the EM, testimony the clout of anti-Western ultra-nationalist elements -not just in the army- but in the state itself. Indicative is that ‘Blue Homeland’ extends to 462,000 km2, which is more than half of Turkey’s land territory of 783,000 km2. Ankara claims maritime jurisdiction on 89,000 km2 of the Aegean Sea and on 189,000 km2 of the Mediterranean. The Turkey-Russia rapprochement was masterminded by these ultranationalist secularists with strong Eurasianist beliefs, who espouse anti-American and antiNATO views, regarding US as a threat to Turkey’s national security, notably because of Washington support for the Kurds in northern Syria. In Rear Admiral Gurdeniz terms, the ‘Atlantic Structure’ or ‘Front’ (NATO and EU), is using Greece to undermine Turkey’s sovereignty and to confine it to the Gulf of Antalya, leaving it with 41,000 km2 of maritime jurisdiction. As a counter strategy, the ultranationalist officers have devised the ‘Blue Homeland’ dogma and closer cooperation with Russia and China, in order to permit Ankara project power and establish supremacy in the EM, so that to offset imperialist designs against Turkey. As Cengiz Candar stipulates, ‘The progenitor of Blue Homeland argues that the demise of the Ottoman Empire at the end of the First World War was ultimately the consequence of its inability to establish itself as a maritime power. In Cem Gurdeniz’s reading of history, the Treaty of Serves in 1920—which partitioned what was left of the defeated Ottoman Empire, leaving 120,000 km2 for a rump Turkish state in north and central Anatolia that would have only a 600 km Black Sea coastline, and no access to either the Aegean or the Mediterranean-, could be imposed because the Ottoman Empire had never been a maritime power [115]. These officers claim that the ‘Blue Homeland’ is not a merely maritime doctrine, but also a blueprint for national liberation, a sacrosanct national doctrine, at equal par with the National

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Covenant of 1920 that delineated the borders of the Turkish homeland that was to be liberated in the Turkish War of Independence (1919–1922) that followed. Ankara’s expansionist policy aims to de facto annulment of the EastMed pipeline project, agreed in early January 2020 by Israel, Cyprus and Greece. Revisionist Turkish pretentions expressed through aggressive navy practices, combined with Qatar natural gas exports to EU markets revenue loses -in case that this project comes to reality-, reveal Turkish true strategy. Turkey, may be ‘thirsty’ for natural gas for advancing its climate friendly energy transition, but very costly hydrocarbon exploitation in the huge depths of the Eastern Mediterranean, contradict free from geopolitical animosities Turkey’s newly discovered gas deposits in the Black Sea and, no doubt, imports from Azerbaijan and Russia [3]. Turkish imperialism also directly affects shipping lanes and energy markets, harassing trade and hydrocarbons transportation in the Suez Canal, Bosporus, Gibraltar, Bad el Manteb and Hormuz straits, thus damaging European (Western in general) interests in the Eastern Mediterranean. We are indeed witnessing a great powers’ change in the patterns of maritime power projection in the wider Mediterranean region. Russian navy is back, seeking to ensure sufficient naval presence on a permanent basis, and expand cruise passage from the Crimean ports and the Krasnodar region to the countries of the Mediterranean basin. The Kremlin pursuits an hegemon role, affirmed by its naval platforms deployment and participation in the Syrian civil war. It also expanded its naval facility in Tartus (Syria), making apparent that Russia is seeking securing access to the warm waters of the Eastern Mediterranean and to global shipping lanes. Moscow’s agreement with Nicosia to allow access of its navy to Cypriot ports (2015)—including other aspects of military cooperation-, aspire to insuring the same cause. No doubt, Russian entry into EM has become possible by covering the vacuum created by the semi retreat of the American navy from the region. Thus Russia is willingly collaborating with Turkey against the entry of EastMed gas to European markets, which will surely deprive her of supremacy there. China also seeks greater role in the Mediterranean, seeking to include Greece, Italy and Turkey in ‘Belt and Road’ Initiative (OBOR) both in its terrestrial and maritime facets. This scheme may be mostly focused to port facilities (majority stocks and operating rights in Piraeus, Ambarli in Istanbul, Suez Canal corridor, Haifa, Cyprus and Lebanon), although Chinese ships visiting and bilateral training and exercises conducting in the area, as well as military presence in the Horn of Africa, probably, foreshadows aggressive presence in the Mediterranean too. In light of such breathtaking developments, the EU member states are divided visa-vis Turkish policies; Italy, Spain and Malta are restrained due to bilateral military and economic deals with Ankara. As for Germany, having business and military armament interests invested in Turkey (as well as numerous double citizenship electoral clientele domestically), she tries to mediate between Ankara, Athens and Nicosia, being overtly threatened by Turkey with a new migrants ‘invasion’ in EU. Nevertheless, Europe seem to slowly evolve to a geopolitically acting entity,

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setting long term geostrategic goals, -a process likely to accelerate in the aftermath of 2022 German elections. France, in particular, is vexed by Turkish hegemonic moves in Levante and North Africa. Paris geopolitical interests in the region and cultural opposition to radical Islam directives professed by the Erdogan regime, drive these two countries in geopolitical collision. Erdogan aspiration for leadership among Sunni Muslims word wide, and expressed wish to defend supposedly oppressed ones in European states, collide with the French President Macron’s will to subdue Islam institutions to state control. Ironically enough, that was the exact purpose serving the Ataturk policy toward Turkish Islam in the 1930’s. The policy conflict between Turkey and France has religious, ideological and identity overtones, and features the battle between pro-Islamist and anti-Islamist forces. Ankara supports extremist Islamist factions as GNA in Libya, Hamas in Lebanon and Muslim Brotherhood movement in Egypt and elsewhere and bitterly strikes Kurdish forces fighting against the Islamic State (ISIS) in northern Syria. France has banned the Turkish far right nationalist ‘Grey Wolves’ movement in its territory, while standing firmly against Islamism, fearing her culturally divided society’s ‘explosion’. Evidently, the Turkish-French confrontation lies in the framework of the global power shift and the rise of emergent, middle-powers like Turkey and Russia, takes a revisionist stand towards the status quo ante by questioning the European centric order. These powers, use provocative moves and unilateralism, tipping the balance of power on the ground in their favor (proxy wars in Syria, Libya and Nagorno-Karabakh), and creating a new geopolitical reality that challenges the current order and generally does not accommodate Western interests. In this battle, France acts as a defender of European leadership, in particular in the Mediterranean [4]. Same views are shared by Israel, coming to realize that it is Turkey the real threat not Iran, as it seeks to assume the leadership of the Muslim world and revive the Ottoman Empire, possibly in geo-economic terms. Erdogan’s pro-Islamist policy in Syria and Libya and the military support he offers to the Muslim Brotherhood forces there -even employing Syrian Jihadists-, has also alarmed Egypt and the UAE. Both countries consider the Turkish interventionism in regional conflicts in pursuit of Ankara’s geopolitical interests in the Eastern Mediterranean and the Red Sea, as an existential threat to their international strategies. As a matter of fact, Turkey military incursion in northern Syria, purchase of Russian arms, its military bases in Qatar and Somalia, as well as its goal to establish ones in Libya along with the Turkish military base in Albania, mark a decisive move toward hegemony establishment in western Eurasia (Magreb, Sahel, and West Africa) and steadfast inclination toward independent of NATO’s goals foreign policy. Ankara, considering the revision of the Lausanne Treaty as integral part of its political ambitions, foreshadows the creation—with the help of Turkic post Soviet states in Central Asia-, of an inter-space between wider West and China. Turkey uses a policy animated by identity/ideology and sea zone delimitation as a stepping stone for regional hegemony, by imposing a new geopolitical reality in the southern flank of Europe. Moreover, Ankara aspires for herself a global caliber role:

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one of mediating between the wider West and China as a separate pole in the emerging international environment of the twenty-first century.

References 1. Fawcett, L. (2013). The Iraq War ten years on: Assessing the Fallout. International Affairs, 89(2). 2. One should take in account the tendency –more and more evident- to move away from the Columbian era superiority of maritime power based mobility, to land based mobility of economic, energy and digital transportation via oil and gas pipelines, which increases the salience of Central Asia’s stability and integration, -according to Mackinder’s theory- a heartland region in the confines of Europe and Asia. Turkey aspires to utilize its geostrategic positioning in order to play central role in this new world configuration as an inter-space between China and Europe. 3. Marketos, T. N. (2021, January). Geopolitical alliances in the making in the Eastern Mediterranean Region. Foreign Affairs Institute, FAINST, www.fainst.eu), p. 3 4. Candar, C. (2020, August 26). Turkey’s Blue Homeland Doctrine: Signaling Perpetual Conflict in the Mediterranean and Rough Waters Ahead. Central Asia-Caucasus Institute (CASI), Silk Road Studies Program, The Turkey Analyst, p. 2.

Chapter 14

Erdogan, Sisi and the Fate of Egyptian-Turkish Relations

The above mentioned new Turkish foreign policy was formulated in 2014. Ankara, watching the establishment of a hostile, anti-Muslim Brotherhood movement government in Cairo, the launching of a military campaign by General Khalifa Haftar in Libya backed by French, Egyptian and Emirati forces, the Iranian-Hezbollah military built-up in neighboring Syria, the release of Russia’s military intervention there (2015), and—most importantly—US military partnership with Syria’s Kurdish ‘People’s Protection Units’ forces—considered as Kurdistan Workers Party (PKK) terrorist organization branch-, felt isolated from its NATO allies and its non-NATO Mediterranean neighbors. Turkey inaugurated a new regional strategy, one that opts for the use of hard power in the Mediterranean and the Middle East, and turned to Qatar as its main strategic partner. By 2016, Ankara established a military base in Qatar, initiated a forward bases program, and decided to work on maintaining a large military presence in Libya. After the failed coup attempt against the government of Recep Tayyip Erdogan (July 2016), and absence of robust US and NATO allies response to it, Turkey asserted its resolve to become an independent regional power. Ankara inaugurated a military base in Mogadishu (Somalia), wishing to establish itself in the sea lines of communication crossing the Eastern Mediterranean-Red Sea corridor. Turkey’s largest training facility outside Anatolia, positions Ankara close to the Gulf of Aden, critical for activating of the Turkey-Qatar partnership. This strategy has not passed unnoticed from all states in the wider Middle East region. As Nicholas Danforth remarks, in “the new contours and fault lines of the Middle East that have emerged in the wake of the ‘Arab Spring’. . ., Turkey’s estrangement from its NATO allies has coincided with a newfound alignment between status quo powers in the region, including Egypt, Israel, Saudi Arabia and the United Arab Emirates (UAE). These countries – brought together by their opposition to Iranian influence and Muslim Brotherhood-aligned actors alike – all enjoy close relations with Washington, even as they have maintained, or sought to develop, pragmatic ties with states such as Russia and Syria. Moreover, they © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_14

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continue to see Turkey as a threat, even as they have more recently sought to reconcile with Turkey’s regional partner, Qatar. Erdogan, in turn, has ever more forcefully cast Turkey in opposition to the regional status quo, both by presenting himself as a champion of the region’s downtrodden and repeatedly flirting with irredentism in his own rhetoric. By throwing his support behind non-state Islamist actors such as Hayat Tahrir al-Sham and Hamas, as well deploying Turkey’s military across its borders” [1], Turkish pro-Islamist policy irritated Egyptian President Sisi, and gained the latter crucial financial support by Saudi Arabia and UAE as he consolidated power. Egypt, Saudi Arabia and UAE were drawing closer together in response to their concern over: a. Iran’s role in the region, b. Assad regime gaining ground in Syria, c. Iranian backed militias helping push back ISIS in Iraq, and, d. US President Trump withdrawal from the Iran nuclear deal (JCPOA, 2015). As a result, Turkey quickly found itself confronting not merely a single hostile regime in Cairo, but an entire interconnected network of hostile governments stretching from the Mediterranean to the Gulf [2]. Meanwhile, Ergogan and Sisi duel was intensified as Turkey sought to cultivate ties with the UN recognized—although Islamist oriented—Government of National Accord (GNA) in Tripoli. Turkey sought to continue—amidst the chaos of war torn Libya-, the profitable economic interactions it shared with the Qaddafi regime. In 2014 Egypt joined Russia and the UAE in their support to Field Marshal Khalifa Haftar and his forces in Cyrenaica (Tobruk). Egypt saw Haftar as her best hope for stabilizing the country under the control of a friendly regime, thereby sidelining Islamist actors, preventing security threats from terrorists and militias and helping ensure Cairo a profit share from Libya’s energy sector. In the wake of Haftar’s spring 2019 campaign to seize Tripoli, Turkey assisted militarily GNA by sending advisors, special-forces and drones, in return for signing a mutual EEZ demarcation accord, expanding its EEZ dramatically against Greece’s lawful rights according to the International Law of the Sea treaty (UNCLOS). Turkey’s purpose in declaring common maritime border with Libya, was to pressure the International Community and revering Mediterranean countries for an equitable settlement of the regional maritime boundaries, so that to avoid that joint Hellenic and Egyptian navies’ action forms a maritime ‘cordon sanitaire’—from the outer islands of the Dodecanese (Rhodes, Karpathos and Kasos) to Crete and the North Africa Eastern Libya/Western Egypt border-, that could nye Turkey’s access to the Mediterranean [3]. That is the reason why Ankara maintains considerable air force presence and is developing naval presence in the GNA stronghold of Misrata (Libya) and supports by all means—Islamist mercenaries included—the GNA fraction in Tripoli. By applying the “Blue Homeland” dogma, Ankara is practicing a new strategic doctrine which consists of using hard power to secure consideration of Turkish interests. Thus Ankara wishes not only deprive Egypt and the UAE of a proxy victory in Libya, but also thwart efforts to exclude Turkey and the Turkish Cypriots from participation in the region’s new natural gas architecture [4]. It is clear that Turkey—considered some years ago as the Arab world model country for combining

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economic liberalization, pro-Western democracy, and Islamic values-, rather than working on for a clean and quick divorce from the West, “is leveraging its various institutional, economic, and security ties with the West to climb the power ladder of the regional system while embracing illiberalism at home. . . Turkey seeks to become a great power able to negotiate on equal terms with the rest of the great powers and, whenever possible, impose its will by resorting to ‘faites accoplis’. Τo maximize its stature, Turkey has invested in its national security apparatus and military-projection capabilities while also ramping up its global soft power in everything including entertainment, religion, and commerce” [5]. As Ankara advances its activities in Africa, the rivalry between Turkey and the France-UAE-Egypt entente is set to become entrenched as one of the main drivers of Afro-Eurasian geopolitics. “All in all, Erdogan’s agenda encompasses much more than mere defense and survival. His ultimate goal is to alter the geopolitical status quo in ways he believes benefit Turkey. In this sense, Turkey is now a revisionist state: It embarks upon military interventions and seeks to control foreign territory, as in Syria and Iraq; challenges land borders and maritime boundaries, as with Cyprus and Greece; engages in demographic engineering and political interference, as in Syria and Northern Cyprus; maintains bases overseas as in Somalia and Qatar; and galvanizes dependent proxies, as in Libya, northern Syria, and Nagorno-Karabakh” [6].

References 1. Danforth, N. (2021, January). A Mediterranean Duel: Erdogan, Sisi and the Fate of the EgyptianTurkish Relations. Hellenic Foundation for European and Foreign Policy (ELIAMEP) Turkey Programme, #53/2021: 3. 2. Jabbour, J. (2021, May 6). France vs. Turkey in the EastMed: A Geopolitical Rivalry between a “keeper” of the Old Order and the Challenging Emergent Power. IFRI, Turkey and Middle East Program, 2, 5, 9. 3. Tziarras, Z., & Harchaoui, J. (2021). What Ergogan Really Wants in the Eastern Mediterranean: Turkey’s adventures abroad are about more than hydrocarbons. They’re a bold and expensive attempt at geopolitical revisionism. Foreign Policy, January 19, 2021: 2. 4. Danforth, N. (2021, January). A Mediterranean Duel: Erdogan, Sisi and the fate of EgyptianTurkish Relations. ELIAMEP Policy Paper #53/2021, p. 6 5. Tanchum, M. (2021). The Geopolitics of the Eastern Mediterranean Crisis: A Regional System Perspective on the Mediterranean new Great Game. In: Eastern Mediterranean in Unchartered Waters: Perspectives on Emerging Geopolitical Realities, Konrad Adenauer Stiftung, #KAS4SECURITY, M. Tanchum Ed. p. 13. 6. Danforth, N. (2021, January). A Mediterranean Duel: Erdogan, Sisi and the fate of EgyptianTurkish Relations. ELIAMEP Policy Paper #53/2021, p. 7.

Chapter 15

The New ‘Great Game’

As Z. Tziarras and J. Harchaoui argue, “The revisionist undercurrents of Erdogan’s worldview indicate than the Eastern Mediterranean crisis is not primarily about natural gas but decades-old sovereignty issues—infused with old and new geopolitical ambitions alike. Material gain has motivated Turkey’s expansionism, but it is also animated by identity and ideology considerations. Actually, Turkey’s current approach to underwater exploration in the Eastern Mediterranean offers a low probability of commercial discovery; no hydrocarbons have been found off of Libya and Greece thus far, and Turkey’s attempts off of Cyprus have proved unsuccessful. Therefore, Turkey uses its sea zone delimitation revisionist plan as a stepping stone for acquiring more influence in the Maghreb, the Sahel, and West Africa [1]. M. Tanchum affirms this by arguing that “. . .the Mediterranean basin is a regional system and the inter-linkage of Eastern Mediterranean flashpoints is increasingly becoming a context over the reordering of power relations across that system. The Mediterranean basin system, moreover, forms the hub of an emerging architecture of inter-regional connectivity so that the Eastern Mediterranean conflicts and the reordering of Mediterranean power relations are now intertwined with a new ‘Great Game’—an intense and complex competition over the nexus of transMediterranean trade routes, energy transit routes, and industrial manufacturing value chains that connect Europe and the MENA (Middle East-North Africa) region” [2]. In this new ‘Great Game’, the principal actors are Turkey, Egypt, France, and Italy, with the latter, defining its strategic priorities with the term ‘il Mediterraneo Allargato’ (wider Mediterranean), stretching from the Balkans to the Sahel, to the Horn of Africa. Rome has achieved compartmentalizing its eastern Mediterranean interests, and has had “a more distant alignment with Turkey based on a confluence of interests in Libya as well as in the central Maghreb states of Algeria and Tunisia” [3]. Indicative in that sense is the absence of Rome in the signing ceremony of the EastMed pipeline project (2019). However, Italy’s largest company by revenue, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_15

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ENI’s drive to expand its market share across the MENA—following its Egypt massive Zohr natural gas field discovery in 2015-, has shaped the parameters of Italy’s foreign policy orientation [4]. ENI—being the lead operator in Cyprus’s natural gas development-, promoted the pooling of Egyptian, Cypriot and Israeli gas and transfer to Egypt’s liquefaction plants—where the company is the leading stake holder-, to cost effectively market the region’s gas to Europe as liquefied natural gas (LNG) by leaving Turkey off the picture. M. Tanchum stipulates thereon that: “The supralocal agendas, on the part of the Mediterranean actors. . .are increasingly superseding the specifically local grievances that originally gave rise to the Turkey-Greece maritime boundary dispute, the Cyprus problem, and the Libya conflict. The role played by Eastern Mediterranean offshore energy in the interlinking of these conflicts illustrates the transformative impact of these supralocal agendas in shaping the Eastern Mediterranean. At the same time, the Eastern Mediterranean’s three interlinked conflicts now have become a central arena in the Great Game to reorder Mediterranean power relations and the pattern of trans-Mediterranean connectivity” [5]. Egypt, Turkey, France, and Italy involvement in the Libyan civil proxy war has now expanded to EM’s waters between Turkey, Greece, and Cyprus. Trans-Mediterranean connectivity refers mainly to the peculiar cooperation established between Rome and Ankara—a geopolitical symbiosis, as M. Tanchum stipulates [6], aiming to the creation of a Turkey-Italy-Tunisia transportation corridor, an arc of commercial axis from the Maghreb to the wider Black Sea. This central hub project lies in Italy’s deep-sea port of Taranto, is located on the southern tip of the Italian peninsula, in the strategic heart of the Mediterranean Sea, and is managed by the Turkish port operator Yilport. The arc Taranto-Tunisia segment serves simultaneously as a core link of the corridor Europe-to-Africa transport route by connecting North Africa’s coast to the manufacturing centers of Italy, Germany and Northern Europe via Italy and Europe’s high-speed rail systems. From Tunisia’s ports, the corridor can link via Algeria to the Trans-Saharan Highway, potentially extending Italy and Turkey’s Europe-to-Africa corridor southward into West Africa as far as Lagos, Nigeria. This Italy-Turkey alignment—incorporating Tunisia and Malta-, marks Italy’s rebalancing toward the wider Mediterranean basin—a geopolitical continuum termed ‘il Mediterraneo allargato’ (the enlarged Mediterranean)-, where Rome has exerted its strategic autonomy, particularly in its pivot to Africa, to challenge France’s dominance in Africa. Thus, a new strategic paradigm for Mediterranean geopolitics—formulated by the Maghreb and the Horn of Africa on one side and the Balkans and Middle East on the other—is created, very accurately now augmented by the entrenchment of Turkish hard power in Libya. Turkey’s drive refers in developing inter-regional connectivity in the roughly overlapping geographical space defined by the territories of the former Ottoman Empire. Worth mentioning is that Italy has long been among the strongest advocates of closer EU-Turkey relations. We are witnessing thus a compartmentalization of policies between Italy and Turkey, given that these are at odds concerning Cypriot offshore natural gas development.

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References 1. Tziarras, Z., Harchaoui, J. (2021, January 19). What Erdogan Really Wants in the Eastern Mediterranean. Foreign Policy, p. 2. 2. Tanchum, M. (2021). The Geopolitics of the Eastern Mediterranean Crisis: A Regional System Perspective on the Mediterranean new Great Game. In Eastern Mediterranean in Unchartered Waters: Perspectives on Emerging Geopolitical Realities, Konrad Adenauer Stiftung, #KAS4SECURITY, M. Tanchum Ed., p. 14. 3. Tanchum, M. (2020). ‘Morocco’s Africa-to-Europe Commervial Corridor: Gatekeeper of an emerging trans-regional strategic architecture”, AIES Focus 8/2020, Austrian Institute for European and Security Policy (AIES) 8 July 2020; Michael Tanchum, ‘Italy and Turkey’s Europe-to-Africa Commercial Corridor: Rome and Ankara’s Geopolitical Symbiosis is Creating a New Mediterranean Strategic Paradigm’, AIES Focus 10/2020, Austrian Institute for European and Security Policy (AIES) 25 August 2020. 4. Tanchum, M. (2020, August 25). Italy and Turkey’s Europe-to-Africa Commercial Corridor: Rome and Ankara’s Geopolitical Symbiosis Is Creating a New Mediterranean Strategic Paradigm (AIES Focus 10/2020). Austrian Institute for European and Security Policy (AIES), p. 1 5. Villa, M. (2016, May 30). In for the Long Haul: Italy’s energy interests in Northern Africa. Instituto Per Gli Studi Di Politica Internationale (ISPI). 6. Tanchum, M. (2021). The Geopolitics of the Eastern Mediterranean Crisis. p. 8.

Chapter 16

Two Opposing Geostrategic Blocks for the Prize of Euro-Africa Trans-Mediterranean Trade and Energy Connection

Despite Italy’s proximity to the North African coast, France remains the dominant foreign policy actor in the Maghreb. Notwithstanding Rome’s heavily state influenced company ENI leading role in the development of Egypt’s natural gas industry, Italy’s economic relations in North Africa and the rest of Africa are constrained by France’s outsized influence on the pattern of Afro-Mediterranean commercial connectivity. Italy’s influence is constrained by France’s strong security relationship with Cairo, as Paris is Egypt’s third largest weapons supplier and maintains a naval base on the coast of Egypt’s close strategic partner, the United Arab Emirates. Paris was engaged in covered cooperation with Egypt and the UAE to support General Khalifa Haftar’s forces in eastern Libya against the western Libyan Government of national Accord (GNA) supported by Italy and Turkey, before the early 2021 creation of Libyan interim government. M. Tanchum argues thereon that “The Franco-Emirati-Egyptian partnership was put on prominent display in late August 2020, with concurrent Franco-Emirati-Greek joint air force exercises and Franco-Egyptian-Greek joint naval exercises, in support of Greece in its eastern Mediterranean stand-off with Turkey”. M. Tanchum adds that “Turkey’s ability to establish its own inter-regional commercial connectivity via North Africa is stymied in the western Mediterranean by Morocco and in eastern Mediterranean by Egypt –both of whom share deep economic and military ties with France and the UAE”. Adding that “Turkey’s overt military intervention during the first half of 2020 to preserve Libya’s GNA has created an important strategic beachhead for Turkey in the central Maghreb” though witch Ankara “has cemented its status as a major power in North Africa”, translated in regional clout in Tunisia and Algeria by means of air and naval forces stationed in Libya [1]. Combined with the trilateral energy interconnectivity that Italy has actively promoted with Algeria and Tunisia (TransMed natural gas pipeline and electric grids), Turkey’s major ports on the Aegean connection to Taranto (Italy) and to Malta and Biserte and Sfax in Tunisia, form a north-south axis corridor connecting © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_16

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North Africa to major manufacturing and commercial centers of Europe. “By interconnecting the EU’s Scandinavian-Mediterranean Corridor with Africa’s Algeria-to-Nigeria Trans-Saharan Highway, the Turkey-Italy-Tunisia corridor potentially forms the vital link for the creation of a mega-corridor spanning Europe and Africa from 60o N. latitude to 6o N. latitude”. Assorted by sizable investments in Tunisia by Turkey’s strategic partner Qatar, “Italy and Turkey have achieved a paradigm shift in Mediterranean geopolitics that is reshaping the contours of NATO’s and the European Union’s strategic agenda” [1]. Italy’s and Turkey’s synergy achievements notwithstanding, “the key geopolitical formation in the Mediterranean’s Great Game is the partnership between France and Egypt to oppose the expansion of Turkish influence on the shores of the southern Mediterranean and adjacent regions of sub-Saharan Africa. . . . The Franco-Egyptian partnership also serves as a platform for the UAE in its systemic competition with Turkey and Qatar. France maintains a naval base in the UAE while Abu Dhabi engages close security cooperation with both France and Egypt in Africa. The three countries collectively maintain seven naval bases along the entire Red Sea approach to the EM on the Red Sea’s African coast. The UAE is the foremost backer of Khalifa Haftar in eastern Libya and has been working steadily over the past five years to develop partnerships with non-Arab regional actors in the Eastern Mediterranean –Greece, Cyprus, and Israel” [2]. Hellenic countries cooperate closely with UAE: Nicosia has awarded two concession agreements to the UAE marine terminals operator, DP World, in Cyprus’s Limassol port, while Emirati air force has participated in 2017 and 2019 Greece’s Iniochos multi-national exercise, and mostly important, Greece signed partnership and defense agreements with the United Arab Emirates (2020). Equally important is the 2015 status of forces agreement (SOFA) that Tel Aviv has signed with Athens (first such agreement Israel has signed with any other country besides US), and the August 2020 UAE-Israel relations normalization treaty. These two 2020 Israel/Greece-UAE agreements mark the full entrance of the UAE into the broad Eastern Mediterranean alignment. Moreover, USA, Italy and UAE participation in Iniochos 2017 military exercise in Greece, explicitly shows that NATO is no longer an even-handed broker in the EM but acts to contain Turkish power in the region, and that Italy –notwithstanding its commonalities with Turkey on Libya-, could potentially support Greece and Cyprus [1]. Noteworthy mentioning is that although Turkey’s 2020 intervention preserved the Tripoli based GNA government -on whose territory almost all of Italy’s considerable energy assets are concentrated-, Turkey’s outsized military presence has rendered Italy’s vital economic interests vulnerable to Ankara’s dictates. Turkey starts to leverage its status as Tripoli’s security guarantor to obtain contracts in Libya’s energy sector and infrastructure development. In fact Rome—already since 2018 closer to France so as to mitigate risk to its energy interests in Cyprus from Turkish interference-, is on the verge of shifting away from Turkey toward a Mediterranean-wide strategic partnership with France and Egypt. Turkey’s military power moves in EM and Libya seem to have changed the strategic calculus in both Paris and Rome, providing momentum for a comprehensive Franco-Italian

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rapprochement [2]. M. Tanchum hereby concludes that, if this trend leads to “equitable solutions to the Greek-Turkey maritime boundary dispute, the Cyprus problem, and the Libya conflict, rooted both in the rule of law and realpolitik”, one could acquiesce “a reset for the EU-Turkey relations as well as for the future of EU-MENA cooperation” [3].

References 1. Tanchum, M. Italy and Turkey’s Europe-to-Africa Commercial Corridor. p. 1. 2. Tanchum, M. Italy and Turkey’s Europe-to-Africa Commercial Corridor. p. 2. 3. Tanchum, M. Italy and Turkey’s Europe-to-Africa Commercial Corridor. pp. 3–4.

Chapter 17

Greek Foreign Policy Changing Geometry and the Re-Definition of the West

This strategic dictum led the Hellenic Republic to host in Athens (11.02.2021) an important foreign ministerial summit of EU and Arab states (Egypt, Saudi Arabia, the United Arab Emirates (UAE), Bahrain, France, Greece and the Republic of Cyprus), named ‘Philia (Friendship) Forum’ (Fig. 17.1), a capstone to Athens’ extraordinary series of diplomatic achievements in the Middle East and North Africa (MENA) region throughout 2020 [1]. Issues concerning common interests and concerns related to sovereignty, territorial integrity, non-interference and freedom of navigation were discussed, all explicitly referred to International Law, UN Security Council Resolutions and the United Nations Convention on the Law of the Sea (UNCLOS). Participants, including France, reiterated their will to put in place result oriented exchanges, joint actions and initiatives in the fields of energy, innovation, digital economy and civil protection. The EastMed crisis with Turkey, the ambivalent end of the Qatar crisis and the clear and present danger of offshore security in regional maritime waters (East Med, Suez Canal and Red Sea), are the main issues in the region. Accessibility and freedom of navigation are the topics upon which regional actors economic plans depend on. While more than 80 percent of global trade and commodities is maritime bound, for most ‘Philia Forum’ countries these alignments constitute a lifeline, not only for oil, gas or commodities exports, but also for mere survival, as the region is more than 80% dependent for food and feedstock imports. The ‘Clash of Civilizations’ Samuel Huntington theory precluded twenty years ago the possibility of a direct Europe-Arab World confrontation. Such an option now seems to shift with the emergence of new global and regional powers, eager to fill the political vacuum of United States retrenchment from the region. Joe Biden, newly elected United States President, solemnly declares that “America is back” in the Euro-Atlantic chessboard, though Turkey’s geopolitical and military power projections, US-Russia rivalry, Russia’s return in the Mediterranean as a strong power player, and China’s ‘One Belt One Road’ initiative -as for now only interested in business prone new alliances-, are changing the region’s set-up. Containing the © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_17

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Fig. 17.1 “Philia Forum” participating countries, Athens, 11.02.2021

twenty-first century new land power, China, from dominating Eurasia’s Rimland from the South China Sea, along the Indian Ocean, to the Mediterranean, seems to be the West new world strategy [2]. ‘Philia Forum’s’ declared aim is to emerge as supra-regional cooperation tool on economic, security and politics issues, at a moment when South East Europe, East Med sub-region and Gulf States Council (GSC) are involved in expanding maritime logistics and energy integration, as a post Covid-19 pandemic strategy. Hopefully, Israel will soon cooperate on maritime and security issues with its GCC counterparts in application of the Abraham Agreements (2020). Washington is determined to limit Ankara’s power projection from Northern Cyprus to Qatar, a feature that changes the security architecture of the ME. In response, Ankara opts for cooperating closely with Beijing within the OBOR scheme. In addition to Moscow’s reactivation in the Eastern Mediterranean and the West Balkans, NATO’s role in the multi-polar new global power system has to be crucially re-invented. Thus, a Europe-Middle East security diplomacy network could be a new bridge between EU/NATO and the Arab World, at a moment when China and Russia are steadily power building in NATO’s backyard and even soft belly. In that sense, the US sponsored relations normalization agreements (“Abraham Accords”) between Israel and two Gulf states, UAE and Bahrain (2020) -all three preoccupied by Islamist movements rise and Turkey/Iran expansionist foreign policy-, have encouraged the emergence of India, Israel and the United Arab Emirates geostrategic alliance. Turkey’s support to Pakistan as security partner and arms supplier, urged India looking to the Eastern Mediterranean and Gulf to counter Turkish influence through cooperation with Ankara’s main opponents, Greece and the UAE. Israel alignment with UAE and India to counter Islamist

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movements and powers and Turkey-led Muslim order and defending state sovereignty, may evolve into establishing an Indo-Abrahamic strategic dialogue, particularly as Saudi Arabia seems to consider this grouping as a strategic opportunity. Greece has asked for a trilateral India and UAE dialogue, which could include Israel given Athens strategic relation to Tel Aviv. Furthermore, an Indo-Abrahamic strategic grouping could provide the US a gap covering solution due to Washington’s leaving the Middle East, and connecting this grouping with the emerging US IndoPacific strategy. Greece, has demonstrated in the height of Turkey August 2020 bellicose maneuvers, an impressive outreach to MENA, when the Egyptian Navy and the UAE Air Force conducted concurrent joint exercises with the Hellenic Navy and Air Force as a support sign for Greece. Michael Tanchum argues that “Greece's ability to transform itself from a transit state into a leader of trans-Mediterranean connectivity. . ., crucially depends on how Greece manages its set of foreign partnerships, particularly Athens' ability to substantially participate in East Africa-to-Europe and Middle Eastto-Europe manufacturing value chains. Utilizing opportunities presented by its developing innovation economy, Greece can anchor itself in the East Africa-toEurope and Middle East-to-Europe corridors through the establishment of production facilities with its new partners. The extent to which Greece succeeds at industrial value chain integration will determine its role in the emerging trans-regional commercial architecture, and with it, Greece's strategic standing within the European Union (EU) and in the MENA region” [1]. Hellenic commercial cooperation with Egypt forms the core of its transMediterranean connectivity. The relationship evolved rapidly since 2014 in face of shared concerns about Turkey increasing tendency toward ‘coercive diplomacy’ in EM. Cairo, Athens and Nicosia convened eight summits that fostered a deepening strategic cooperation in both security and economic matters, culminated by the August 2020 EEZ Egypt-Greece maritime boundary agreement. Egypt, thanks to its large offshore natural gas deposits and smart energy policies, has achieved natural gas self-efficiency in 2019 and has become a net energy exporter. Combined with massive investment in renewable energy power generation, Egypt is on the threshold of becoming both a natural gas and electricity export hub— a development which potentially could radically reconfigure the pattern of energy connectivity between Europe, Africa, and the Middle East. Greece is continental Europe’s landfall for the 2-GW capacity Euro-Africa electricity interconnector (compared to Italy’s one link to Algeria and Tunisia of only 0,6 GW), that will reach mainland Greece from Egypt via Cyprus and Crete. Hellenic Republic will thus shortly form integral part of Egypt’s energy connectivity network. Mainland Greece will equally receive another 2-GW from the Euro-Asia Interconnector grid coming from Israel through Cyprus. These European Commission founded projects, along with Greece’s own advances in renewable energy power production, will foster Athens brighter future in the energy geopolitics of South East Europe. Egypt and Greece are also working on projects of commercial port connectivity, combined with rail connectivity projects from East Africa to Egypt, and COSCO’s freight rail service from Piraeus through the Balkans to major markets and

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manufacturing centers in Austria, the Czech Republic, Germany, and Poland. Provided that these projects materialize, Greece could be the nexus of a multi-modal East Africa to Eastern/Central Europe corridor via the Eastern Mediterranean, in condition that Athens anchors its position in manufacturing value chains so that to become not just a transit state but a trans-Mediterranean power [3]. Hellas commercial relations, paralleled with deepening cooperation in the field of defense with Egypt, Israel, the UAE, and Saudi Arabia, provide Athens a measure of autonomy in defense matters that enables it to approach its European partners in a less dependent manner. This is crucial for Greece in light of the fact that the most geopolitically turbulent areas in the South/Southeast proximity of the European Union, all share a common historical-political contact point and denominator: all were territories of the former Ottoman Empire. The three recent circumstances that have given Turkey its renewed political relevance—Ankara’s resurgence, migrants/ refugees issue, and natural gas findings in EM as a disputed energy resource-, need to steager EU and NATO to obtain a clear understanding of the specificity of this region and to approach it not in the Euro-Atlantic cultural logic and strategic thinking, but from a regional point of view. Partly due to this European Union fragile historical and geopolitical knowledge, inconsistent expectations were created for too long regarding the state heir to a powerful empire—Turkey. Powered with strong historical, cultural and political identity and facing conflicts around its borders, Turkey cannot simply be absorbed by the EU. The resurgence of its past—albeit in other forms-, has given rise to a new “Eastern Question” in the twenty-first century [4]. In this context, the Hellenic Republic is constructing a new geopolitical identity as a bulwark of the West in the Eastern Mediterranean. This means that the country will assume new responsibilities within the framework of NATO/EU planning as far as regional security issues are concerned. Thus Greece steadily becomes a security provider that will protect Western interests in a perennially volatile region [5]. One that faces a paradigm shift with new geopolitical configurations arising. The whole range of these developments mark the transformation of the Eastern Mediterranean region into a strategic hub lying between the EU and the Red Sea. The designation of the Indian Ocean as the strategic epicenter of the geopolitical rivalry between US and China, illustrates clearly the importance of this evolution. Within the context of this wide area new geopolitical configurations, Athens has achieved the signing of two important defense agreements: one with France witch substantially reinforces the Hellenic Navy with a FDI type frigates sale, and includes a mutual defense assistance clause in case of third party—including NATO member state—assault (Paris, 28.09.2021). The other with USA extends by 5 years the two parties mutual defense cooperation agreement to major strategic value areas for both countries (Washington, 14.10.2021). These agreements reflect the new Aegean Sea and wider Eastern Mediterranean strategic data, as stipulated by the Biden administration put in effect President Obama’s strategic dogma of US interest shift to the Pacific (2014–2015). The new US-Greece defense pact reveals Washington’s desire to maintain regional supervision, and sends to Turkey an indirect deterrence message, as

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opposed to the France-Greece pact that operates as a direct deterrence tool and a real Western defense and security paradigm shift. Eastern Mediterranean energy resources bring France closer to Greece and the Republic of Cyprus in order to contain Turkey’s expansionism. In fact, the EastMed pipeline seems to becoming in the medium term utilized as a tool to contain the ‘Blue Homeland’ revisionist doctrine. This would assess the effectiveness of the France-Greece defense pact. US most evidently support France to pursue a more proactive role in the Eastern Mediterranean through the Franco-Greek deal. As the latter highlight Paris interest to the area as France’s strategic depth bridge between France and Africa, one could assess a high value complementarity between the France-Greece and US-Greece defense pacts. This characteristic was evidenced in Washington’s Athens Ambassador Jeffrey Pyatt record briefing following the 3rd US-Greece strategic dialogue procedure (18.10.2021). The ambassador stipulated Greek foreign policy changing geometry. Making reference to the two countries’ deliberations “which really covered the whole world — from Asia and the Indo-Pacific and U.S. and Greek strategy there to North Africa, of course the Eastern Mediterranean, the Western Balkans”, he mentioned that Greek foreign policy “. . .is no longer constrained by a decade of economic crisis and is no longer focused just on one neighbor, but rather is thinking broadly about how to advance our shared interests in stability, in democracy, in rule of law across a broad swath of territory that goes all the way from the Western Balkans and the Black Sea down across the Eastern Mediterranean into North Africa, across through the Gulf and as far as the Indian Ocean” (https://gr.usembassy.gov/ ambassador-pyatts-on-the-record-briefing-with-greek-journalists-following-the-3rdu-s-greece-strategic-dialogue/). In light of French President Macron’s intensive effort to achieve EU’s strategic autonomy within a united trans-Atlantic cooperation scheme, one could configure the evolvement of the France-Greece defense pact as a nucleus of EU member states defense policy integration. Regarding the defense pact per se, there was a tolerance if not acceptance on the part of the US, both because they would like to gild the pill in France for what happened with the AUKUS agreement, and because Washington is currently in a state of distancing -not to mention relative escape- from the area. And US certainly would not want the gap left by their distancing to be covered by forces such as Russia and China, possibly cooperating with Turkey. Washington prefers to fill its gap with a network of allies and alliances that could include France, Greece, Cyprus, Israel, Egypt, Saudi Arabia, the United Arab Emirates, and so on. In other words, countries close to the USA. What United States are really opting for is the re-definition of the West, in other words re-drawing the western alliance around the US by creating an old allies to new allies union system; in essence, a unifying effort to bind together Atlantic alliance system (NATO) with US allies in the Indo-Pacific. In that sense, we are witnessing regionalism tentatives which aim to cover-up regional power vacuums. The US sponsored relations normalization agreements (“Abraham Accords”) between Israel and two Gulf states, UAE and Bahrain (2020)—all three preoccupied with Islamist movements rise and Turkey/Iran expansionist foreign policy-, have encouraged the emergence of an India, Israel and the United Arab Emirates

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geostrategic alliance. Turkey’s support to Pakistan as security partner and arms supplier, urged India looking to the Eastern Mediterranean and Gulf to counter Turkish influence through cooperation with Ankara’s main opponents, Greece and the UAE. Israel alignment with UAE and India to counter Islamist movements and powers and Turkey-led Muslim order and defending state sovereignty, may evolve into establishing an Indo-Abrahamic strategic dialogue, particularly as Saudi Arabia seems to consider this grouping as a strategic opportunity. Greece has asked for a trilateral India and UAE dialogue, which could include Israel given Athens strategic relation to Tel Aviv. Reasonably, an Indo-Abrahamic strategic grouping could provide the US a gap covering solution, due to Washington’s resolve into distancing from the Middle East, and connecting this grouping with the emerging US IndoPacific strategy. Consequently, one could configure France assuming responsibility for an Eastern Mediterranean, Middle East-North Africa regional security “sub-contract”, due to US relative distancing from the area. Practically speaking, Washington would acquiesce that EU strategically focuses on the Mediterranean and MENA region, eventually leading even to the establishment of a MENA region security council. From that point of view, ‘Eastern Mediterranean Gas Forum’ international organizations (EMGF) recent involvement on regional security issues, could pave the way for the ‘birth’ of an “effective multilateralism” regionalism scheme.

References 1. Tanchum, M. (2021). The Geopolitics of the Eastern Mediterranean Crisis. p. 10. 2. Marketos, T. N. Geopolitical Alliances in the Making in the Eastern Mediterranean Region. p. 10. 3. Tanchum, M. (2021). The Geopolitics of the Eastern Mediterranean Crisis. p. 11 4. Tanchum, M. (2020, September 23). Turkish Military Maneuvering Pushed Italy and France to join Forces in the Mediterranean. Now what? Foreign Policy. 5. Tanchum, M. (2021). The Geopolitics of the Eastern Mediterranean Crisis. p. 15.

Chapter 18

Afterword

The East Mediterranean Gas Forum (EMGF) is paving the way to emerge as the region’s most significant energy regionalism tool, owing to Egypt-Israel strong relationship that hopes to expand beyond natural gas and the Mediterranean. United States, approved as the international organization official observer (Cairo, March 9 2021), seeks to expand the forum to the Red Sea and mediated for the signing of the Abraham Accords (Washington DC, September 15 2020), by which United Arab Emirates, Bahrain, Sudan and Maroco normalized relations with Israel. Despite US Administration and EU officially declared policy aiming to achieve climate change goals and less interest to finance fossil fuels—such as natural gas, except from projects that allow to phase out of coal—projects, some of Biden’s energy experts recognize the critical role natural gas will serve to reduce global greenhouse emissions. In parallel, reports show that even if European carbon prices more than tripled to 200 euros ($236), hydrogen from renewable energy (Green Hydrogen) would still struggle to compete with natural gas made hydrogen (Blue Hydrogen), commonly used already in oil refining and fertilizers manufacturing. Moreover, the dependence of Europe to imported gas is due to grow in the years to come, considering the will—and the level of resources—from European gas producers (UK, the Netherlands and even Norway) to limit or end their gas production. Thus, there is a dilemma for Europe: support new gas infrastructure projects (LNG terminals or pipelines) even with the carbon emissions issues or face the grow of Russian part in EU gas imports due to the completion of Nord Stream 2, TurkStream and northern LNG projects. It is thereof estimated that geopolitical instability in regions such as North Africa, East Mediterranean or Middle East, can be countered by increased EU cooperation on renewable energy sources exploitation, in which natural gas reserves available outside of the union are a major source of income and stability. Blue Hydrogen, producing hydrogen via natural gas and capturing up to 90% of CO2 emissions, will pave a more smooth transition of hydrocarbon exporting and producing countries in these regions to a non-carbon based economy, without confronting them with huge © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 T. Marketos et al., Geostrategic Alliances in the Eastern Mediterranean and MENA, SpringerBriefs in International Relations, https://doi.org/10.1007/978-3-030-97593-7_18

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financial constraints, political and economic instability or outright conflict. Blue Hydrogen could easily serve as a geopolitically safe bridge to Net-Zero set by EU for 2050. The challenge with the EastMed pipeline is the economic feasibility of the project, considering the high costs of such a pipeline, compared to an LNG option. This EastMed issue underlines the specific situation of major energy infrastructures: being as an economic issue as a political issue. From an economic point of view, EastMed is nearly a non-sense, yet from a political point of view it could be a major element of gas security of supplies. By creating such a permanent infrastructure— harder to disrupt than LNG carriers’ traffic—the countries of EastMed Gas Forum are sending a signal to both Turkey and the EU. Facing the competition of Turkey for the position of new gas hub in Southern Europe, EMGF countries—especially Greece—show their determination not to put the energy security in the hands of Ankara alone. EastMed quasi alliances and EMGF can prove to be very useful to meet Europe’s still growing energy needs by potentially including EastMed gas into a blue hydrogen supra-regional approach. By changing EastMed gas from LNG/pipeline targets to a blue hydrogen opportunity, will not only be very attractive for Europe but also support ongoing energy transition and economic diversification in North Africa and Eastern Mediterranean. Main pivotal factors are already in place, as the region has a significant gas transport infrastructure, while LNG export plants can be used to support hydrogen projects in future too. Moreover, from a regional perspective, local energy transitions are also the key to major strategic evolutions. The will of several Eastern Mediterranean and MENA countries to operate a diversification in their energy mix—to face both resources exhaustion and European customers lower demand—leads to new partnerships and new dependences for these countries. As they don’t produce any industrial solutions for low carbon electricity production (e.g. wind turbines, solar panels, nuclear reactors), they have to rely on foreign suppliers, reversing the dependance issue in energy. MENA countries especially have to cope with this new situation, where China, Europe and—in specific areas—the United States are in competition. The MENA and Eastern Mediterranean energy transitions could therefore be the basis of new regional geopolitics. Turkey and Egypt seems to have an upgraded role in this arena, as they have the necessary degrees of freedom, in terms of energy profile and flows, to implement an active revisionism policy. While Turkey implements its new agenda on a rather tactless way, Egypt seems to follow more cautious and patient steps in this new energy era. For the moment China, promoting a global partnership through the Belt and Road Initiative, is having the upper hand, as BRI is not only a trade system but also includes potentially electric interconnexion, smart technologies development and the potential exports of up-to-date net zero electricity production systems. On the diplomatic level, recent ‘Philia Forum’ (Athens, 11.02.2021) which brought together Cyprus, UAE, Saudi Arabia, Egypt, Bahrain and France (but not Italy), characterizes Greece’s efforts to operate as the junction between the Gulf and the Mediterranean and to position itself as the entry point to Europe in a way that will

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more effectively counter Turkey’s aggressive strategy of occupying the eastern Mediterranean space. Athens role is even more highlighted considering that most Gulf based exporters are investing heavily to Green Hydrogen future projects. To bridge the gap between Europe’s Green Deal strategies and Gulf countries, hydrogen can be the bridge cornerstone.