Gas rig stand-off

The development of gas fields by Israel, Syria and Lebanon are paving the way to create a new reality in the region.

By YOSSI MELMAN
Syrian Oil Minister Suleiman al-Abbas (right) and Russian Ambassador Azmatullah Kulmohamedov in Damascus (photo credit: SANA/REUTERS)
Syrian Oil Minister Suleiman al-Abbas (right) and Russian Ambassador Azmatullah Kulmohamedov in Damascus
(photo credit: SANA/REUTERS)
 THE TWO rounds of talks held in February, in Geneva, between the Syrian government and the opposition groups ended, as expected, with no results. The Syrian civil war – almost three years in the waging, and responsible thus far for some 140,000 fatalities, half a million wounded and the displacement of around seven million Syrian nationals – is nowhere near its conclusion.
Israeli officials recently revealed that Syria, disintegrated and dysfunctional, is now hosting some 30,000 Islamist fighters and terrorists from all four corners of the world who are fighting both the government and the secular opposition.
However, the fact that there is no end to the war in sight – even embattled President Bashar Assad recently admitted in an interview with the French news agency AFP that the war would continue – is not preventing Russia and large US corporations from carrying on “business as usual.”
In December, as Syrians continued to die in the killing fields, the Russian firm Soyuzneftegas concluded a huge deal with the Assad regime. The agreement was signed by the Russian Ambassador in Damascus Azmatullah Kulmohamedov, and Syria’s Oil Minister, Suleiman al-Abbas. Under the deal, the Russian oil and gas giant was granted a 25-year concession to explore and develop Bloc 2 of Syria’s territorial waters, opposite the port of Tartus. The company estimates that its initial investment will be around $100 million.
The Russian-Syrian agreement is not merely a business venture; it is also of significant strategic importance for the region and Israel. Bloc 2, which covers an area of over 2,000 square kilometers, is estimated to be the largest gas and oil reservoir in the Eastern Mediterranean basin. If gas and/or oil are discovered and produced, it would ensure Syria’s future economy, assuming of course that the civil war will end one day and Syria remains one undivided country.
One important partner in the concession is Rami Makhlouf, a wealthy Syrian businessman and Assad’s cousin. Makhlouf is considered to be one of Syria’s richest men and his family’s fortune is estimated at $4 billion. Even before the civil war erupted, international corporations and businessmen were aware that not a single important deal could be arranged without crossing Makhlouf’s threshold. His involvement in the Russia deal ensures that the corrupt Assad and his clan will not be deprived of their share.
Soyuzneftegas, a state-owned company with ties to Russian President Vladimir Putin, is already involved in oil exploration in northern Syria. The company is also active in Iraq, Uzbekistan, North Africa and Australia.
For more than a decade, Russian foreign policy has been characterized by efforts to promote business opportunities, especially in the energy sector. Russian gas and oil corporations, among the biggest in the world, are enhancing Russia as a superpower on five continents. And as part of this policy, leading Russian oil and gas companies are seeking to set foot in other areas of the Eastern Mediterranean basin to gain gas concessions.
Some 20 kilometers south of Syria’s Bloc 2, three large Russian companies – Rosneft, Lukoil and Novotec – are trying to secure concessions from Lebanon in maritime zones bordering Israel. In this regard, it is important to note two interesting developments. One is the fact that Hezbollah, the Shi’ite terror and political movement, is a prominent faction in the coalition government of Beirut.
The second is the fact that American oil companies, Exxon-Mobile and Chevron, are also bidding for the Lebanese concessions and have teamed up in joint ventures with their Russian counterparts.
This illustrates once again that despite the strategic rivalry between Russia and the US in the Middle East in general, and in Syria in particular, neither national interests nor strategic considerations play a part when it comes to turning a profit.
Russian oil firms are also anxious to get a share in the potential gas reserves in Cypriot waters. It was Russia that rescued the island from total economic disaster in 2012, when Cypriot banks collapsed. Russian assistance in a way turned Cyprus into Putin’s turf. No wonder then that Russian oil giant Novotec has already obtained a Cypriot concession.
Intense Russian energy diplomacy does not ignore Israel. Russia’s largest energy corporation, Gazprom, has been trying for years to penetrate the Israeli market.
Recently, it has been trying to participate in one capacity or another in marketing Israeli gas (the Tamar and Leviathan fields run as a joint venture between the Israeli Delek company and Texas-based Noble Energy) discovered a few years ago in the Mediterranean Sea. The Tamar field began production and marketing in 2013 and Leviathan is scheduled to go online in 2017.
Another idea floated by the Russian giant is that Israeli gas will be transferred by undersea pipeline to Cyprus, where a facility will be built to liquefy it.
Israeli sources told me that so far no agreement or deal has been made with the Russian company, but its proposal is being considered. The final decision, I was told, will not be made by the government but rather the Israeli-American partners and Australia’s Woodside Petroleum company, which recently signed a memorandum of understanding to buy a $2.7 billion stake in the Leviathan venture.
All these developments show that Russia is deeply committed to ensuring the survival of the Assad regime, and that its American oil and gas partners will play a role in influencing the Obama Administration’s approach to the civil war.
Russia’s energy involvement in the Eastern Mediterranean basin may also have an important effect on Israeli fears and security doctrines.
Last month, Israeli security chiefs – including the head of Military Intelligence, Major General Aviv Kochavi – revealed that the country is currently threatened by 170,000 rockets and missiles directed at Israeli cities and strategic installations. Some 60 percent are in the hands of Lebanon’s Hezbollah, and another 30 percent are deployed in Syria.
In the last year, according to foreign reports, the Israel Air Force launched at least six strikes against Syrian arms depots and convoys carrying sophisticated missiles to Hezbollah. Israel is especially concerned that Russian-made Yakhont land-sea missiles will reach the Lebanese Shi’ite movement, thus enabling it in a future conflict to target Israeli gas rigs.
Over the past two years, Delek and Noble Energy, together with the Defense Ministry and the navy, have been conducting a behind-the-scenes scare campaign aimed at forcing the government to invest an additional 3 billion shekels (close to a billion US dollars) to provide special defense for the gas rigs.
It emerged that when the government issued the tenders for the gas concessions, it forgot to add the defense cost. Now, the private companies that won the concessions are refusing to carry the burden of protecting their investment and are demanding that the government reach into its own pockets and pay the cost.
Two and a half years ago, a special strategic planning team of the Israel Navy came to the conclusion that in order to provide a minimal “defense blanket” against all potential threats to the gas rigs from Syria and Lebanon’s Hezbollah, the navy would need to acquire four new missile boats and frigates.
But the exaggerated demands may be superfluous. The new discoveries and development of gas fields by Israel, Syria and Lebanon are paving the way to create a new reality in the region. This reality might be called “an energy-terror balance” or “mutually assured economic strategic interests.”
Thus, Russian interest in the regional gas and oil projects may have a moderating effect and reduce the motives of Hezbollah and Syria to act against Israel. Knowing that their gas rigs will be damaged in retaliation, Hezbollah and Syria will think twice before making a decision to attack Israel’s gas installations.
The Russian (and American) energy companies’ involvement and business interests may also help to shorten the Syrian civil war. Already there are signs that Washington, the EU, Turkey, Jordan and Israel are undergoing a change of heart. In the face of the growing radical Islamist threat, all are having second thoughts about the prudence of removing Assad from power.