Gas in the Eastern Mediterranean: “pragmatism” is the watchword (ABO.net)

east medBy Nicoló Sartori. While it is clear to many that gas in the Eastern Mediterranean is an opportunity for the entire region, it is equally clear that concrete initiatives on the industrial plan must be launched in adequate times and manner.

In recent years, the development of gas reserves in the Eastern Mediterranean has fueled high expectations in the region and globally. Not only as a strengthening factor of energy policies for the players involved, but also as a real geopolitical game-changer and uniting element in an area that is still very unstable and divided. In addition to this is the hope that gas discoveries will act as a catalyst for greater cooperation between the European Union (Italy in particular) and the southern Mediterranean countries, the Mare Nostrum too often becoming a disaggregating element rather than a™ driver of peace and prosperity. However, as emerged from the conference organized in October by the Institute of International Affairs (IAI) and by the Italian Centre for Peace in the Middle East (CIPMO), optimism regarding the possible development of hydrocarbons in the region must necessarily deal with a series of local dynamics, time constraints and economic and industrial factors that will significantly influence the possibilities for gas exploration and export from the area.

Local development in the spotlight

It is certainly not a new approach, but it is always worth keeping it in mind: the development of energy resources in third countries cannot ignore the focus and evaluation of the local component, especially if you work in contexts characterized by complex socio-political dynamics. As pointed out during the conference by Pasquale Salzano of Eni, this model – prepared with great foresight by Enrico Mattei since the ’50s – should be the basis of every energy initiative in the Mediterranean. While it is true that the local reserves in the region are unlikely to have a clear impact on the market dynamics on a global scale, it is also true that their rational and sustainable exploitation may (and should) generate tangible, long-term benefits on a local level, as an element of economic recovery, social stabilization and, potentially, political consolidation. This is obviously the case of Egypt which – as pointed out by Sherif El Diwany – thanks to gas from Zohr, may boost its economy and deal with the current energy and financial imbalances afflicting the country, but will do so partly due to potential newcomers, such as Lebanon. As noted by Bassam Fattouh, the only way to overcome the current political resistance in the region is to leverage the potential returns on a local level – both those directly aimed at the welfare of citizens and the competitiveness of national enterprises, as well as those indirectly aimed at governments and the political class. On this basis, it is likely that initiatives limited to the sub-regional or national level will be undertaken, capable of maximizing the personal profit of each of the players involved, rather than to imagine the implementation of ambitious cooperation schemes on a macro-regional scale, which risk remaining the victim of vetoes.

Optimism regarding the possible development of hydrocarbons in the region must necessarily deal with a series of local dynamics, time constraints and economic and industrial factors that will significantly influence the possibilities for gas exploration and export from the area.

Timing and pragmatism

“Pragmatism”, should in fact be the watchword for stakeholders in the region. Such an important opportunity for the region cannot be missed, in the expectation that all political variables are in place, as clarified by Harry Tzmitras, which called for a less idealistic approach when it comes to regional energy cooperation. The potential development of gas in the Eastern Mediterranean takes place in a global market context (demand, supply, prices), largely outside of the control of policy makers. Decisions, therefore, must be mainly dictated by the actual financial and commercial conditions and by the energy potential of the individual countries and of the area in general, to which, after all, only the industrial operators – who incur the costs of exploration, production and infrastructure development activities – are able to provide an objective assessment. Pragmatism must necessarily be accompanied by the right timing: the development of resources located in the areas must in fact have to deal not only with the national interests at stake, but also with the temporal dynamics of a rapidly and constantly evolving market – the energy market. While it is clear to many (if not all) that gas in the Eastern Mediterranean is an opportunity for the entire region, it is equally clear that concrete initiatives on the industrial plan must be launched in adequate times and manners. Timing, in this context, is a key factor, but often there is a mismatch between the modus operandi of the industrial stakeholders – accustomed to thinking in the long term but to acting promptly and dynamically – and those of the institutional stakeholders – used to playing for time, driven by short-term political dynamics. A situation certainly not optimal for cooperation in a fragmented context such as that of the Eastern Mediterranean.

The emphasis on local dynamics and the primacy of financial and commercial factors places, to a certain degree, Europe’s role in the Eastern Mediterranean energy game on a secondary level.

What contribution is coming from Europe?

The emphasis on local dynamics and the primacy of financial and commercial factors places, to a certain degree, Europe’s role in the Eastern Mediterranean energy game on a secondary level. Also under this analysis, as pointed out by Ahmet Sözen, the absence of the European Union in the region is noticed. The EU is often considered cut off from local developments and with no clear strategy towards the region. The difficulty of the EU to intervene effectively in the region is also pointed out by Marco Berti-Palazzi, according to whom the diversity of interests in the region means that European action – despite Brussels’ attention to the dossier – is not always in line with expectations. Despite these difficulties, the EU still has important tools for contributing to the full development of energy resources in the area. Tools ranging from traditional mechanisms of dialogue and political cooperation with the regional authorities, to initiatives that are more operational in nature, capable of involving stakeholders in the industrial, financial and regulatory sectors, in order to make investment opportunities more appealing, as pointed out by Valeria Termini. One of these was launched by the MedReg assembly – the Association of Mediterranean Energy Regulators – as part of the InfraMed Mediterranean infrastructure fund, attended by international financial institutions, including the World Bank, the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the Italy’s Cassa Depositi e Prestiti. If “pragmatism” is the recipe for the development of resources in the region, the role of these stakeholders alongside traditional political players will be crucial.

sartoriNicoló Sartori
A researcher in the Security and Defense Department at the Institute of Foreign Affairs

(Source: ABO.net)

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