This week, Israel officially positioned itself as a natural gas supplier to Europe, one of the largest markets on earth.
A Big Deal for Europe and Israel
For decades, Europe has relied on Russian natural gas, and on Russia’s good graces, for energy. Moscow has repeatedly shut off gas to European nations at will as a way of influencing policy.Gaining new access to Israeli natural gas allows Europe to pivot away from Russia as its source for energy, particularly for its natural gas supply.
A Change in Plans
Initially, the long-term plan had been to build a pipeline from the gas fields in the Eastern Mediterranean to Cyprus, then to Greece, and on into Western Europe. Those plans have been challenged by Turkey, which claims ownership of natural gas. It has also claimed territorial rights to any pipeline that runs through Cyprus or crosses the maritime line that Turkey and Libya have claimed exists between their two countries.Israel’s Gain Is Russia’s Loss
As exports of LNG to Europe ramp up over the next couple of years, Israel will gain tremendous revenue inflows from its European customers at Russia’s expense. Currently, Europe relies on Russia for about 40 percent of its natural gas supplies. In 2021, that represented $119 billion in annual revenues flowing from Europe to Russia. Revenue flows will be even higher as energy prices continue to rise. Natural gas is nothing short of a strategic asset, as it’s the single biggest portion of Russian–European trade, constituting 36 percent of Russia’s total budget.A Diplomatic Victory Across the Arab World
The deal is more than just an economic windfall for Israel. It demonstrates just how well Israel and its Arab partner, Egypt, can work together for their mutual economic benefit.That message of cooperation and mutual benefit will be seen and heard loud and clear across the Arab and Islamic world. It’s not wishful thinking that Egypt’s cooperation will attract the same from other Arab nations that could benefit from better relations with Israel.
Bad News for Russia
That’s good news for Europe and Israel, but it’s very bad news for Russia and President Vladimir Putin. From an economic standpoint, the impact of Europe ditching Russia as a supplier of both oil and natural gas will be catastrophic for the Russian economy.Russia may have to find new markets quickly.
How Will Moscow React?
How, for example, will or could Moscow react to this development?As noted, it could be considered a threat to Russia, if not an economic act of war. It’s certainly not a deprivation of energy or food per se, but the net effect could be similar.
Moscow could interpret the new natural gas agreement in the context that the EU and Israel (two prominent critics of the Ukraine invasion) are cooperating—if not conspiring—to deprive Russia of its most important market.
That’s true. And it could well cause Russians to suffer great economic hardship. Moreover, Russia’s geopolitical influence in Europe and the rest of the world would diminish as well.
Would Moscow take a wait-and-see attitude toward Israel and the European Union, hoping it would be able to convince either party not to go through with the deal?
Or would it resort to a naval blockade of natural gas shipments into Europe to protect its economic interests?
Much may depend on the state of the outcome of Russia’s war against Ukraine, which is not readily foreseeable. But once Europe is free of Russian gas, it will no longer be a hostage to Russian blackmail, though it still risks being bullied by Moscow militarily.
That same reasoning also applies to Israel, and it’s keenly aware of Russia’s military presence on its northern border. More war from Russia over this deal could be in the cards.
After all, what other card does Russia have to play?