Could natural gas exports change the Israeli government’s trajectory?

Spin doctors, those officials employed to interpret events for the media favorably, have many arrows in their quiver. One of the most effective in Israel has been dubbed “bigger elsewhere.”

The “bigger elsewhere” strategy is simple. When one’s client is in the midst of a crisis, redirect, divert, and distract the public’s attention to something bigger, preferably better, happening elsewhere.

Undeniably, Prime Minister Benjamin Netanyahu and his government find themselves embroiled in a deep domestic crisis.

The judicial overhaul plan has overtaken Netanyahu’s political and diplomatic agenda. Except for the occasional security incident or flare-up, this has dominated the headlines for the eight months Netanyahu has been back in power. It is what people are talking about, protesting about, and the reason reservists are declaring they will not show up for duty, hi-tech firms are spiriting money out of the country, and now doctors are threatening to lay down their Israeli-issued stethoscopes and look for the ill to treat abroad.

In this atmosphere, little good that the government does can seep in through all the noise. For those in charge of media relations for Netanyahu and this government, what is desperately needed is something “bigger elsewhere.”

One such possibility has, in recent weeks, been peeping through the lattice: a US-Saudi agreement that would include normalization of ties between Israel and Saudi Arabia, which could have a transformative impact on the region.

Under the broad contours of the agreement that have leaked out, Israel and the Saudis would sign a NATO-like defense treaty; the US would sell state-of-the-art weaponry to the Saudis and assist in its development of a civilian nuclear program; the Saudis would normalize ties with Israel, help end the war in Yemen and provide massive financial assistance to the Palestinians; and Israel would put a cap on settlement activity and pledge not to annex Judea and Samaria.

Those broad strokes reveal the interests of all parties: The Saudis get US military protection from Iran; the US pushes China, which has been making inroads through the Saudis into the Mideast, out the door, and US President Joe Biden gets a major diplomatic triumph on the eve of a US election; and Israel gets normalized ties with the most influential state in the Islamic world.

Were that to come together, it would definitely be an example of “bigger elsewhere” which would make any talk of a possible next phase of judicial reform – altering the way judges are selected or reducing the power of the ministerial legal advisers – pale in comparison.

THE PROBLEM from Netanyahu’s point of view – he would like to see some, but not all, of that plan come to fruition – is that there are numerous moving parts, and it is not dependent on him. He cannot rely on this “bigger elsewhere” happening anytime soon to relieve his current political woes.

But that does not mean that there is not something else out there – though admittedly of a smaller scale – that could serve a similar purpose.

Netanyahu and Finance Minister Bezalel Smotrich hinted at what it may be last week in the much-ridiculed statement they put out after Moody’s issued a warning about the economy as a result of the Knesset passing limitations to the Supreme Court’s ability to strike down government decisions using the reasonableness standard.

How can natural gas help Israel diplomatically amid a judicial reform crisis?

“The economy is very strong,” the duo said in a statement mocked because, at that moment, the shekel had tanked, and the stock exchange was plummeting. As one of the proofs of the robustness of the economy, the statement read, “The gas industry is increasing exports to Europe, and seven companies are now competing for tenders to explore for gas in Israel at an investment worth billions.”

Energy Minister Israel Katz hammered the point home on Wednesday during a visit to the Leviathan gas field platform – one of three of Israel’s functioning gas fields – some 130 km. off the coast of Haifa.

“Today, the most potent card in Israel’s diplomatic arsenal is natural gas. We are a land flowing with milk, honey, and gas,” he said. “Everyone in the region and the world wants to be connected with Israel because of natural gas. Our ability to export natural gas is a tremendous strategic asset that strengthens Israel’s position in the region and the world.”

In other words, Netanyahu and this government’s “bigger elsewhere” may be found in a decision that is expected shortly: whether Israel should significantly increase the amount of natural gas that it exports – primarily to Egypt, and from there on to markets in Europe.

IN 2022 Israel’s three gas fields – Leviathan (the largest), Tamar, and Karish (the smallest) – produced 21.29 billion cubic meters (bcm) of natural gas, of which some 43% was exported to Egypt and Jordan.

Israel, which once depended on imported coal for electricity, now gets 70% of its electricity from gas. In 2013, at the start of the country’s natural gas revolution, Israel set limits on how much could be sold abroad, specifying that about 60% of the reserves should be used domestically.

Currently, there are two routes to export the gas, one through two pipelines to Jordan, which also connects to Egypt. And the other is the East Mediterranean Gas pipeline, a subsea pipeline running from Ashkelon to El-Arish in Northern Sinai. Earlier this year, the cabinet approved plans for an additional pipeline – Nitzana – to Egypt.

Why Egypt? Two reasons: first, because that country of 110 million people desperately needs other energy sources, and second, because it wants to turn itself into a lucrative hub for energy to Europe, which is scrambling to find alternatives to Russian oil and gas.

The Egyptians have built two liquefied natural gas facilities on the Mediterranean that turn gas into a liquid that is easily transported. This is a boon to the reeling Egyptian economy, and Egyptian President Abdel Fattah al-Sisi is keen on increasing output. But he needs more gas. This is where Israel comes into the picture and where the issue of gas intersects with security and geopolitical considerations.

For Sisi, this is a top priority, and according to senior officials, an increase in Israeli gas exports to Egypt is raised at every high-level bilateral meeting. Israel has a paramount interest in maintaining strong security and intelligence ties with the Egyptians, and this commodity is a heavy tool to have in the toolbox that all countries bring with them in their relations with other states. Increasing gas exports to Egypt would further cement ties between the two countries because Egypt wants and needs the gas, which would weigh heavily on the Egyptians’ minds in future decisions the country makes regarding Israel.

It would also strengthen ties with the United Arab Emirates, which is one of Egypt’s key financial backers, and which would take a kind view of a move that could benefit the Egyptian economy. Such a move allows Netanyahu to strengthen ties with the Arab world independent of the US. Additionally, it puts Israel in a triangular relationship with the EU, which now needs more and more gas from other sources. Having the EU need Israel for something is, obviously, an excellent position to be in.

Israel’s existing gas fields and four other exploration zones that have just been parceled out hold vast reserves and the potential to exceed 100 bcm. The Leviathan and Tamar fields are interested in increasing production from 12.5 to 21 bcm and 10.5 to 15.5 bcm., respectively. To do that, however, they need – in addition to the infrastructure to carry all that gas, thus the recent decision to build an additional pipeline to Egypt – export permits enabling them to export the gas.

And that is where things get dicey.

LAST AUGUST, Tamar asked for permission to export an additional 4 bcm to Egypt, and a decision is expected to be made by Katz and Netanyahu in the coming weeks. While on the surface this would seem like a no-brainer, it is not turning out to be so clear-cut, and not only because of opposition from environmentalists.

Israel’s budget director Yogev Gardos wrote a letter at the end of June saying there was “an immediate need for the examination” of the country’s gas export policy. He wrote to the director-general of the Energy Ministry saying that slower-than-expected development of renewable energy sources necessitated this review, and that, at this time, exporting too much natural gas “could endanger Israel’s energy security” and lead to higher domestic electricity prices.

Gardos’s meddling in an area that Katz viewed as his own infuriated the minister and prompted him to tweet that he – not the “professional echelon” – will make decisions on the gas sector that “take into account broad policy considerations, such as Israel’s standing [in the world].”

The war of words escalated this week between Katz and Smotrich over the issue, after Smotrich sent a letter to Netanyahu saying there is an immediate need to review Israel’s overall gas policy, calling for establishing a steering committee to do just that.

Katz did not take kindly to what he viewed as Smotrich’s meddling and wrote him a sharply worded reply that accused him of not promoting gas exports to Egypt.

As Netanyahu grapples with domestic challenges, a possible US-Saudi-Israel agreement hangs on the horizon as a tempting prospect, offering a potential escape from his domestic problems. But it’s very far from a safe bet.

Cementing ties with Egypt while providing the Treasury with an economic windfall would be a move that – while not the “bigger elsewhere” of a Saudi deal – could yield tangible economic and diplomatic benefits for Israel, and political ones for both Netanyahu and Katz, who is due to become foreign minister in December.

But even that, because of various domestic considerations, is no slam dunk. The passage of 12 months since the request for an export permit by those overseeing the Tamar gas field is ample evidence of all the complexities involved.

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