Gazprom, the state-owned Russian natural gas extraction company, has been interested in Israel’s natural gas market for several years. But the Middle Eastern state's recent emergence as a natural gas production destination is making it an even more attractive target. Last week’s confirmation that the Israeli government is talking to Russia about the development of Israel’s gas fields indicates yet another potential opening for Gazprom. Israel has so far asserted an energy policy independent of Russian influence, but preserving that stance ultimately requires limiting Gazprom’s activities.
The announcement of bilateral talks on natural gas is actually a response to an accusation that Russia had already attempted to extract favorable conditions from Israel—a promise to not export gas to Europe in exchange for stopping shipments of certain weapons to the Assad regime in Syria. Europe is Gazprom’s biggest customer and accounts for 40 percent of its revenues, but Russia fears Israeli natural gas could cut into that market if export routes to Turkey or Cyprus are connected to other regional pipelines. Given that the market is already shrinking due to Europe’s plateauing demand for natural gas, it is not implausible that Russian President Vladimir Puti proposed the deal to Netanyahu. The Prime Minister’s Office insists in an official statement that these conditions were never discussed.
Meretz chairwoman and Member of Knesset Zehava Gal-On made the accusation in a written question a few months ago, and her wariness is not unwarranted. In 2009, then-First Deputy Prime Minister Viktor Zubkov, who now serves as chairman of Gazprom’s board of directors, called a Russian gas pipeline to Israel via Turkey “very promising.” The plan for Israel to be part of the Blue Stream-2 system, though, was shelved in 2010 shortly after Israeli military personnel killed nine Turks on board the Gaza-bound Mavi Marmara aid flotilla. Putin denied that the incident factored into Russia’s decision-making, reasoning instead that Israel no longer needed the gas due to its own recent discoveries off the coast of the Mediterranean.
Gazprom, however, began to exhibit a keen interest in taking advantage of Israel’s budding upstream sector in 2011 when a company delegation visited Israel to talk with local energy market players. They discussed three partnership options for Leviathan, the field discovered off Israel’s coast in 2010—becoming a partner in the Leviathan license, purchasing Leviathan gas for sale in the Middle East and East Asia, and acquiring gas as a “license-partner to a joint liquefaction terminal and shared exports.” In July 2012, following Putin’s visit to Israel, Israeli officials were quoted as saying that Gazprom had plans to “set up an Israeli subsidiary that … will focus on drilling as well as gas transmission from the country’s offshore fields.”
Just a few months later, Gazprom submitted the highest offer for a 30 percent stake in Leviathan, and in February 2013, after a year of negotiations, it signed a letter of intent with the partners in the consortium for the Tamar field, the 2009 offshore natural gas find that put Israel on the map, to “finance an offshore liquefied natural gas facility” and oversee annual sales of 3 million tons of LNG over 20 years. This would enable the company to diversify and compensate for losses in Europe by reaching East Asian markets.
Unfortunately for Gazprom, none of these efforts have produced concrete results so far. There is no subsidiary in Israel, it was not awarded the coveted Leviathan stake, and the Tamar agreement is in no way written in stone. Meanwhile, there is a consensus among local officials and analysts that Israel would never accept the idea of not exporting to Europe, nor do they believe Moscow would mobilize the million-plus Russian speakers in Israel against such a decision.
While Israel is clearly going its own course on natural gas, there is still a palpable unease that Israel could become beholden to Russia and Gazprom to some degree. Former Minister of National Infrastructures Yosef Paritzky, for one, does not want this to happen. When Gazprom representatives visited in 2003, he objected to then-Prime Minister Ariel Sharon’s favorable consideration of the company’s entry into Israel. “I did not then, and I do not want now, for Israel to be under political pressure from Russia because of Gazprom’s control of its energy sources,” he said last week.
Foreign Minister Avigdor Lieberman was born in the Former Soviet Union and has a cozy relationship with Russia. This, combined with rumors that he has been personally involved in bringing Gazprom to Israel, adds more fuel to the fire of controversy.
According to a WikiLeaks cable sent to the State Department from the U.S. embassy in Moscow about Lieberman’s visit to Russia in 2009, Israeli deputy foreign minister Yuval Fuchs “cemented Moscow’s impression that the Russian-speaking Lieberman is one of their own,” and said that he created “a comfortable atmosphere with his Russian interlocutors,” who “acted as if they already knew him.” A New York Times profile of Lieberman published that same year also focused on his relationship with Moscow, noting that he seemed to thrive in Russia “because he speaks not only the language of Russia, but also that of the Russian leadership.”
Lieberman was acquitted Thursday of corruption charges and is expected to return to his post as Foreign Minister, where he will continue to steer the Israel-Russia relationship and, presumably, try to encourage Gazprom’s entry.
Gazprom is making its best effort to gain a foothold in Israel’s natural gas sector. So far, Israel has done a decent job of preventing these efforts from becoming reality, but the news that Israel is talking directly to Russia about natural gas, plus Lieberman’s imminent return to the Foreign Ministry, is disconcerting. Gazprom and, by extension, Russia, could also acquire the ability to influence Israel's energy policy.