JERUSALEM: In a move stunning in its timing and significance, Israeli Prime Minister Benyamin Netanyahu announced on Friday afternoon – with the Quartet's Tony Blair standing by his side – that he now thinks it's time, finally, to develop Palestinian-allocated offshore natural gas deposits buried under the eastern Mediterranean in maritime space, defined by mutual agreement under the Oslo Accords, that extends 20 nautical miles out from Gaza's coastline. Netanyahu did specifically mention Egypt in the announcement on Friday, saying: “Most of our [natural gas] supply today is coming from Egypt”, Netanyahu said. But, he added immediately, “It's important for us to develop additional resources”. The exact situation on the ground, resulting from the Egyptian-Israeli natural gas deal, is rather unclear. The announcement – as CNN's Jerusalem correspondent Kevin Flowers pointed out in a Tweet on Friday afternoon – came on the eve of the first meeting of the Middle East Quartet principles of 2011 on Saturday (February 5) in Germany, on the margins of the Munich Security Conference. The Quartet meeting will be chaired by Catherine Ashton, European Union High Representative for Foreign and Security Policy, and will be attended by UN Secretary General Ban Ki-moon, U.S. Secretary of State Hillary Clinton, Russian Foreign Minister Sergei Lavrov and the Quartet Envoy Tony Blair. In a statement released by the EU on Friday, Ashton said: “This meeting comes at a crucial time when we are witnessing significant events in the Middle East region. It is therefore extremely important that we stay the course in the Middle East Peace Process. We must remain focused on making progress on a negotiated peace agreement between Israel and Palestine — a key component in bringing about peace and stability in the wider region.” In his announcement in Jerusalem on Friday, Netanyahu didn't utter a word about Gaza (nor did he mention Hamas, who now control the Gaza Strip) – and mentioned only the Palestinian Authority (PA). Netanyahu said: “It's important for us to develop additional resources but it's also important for the Palestinians. There's a Palestinian Authority gas field adjacent to an Israeli gas field. We need to develop both simultaneously. This is something that the Palestinian Authority expressed interest in. I think we're going to begin discussions and negotiations to facilitate both, where the revenues from the Palestinian field go to the Palestinian Authority and the revenues from the Israeli field go to the Israeli government and I think this is good for stability, good for prosperity and good for peace”. Previous hard-nosed Israeli negotiations with BG (formerly British Gas – whose commercial interests in a long-pending Gaza gas deal were strongly backed by Tony Blair when he served as British Prime Minister) were stuck for some years on an Israeli insistence on negotiating a highly-concessional long-term and below-market price for the gas it would buy from the Palestinians – similar to the deal it had signed with Egypt. These negotiations were conducted between BG and the Israeli Ministry of National Infrastructure (then headed by Benjamin “Fouad” Ben Eliezer, who is of Iraqi origin). However, BG was consulting closely throughout the negotiations with the Palestinian Authority in Ramallah – and could not have concluded a deal without PA approval. The PA position was, and still remains, that it will not sell Palestinian natural gas for anything less than the going market rate (apparently, at any given time). The broad outlines of the deal were that the gas would be piped, underwater, to an Israeli refinery near Israel's southern port city of Ashkelon, which would process the gas and then re-ship a small quantity back to Gaza for the Palestinians' own needs (at the time, it was assumed that the Palestinian usage would be small – but this might not be realistic any longer). The gas could be used to fuel Gaza's only power plant, and a possible water desalination plant, as well as other domestic needs. A pipeline to the West Bank was not apparently envisaged. The PA in Ramallah would receive about 25% of the profits, which was projected at the time to be about $1 billion dollars. Somewhat surprisingly, these profits would not go to the PA governmental coffers directly, but would instead go to the extra-governmental Palestine Investment Fund, originally set up to receive many of the assets in the portfolio of the late Yasser Arafat, when donors demanded greater transparency in PA operations. The PIF itself, led by a group of prominent Palestinian businessmen, has itself adopted a policy that seems rather less than transparent. Political and legal challenges to the highly-concessional Egyptian-Israeli gas deal were raised by the Egyptian opposition in the wake of the unprecedented Israeli military operation, Cast Lead, ostensibly against Hamas forces in Gaza from 27 December 2008 to 18 January 2009. These challenges were discussed, then dismissed, first in the Egyptian parliament then in the courts. But, there appear to be significant technical problems that have not been overcome. It had been announced with much fanfare in May 2008 (after an earlier disappointment in March) that gas had started flowing from Egypt to Israel in an underwater pipeline. Since then, not much clear information has been given publicly. There have been indications of problems with the pipeline itself, then with the particular mix or chemical composition of the Egyptian gas being fed through the undersea pipeline, which apparently was not suitable to the needs of the Israeli refinery (though this is something that is usually clarified at a very early stage in any negotiation). Before these disappointments – but within weeks of the BG announcement that it was freezing negotiations with Israel – then-Minister Ben Eliezer told participants at the right-wing Jerusalem Conference in Jerusalem in January 2008 that even with the 15-year Egyptian gas deal in place, Israel needed to diversify its sources for security needs – because it lived in a “rough neighborhood” and had relational problems. Ben Eliezer specifically said at that time that Israel should ideally have at least five different sources of supply for natural gas. Despite the BG statement that negotiations had been frozen, Ben Eliezer said Israel was still interested in concluding a deal with the Palestinians. But, it became clear that the real problem – as much for the PA in Ramallah as for anyone else – was Hamas. Israel had increased its price offer to about half of the going market rate – still not enough to satisfy Ramallah's requirement – by the time of the Hamas rout of Fatah/Palestinian Preventive Security Services in mid-June 2007. When it became clear, about six months later, that the resulting split between the two parts of the occupied Palestinian territory was not about to change any time soon, BG “froze” its negotiations with Israel, and closed its office in Herzliya, north of Tel Aviv (though a small Ramallah office has been maintained). The unstated reason was that nothing could be done as long as Hamas was in control in Gaza. Hamas had said in late 2007 that it wanted to have a say in the negotiations, and suggested it would like to see a revision of terms already agreed. Since then, everything went quiet. Some thought that Israel would completely lose interest in pursuing any gas deal with the Palestinians following announcements, first in 2009, and then in 2010, of one large natural gas discovery, then a second, possibly huge, gas under the Mediterranean Sea off Haifa on Israel's northern coast (more or less on the same latitude as the Israeli city of Hadera, a bit inland). If the promise lives up to expectations, and all arrangements put into place, these wells could come online in 2012 or 2014, respectively. Netanyahu said, in the announcement with Blair on Friday, that “Israel has of course its own gas supplies down the line in the close of the decade, but we have interim gas needs”. A day before (on Thursday 3 February), the largest-circulation Israeli newspaper, Yediot Ahronot, published an article discussing “the day on which Egypt will close the [natural gas] pipe.” The Yediot Ahronot article said, according to an English-language translation provided by the Israeli Government Press Office, that “It has become clear, in the wake of the recent events, that it is difficult to depend on others. Accordingly, what is necessary is to prohibit natural gas exports [from Israel, once these new finds become productive]…That would ensure the supply of gas to Israel for decades.” But, Netanyahu's remarks suggested a far more wide-reaching strategy. The Israeli Prime Minister's remarks on Friday, with Blair by his side, are yet another of several indications that some kind of multi-sided deal has already been sketched out, and agreed in private, with both Hamas and the PA on board. The move also sends a signal (the significance of which is not yet totally clear) to Egypt. This implies a deal on Palestinian reconciliation is in the works, which would be another a major shift in the regional equation – but it is one demanded by most Palestinians. Egypt had been playing a role in inter-Palestinian reconciliation talks for the last couple of years, without results. These efforts may have been, in part, a stalling tactic. It also signals that Israel is not quite as dependent on Egypt as some in Egypt may have thought. For Israelis, it may remove anxieties about Israel's dependency on Egypt. For international actors, it suggests a way to defuse the ramifications, in Palestinian territory, of the potentially-destabilizing effects of major changes that are now expected in Egypt. The discovery of these large – possibly huge – offshore deposits of natural gas in areas of the eastern Mediterranean that Israel in effect must share with neighboring countries, not all of them friends, has been expected to cause a positive change (a “mellowing”, one regional diplomat predicted) in Israel's regional and international outlook. Israel will have to clarify its Mediterranean maritime claims by reaching negotiated agreements with its neighbors. So far, Israel has only reached agreement with Cyprus (and this is still subject to parliamentary ratification, but no problem is envisaged). With Lebanon, it is another story. Israel has asserted that it possesses rights that, in reality, must be negotiated. But, the two countries remain in a state of war, and Lebanon has said several times that it is prepared to defend its own economic interests in Mediterranean waters. Even more, Lebanon is not ready to negotiate with Israel (unless there are big regional changes – including Israel's acceptance of the Arab Initiative offering recognition and full normalization of relations if Israeli withdraws from territory occupied in the June 1967 war. This will also require Israeli ratification of the Law of the Sea treaty – a move that Israel had been considering anyway, apparently even before the discovery of the large new undersea gas deposits. Netanyahu also said on Friday that “We've had a series of meetings and we're concluding with the announcement of several steps that we take to, first of all to enhance stability. I think people understand that stability is important at all times, but it's especially important now and the first set of steps that we're taking are to continue the policy we've advanced to enable economic growth in the Palestinian areas. I think this has contributed to stability; it's contributed to a better life for the Palestinians and I think it's contributing to peace and security in the long term”. Netanyahu added that Israel was also going to take steps which he said were “intended to make Gaza independent of Israeli infrastructure by helping to develop their electricity plants; water, sewerage treatment. I think this is important. There are significant international projects that we want to advance. We talked about the ways to do it in specific concrete terms”. Netanyahu added: “I don't delude myself for a second that an economic peace is a substitute for political peace. We need both, and I hope that Abu Mazen [Palestinian President Mahmoud Abbas] will heed my call and enter direct negotiations with us. And one of the things that I think people can appreciate today is the importance we attach to the security arrangements on the ground because as recent events have shown us, the peace agreement has to take into account not only the situation that is present today, but the situation that could unfold tomorrow. So I look forward to resuming these negotiations with the Palestinians”… The Palestinians suspended direct negotiations with Israel in December 2008, a few days after the start of Operation Cast Lead. Under pressure from the Obama administration that took office in January 2009 (just hours after two unilateral cease-fires — one by Israel, one by Hamas — that ended the massive Israeli military operation) the Palestinians agreed in March 2010, then again in September, to engage in indirect talks, but only if Israel stopped its settlement building. There are no negotiations at the moment. BM
